Bitcoin

[Salvatorin]

mtgox is a shit

agreed

[RichieBees]

buttcoin

[kokoon]

I think this (80ish) is a pricepoint people consider BTC to be "cheap"... it's double digits after a while and it doesn't look like it's dropping...very much.

this might be the bottom *crosses fingers*

[BCM]

pls send much bitcoin thx:

 

13pRe4KX5GUEYKXb72ZLm6sFoTFRRv2xNx

[Salvatorin]

can someone hook me up with some survey sites to make btc thx.

[BCM]

non of them fucking pay out any more...i've been trying to do loads lately and got bugger all :(

[kokoon]

I think this (80ish) is a pricepoint people consider BTC to be "cheap"... it's double digits after a while and it doesn't look like it's dropping...very much.

this might be the bottom *crosses fingers*

Yeah well I guess not :(

[zazen]

Yeah I've never really understood the concept at all - even after watching an explanation video I'm still like, but how is that making money ? And why does it go up and down (and at such extreme rates). We make a long number (somehow) and then what gets done with it.

 

The whole thing has eluded me for years.

 

OK, let me explain it:

 

Money is just confidence in a collaborative illusion.

 

USDs are backed by the government etc and so on, but in the end, the value of a USD is just based on the idea that people are confident in it. Granted, the US Government is a pretty powerful entity. On the other hand they're in a lot of debt and so on. Its confidence judegments about that based on other countries that makes the USD go up and down against other currencies. And those other currencies are also based on confidence about their respective countries/governments.

 

And thats it. The USD represents nothing else than that. Its not backed by gold stacked away somewhere. Its just based on confidence that the USD will continue to be the USD.

 

Currencies need a community. For the USD that community is obviously people of the USA and also most of the rest of the world who are happy to deal with USD. If you're talking Uruguayan Peso then thats a smaller community, but still, lots of people all over the world are willing to exchange your Uruguayan Pesos for things. Zimbabwean Dollars - not so good. In theory the people of Zimbabwe form the community for that currency, but in practice they barely believe in it. Not a very big community for Zimbabwean Dollars.

 

Gold - has some intrinsic value due to its use in jewelry (its a nice bendy pretty metal) and also electronics. But its trading value as a commodity is based on confidence - confidence that people will continue to use it as an exchangable thing and will continue to view it as valuable.

 

Bitcoin, then, is designed to be distributed. The problem of keeping track of who has which bitcoins in their wallet is solved by a distributed system. The blockchain. I won't go into detail, but its designed so that as long as the Bitcoin community have more processing power combined than the 'bad guys' combined (whoever they may be) then the system will continue to work. Note that this has never been done before on this scale. Every other currency must be tracked by centralised regulated entities like banks. Bitcoins are tracked by the 'cloud' as it were.

 

Bitcoin has also been designed so that people can generate new bitcoins by mining. Its designed to get harder over time and then stop completely by the year 2140. This serves to entice people into the bitcoin community and also helps make sure the bitcoin community has more combined processing power than the 'bad guys'.

 

Bitcoin is new and very innovative, so although it has a community and that community has confidence in it, that confidence wavers a lot and so the price of bitcoins will remain volatile for many years to come. But i think it has a future.

 

Bitcoins don't exist, but then neither do USDs in any strict sense. Whats important is that there is a system to track who has what and that there is a community and that they have confidence in the illusion.

Edited April 11, 2013 by zazen

[Salvatorin]

beautiful

[Redruth]

 

 

 

Money is just confidence in a collaborative illusion.

 

[Adieu]

awesome.

[Salvatorin]

jesus balls that was ridiculous...is it over?

Edited April 12, 2013 by Salvatorin

[azatoth]

If bitcoin crashes how will the pedos get their CP?

[Rubin Farr]

http://www.huffingtonpost.com/mobileweb/2013/04/11/winklevoss-bitcoin_n_3063831.html

[zazen]

this fascinates me. I've just heard an opinion from my boss, who happens to be a pretty full-on math/tech nerd, and he reckons it's basically a giant Ponzi scheme (in bitcoin terms, not in physical currency terms). does anyone see it turning out that way? why/why not?

 

No-one really knows how its going to turn out yet. Its a new thing. People try to compare it to Gold or Tulips or Ponzi schemes but because of the open-source and because of the internet angle it feels fundamentally different to me.

 

Its being built with an open-source hacker/engineer mentality.

 

e.g. Compare with the Euro: invented by economists, politicians and bankers in the mid-1990s. They just decided how it was going to work. Not many people ever understood the finer details of how it was supposed to work once you had countries sharing a currency but not a central bank. The economists and politicians assured everyone it was fine. Confidence held for a bit (see my previous post about confidence). Now its all falling to pieces.

 

Now look at Bitcoin: Created on the basis of a published paper, code written open-source, collaboration by different people. Decentralised, see what works mentality. Different clients and exchanges all plugged into the same system. Public debates about features and future directions. When there's a crisis (a hack, or 0.7/0.8 blockchain split) some people panic, some people get together and work out a fix.

 

A good example: MtGox site has been unresponsive/up/down for maintenance for the last few days. Everyones angry. Do they put out a press release? No, they do an AMA on Reddit.

 

This is completely unlike anything we've seen before - a currency backed by hobbyists and hackers rather than a Government.

 

That means its shaky - confidence wanes, exchange rates yoyo, exchanges come and go bust again, web sites buckle under the pressure. But thats an engineering approach - try different things, see what works. Main problem at the moment is that for Bitcoin to be useful the exchange value needs to be less volatile. But because its new and interesting and has been getting a lot of press, we're getting spikes and bubbles. But perhaps the community will figure out a fix.

 

A word of warning though: Along with the DIY hacker mentality, is the opportunity for scammers and thieves, so be careful.

 

In summary: This is a new thing, it looks somewhat like old things that didn't work. But really, no-one knows. its all about confidence in the end.

 

Here's a good quote from Paul Graham, veteran technologist at head honcho at Hackernews:

    I am very intrigued by Bitcoin.  It has all the signs.    Paradigm shift, hackers love it, yet it's derided as    a toy.  Just like microcomputers.

Edited April 12, 2013 by zazen

[J3FF3R00]

Have you guys seen that there is a Bitcoin Magazine?

 

All of this stuff makes me want to believe its validity, but something in my head always keeps telling me this is all bullshit.

[Plarkreluke Banloboh]

Instead of evaluating it as a way to get rich, consider it a way to reduce fees. I would really like to buy and sell stuff online without supporting PayPal, eBay, Mastercard, Visa etc, especially after they colluded to deny donations to Wikileaks.

Edited April 14, 2013 by wabby

[Guest Vhy]

That story is included in this amusingly biased history of Bitcoins: http://buttcoin.org/history

 

Funniest part imo:

"The largest Bitcoin exchange marketplace, Mt. Gox (which stands for Magic The Gathering Online eXchange)"

[Guest Vhy]

this fascinates me. I've just heard an opinion from my boss, who happens to be a pretty full-on math/tech nerd, and he reckons it's basically a giant Ponzi scheme (in bitcoin terms, not in physical currency terms). does anyone see it turning out that way? why/why not?

 

Seems to me what bitcoin is primarily used for doesn't necessitate actually holding onto bitcoins...which I guess leaves us with superstition & "greater fool theory" as the source of value.

[goDel]

 

this fascinates me. I've just heard an opinion from my boss, who happens to be a pretty full-on math/tech nerd, and he reckons it's basically a giant Ponzi scheme (in bitcoin terms, not in physical currency terms). does anyone see it turning out that way? why/why not?

 

No-one really knows how its going to turn out yet. Its a new thing. People try to compare it to Gold or Tulips or Ponzi schemes but because of the open-source and because of the internet angle it feels fundamentally different to me.

 

...

e.g. Compare with the Euro: invented by economists, politicians and bankers in the mid-1990s. They just decided how it was going to work. ...Hackernews:

I am very intrigued by Bitcoin. It has all the signs.

Paradigm shift, hackers love it, yet it's derided as

a toy. Just like microcomputers.

I admire your optimism, but I really don't see a paradigm shift here. Imo, it's just another form of currency and simply adds another example to a large amount of other examples.

And the comparison to the euro is a bad comparison, imo. The euro was about joining various nations within a new "nation", the eu. The new coin was but an instrument against the context of creating a union. It was not some new invention of how economies should work. It was about taking from how economies tend to work, and using that to help creating an eu.

 

Also, here is a link to krugman's take on bitcoins:

http://www.huffingtonpost.com/2013/04/13/paul-krugman-bitcoins_n_3076574.html?utm_hp_ref=business

The Nobel Prize-winning economist wrote in a blog post Friday that famed economist Adam Smith would have “scorned” bitcoins because “mining” them requires expending real resources. Smith criticized the use of gold and silver currency in the 18th century, arguing that valuable resources were being expended to create something that was simply symbolic. Krugman writes that the same can be said of bitcoins.

 

“Now here we are in a world of high information technology -- and people think it’s smart, nay cutting-edge, to create a sort of virtual currency whose creation requires wasting real resources in a way Adam Smith considered foolish and outmoded in 1776,” he wrote in the Friday post.

[goDel]

 

Excuse me for the blatant copy-paste, but I think a lot of good points are being made in the coming wall of text.

 

So why would somebody want to go and invent bitcoins? There is a certain theoretical elegance to the idea of a borderless currency, with its supply limited by the difficulty of working out very tough mathematical problems. But going back to where we started, money is useful inasmuch as it can be used to buy things. And two massive things stand in the way of bitcoin ever being anything more than a monetary curio. Ironically, both are byproducts of the things that bitcoin enthusiasts most like about it.

 

First, because it has the endorsement of no government, it will never be usable for official transactions. If you are an American, you will eventually have to pay your taxes, which means getting hold of some dollars, and as long as everyone needs to use dollars, that will be the way the currency in which an overwhelming majority of U.S. transactions occur.

 

Second, the cap on the supply of bitcoins may reassure people that there will be no inflation, but in fact it ensures that it can never go into widespread use. A currency needs to be elastic — that is, its supply has to rise and fall in order to keep prices stable even as people’s demand for money varies. Part of the reason the Federal Reserve was created a century ago is that the dollar was at that time an inelastic currency, its supply was basically fixed based on how much gold banks had in their vaults. That meant that when harvest season came around in what was then a heavily agricultural nation, there was always a shortage of cash and a spike in interest rates, and in some years a banking panic.

 

Bitcoin exacerbates that problem. Its supply is capped in the long run. That means that if it ever came under widespread use, demand for bitcoins would rise faster than supply (which is what happened between February and earlier this week), and the price rise rapidly. That may sound good — your money is more valuable! — but in fact it means that prices of goods and services are plummeting. That’s deflation, which as the Great Depression showed us, is not much fun. It is a situation in which everyone has every incentive to hoard money rather than spend it, leading the gears of commerce to grind to a halt.

 

In effect, bitcoin is a reminder of this fundamental truth: To function in a modern economy, you’re always putting your faith in something, whether you like it or not. And you may not like putting that faith in a powerful, independent central bank imbued with power from the state, but the alternatives may just be a lot worse.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/12/bitcoin-is-ludicrous-but-it-tells-us-something-important-about-the-nature-of-money/

[zazen]

 

 

this fascinates me. I've just heard an opinion from my boss, who happens to be a pretty full-on math/tech nerd, and he reckons it's basically a giant Ponzi scheme (in bitcoin terms, not in physical currency terms). does anyone see it turning out that way? why/why not?

No-one really knows how its going to turn out yet. Its a new thing. People try to compare it to Gold or Tulips or Ponzi schemes but because of the open-source and because of the internet angle it feels fundamentally different to me.

 

...

e.g. Compare with the Euro: invented by economists, politicians and bankers in the mid-1990s. They just decided how it was going to work. ...Hackernews:

I am very intrigued by Bitcoin. It has all the signs.

Paradigm shift, hackers love it, yet it's derided as

a toy. Just like microcomputers.

I admire your optimism, but I really don't see a paradigm shift here. Imo, it's just another form of currency and simply adds another example to a large amount of other examples.

And the comparison to the euro is a bad comparison, imo. The euro was about joining various nations within a new "nation", the eu. The new coin was but an instrument against the context of creating a union. It was not some new invention of how economies should work. It was about taking from how economies tend to work, and using that to help creating an eu.

 

 

I know the euro is completely different, I was just comparing how politicians and nation states design things to how computer programmers design things. And, fyi, the countries that used the euro remained separate nations.

 

You don't agree that a completely decentralised currency that uses peer-to-peer validation is a paradigm shift? Well, ok then.

 

I'm not that optimistic - Bitcoin is an experiment and it could go wrong. main problem at the moment is that for it to be useful, its value needs to be fairly steady against other currencies. But because of the press and newness, its attracting a lot of speculation.

 

Here's a good blog post about how Bitcoin could be useful in the Developing world.

 

http://blog.nyaruka.com/bitcoins-bottom-billion-why-the-developing-world-may-be-bitcoins-biggest-customers

 

e.g. imagine you're in Rwanda and you run a tech startup (which is that blogger does, incidentally). Trying to get validated with a merchant visa account is an absolute bureaucratic nightmare. Whereas setting up to receive bitcoin payments requires no rubber stamp from any corporation or government.

 

Similarly, if you're in China, government control of currency exchange is a big problem.

 

http://qz.com/74137/six-reasons-why-chinese-people-will-drive-the-next-bull-market-in-bitcoin/

 

Disclosure: I have 6.2 bitcoins, just for fun. I'm interested in the tech and economic ideas around it.

Edited April 14, 2013 by zazen

[zazen]

The Nobel Prize-winning economist wrote in a blog post Friday that famed economist Adam Smith would have “scorned” bitcoins because “mining” them requires expending real resources. Smith criticized the use of gold and silver currency in the 18th century, arguing that valuable resources were being expended to create something that was simply symbolic. Krugman writes that the same can be said of bitcoins.

 

“Now here we are in a world of high information technology -- and people think it’s smart, nay cutting-edge, to create a sort of virtual currency whose creation requires wasting real resources in a way Adam Smith considered foolish and outmoded in 1776,” he wrote in the Friday post.

 

 

The energy that goes into mining is problematic, I agree. But a technical detail that people often miss is that the Miners are actually providing the "Transaction Engine" that validates the Bitcoin transactions people are making. That is, the pooled processing power of the miners is also what powers the blockchain and hence the whole peer-to-peer validation system. So the energy the Miners consume should be compared to the the energy that normal banks consume with their own transaction systems (visa, swift, bacs etc).

[zazen]

Excuse me for the blatant copy-paste, but I think a lot of good points are being made in the coming wall of text.

 

[snip]

 

In effect, bitcoin is a reminder of this fundamental truth: To function in a modern economy, you’re always putting your faith in something, whether you like it or not. And you may not like putting that faith in a powerful, independent central bank imbued with power from the state, but the alternatives may just be a lot worse.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/12/bitcoin-is-ludicrous-but-it-tells-us-something-important-about-the-nature-of-money/

 

 

As to the deflationary thing, thats a bit beyond my grasp of economics. The article claims it caused the great depression, but surely there was more than one cause of that. Ultimately though, Bticoin is open-source so if the community agrees, they could switch to Bitcoin2 or whatever which could be designed to not have a finite limit. I imagine bitcoins original makers built in a limit because they were hedging against Moore's law.

 

As for the faith question: whether to put my faith in a central bank vs a bunch of programmers: I'm a programmer and I've seen the tech/programming community create some literally amazing things over the past decade or so. The fact that Linux exists is incredible. The fact that Wikipedia exists is incredible. Its early days for Bitcoin but I think a currency created with the same open spirit as Linux or Wikipedia is a fascinating idea. I'm not exactly putting much faith in it yet, but compared to the complete bollocks-up of everything that the traditional financial sector has managed over the last few years, I'm interested to see where bitcoin goes.

[zazen]

Four posts in a row, I must seem pretty obsessed.

 

Ok to be clear: I think bitcoin is fascinating but it is experimental and potentially unstable. I don't think of it as a scam, but on the other hand I wouldn't advise anyone to put money into it that they can't afford to lose. Its all pretty volatile and the exchanges regularly get DDOSed or go bust.