Topic: Buckle Your Seatbelts (Read 2768 times)

Why have you joined this forum
Please clear off and stop polluting it with your worthless necro bumps

This is exactly how I am seing this. Thanks for sharing!

Well, buying any of Joe's stock picks might not have been wise, but buying stock in his kids would have been a good investment, if you like horseracing.  

Seems like both precious metals, and Kennedys were taken off the market in 1963, so I guess that was the top.

Alonzo,

Thanks for that reminder, you have a point.  I lived through those "bubble" days not as a speculator, but as an employee with retirement funds in the stock market, only to see my financial future pretty much go up in smoke between losing jobs and the market plunge.  Indeed, mania is what a top looks like.  I did some long and hard thinking after reading your post to see if indeed your argument might be correct and this might be "irrational exuberance" and probably a market top.  The conclusion that I reached is that although there is indeed a mania taking hold, it's only the 0.1% of investors that have actually heard of bitcoin that are starting to become manic.  When this number climbs above 50% then I'll start to get worried.  For now I still think we have only just entered the second phase of adoption, which is when the initial more-or-less linear curve of early adopters starts to give way to an exponential curve as each person spreads the word and the number of adopters multiplies with each time interval.  This will, of course, give way to saturation as eventually most of those to whom bitcoin will mean anything have heard of it and either accepted it or rejected it.  But given the number of blank stares I still get from even the fairly-well-informed people I know, it's still early on in the game.

The awareness, understanding and adoption of bitcoin is on the rise.  As the community continues to increase in size bitcoin becomes further legitimized and thus its value will rise.  Further, all the nuances relating to initial 'difficulty' of adopting a bitcoin way of life will slowly be solved (more user friendly, or let's say easier-to-understand-for-the-layman, wallet systems, etc.)

The best thing bitcoin proponents can do at this point, as mentioned above, is to spread the word.  Friends, family and FACEBOOK!  I would like to see some large marketing company begin a massive social media campaign devoted to spreading the beauty that is bitcoin

Great post! I'm 24, and I try and get my friends to get in on bitcoin all the time, family also. So far no one has because they're "too broke". I know how that is, I personally sold 25 ounces of silver to buy my bitcoins... And that was really hard! But I know it will all be worth it down the line 

I've been speculating for over 15 years, and I lived through the Dot-com bubble.  The anecdote above is not reassuring, but rather, worrying.  That is the kind of thing that happens near tops.  The wild frenzy over the last week in which "elevator boys" give Joseph Kennedy investing advice says we're very close to a top, at least time-wise, if not price-wise.

Luke,

At the risk of being overly wordy in replying to my own thread, I would suggest that the answer to the question everyone wants to know "when".... is "soon".  That's about as precise as anyone can be.  Think about it, if you'd known about the banking system years ago and then saw a newspaper from March 2013 with the current headlines, you'd know that the collapse was imminent.  We've been boiled slowly and the normalcy bias is strong, but things have now taken a decidedly dangerous turn and these topics are beginning to filter into the mainstream consciousness.  You're seeing it yourself.

What will the final warning signs be?  That's easy, just open a browser tab and check the news.  It really requires very little to get from where we are now to outright instability.  Personally, I'd give it a matter of months, probably sometime this year, when the banks in the US close for the first time.  Of course, I've thought that for a while now and I've been surprised that the band aids and duct tape have held it together for this long.

In the sense of "when should I begin pulling money out of the bank and consider moving to a rural area", again that's an easy one to answer.  The best possible time was several years ago, when you could have sold your city real estate for a good sum.  The second best possible time is now.  Remember, the people in Cyprus didn't get any advance warning (although the warning signs were there to see for those who were paying attention).  I personally "panicked" about 10 years, although going broke after the dot-com boom was definitely a precipitating factor in moving "back home" to our family land.

DirtyGold,

I suspect that the author of the quoted article hasn't actually used bitcoin personally.  While the confirmation delay is true, the initial transaction notification is near-instant like email (typically about 2 seconds).  For most small transactions this is good enough.  Especially for things like retail point-of-sale where you might have customers in line.  For buying larger or more expensive items there aren't usually people waiting in line and a 10 minute delay isn't a deal killer.  For depositing into OKpay, they wait for 6 confirmations so that's roughly an hour.  You wouldn't want to wait that long if you're waiting in line, but to make an online purchase I don't mind planning my life an hour ahead.

The single most powerful argument in favor of bitcoin isn't words, it's a demonstration.  Most people when they see it used, begin to "get it" immediately.  Why can't all money be this easy?  When I set new users up with a blockchain wallet, I zap them some pocket change as a demonstration.  If they have an android phone, I do this phone-to-phone so they see both the phone and the computer update, all within a couple of seconds.  If you already have a wallet address, post it and I'll send you some pocket change too.

The real reason it's hard to obtain bitcoin is that it's so superior that nobody really wants to take fiat for it.  At best, guaranteed fiat like cash or bank wire works, but inferior reversible forms like Paypal and credit cards are right out of there.  I also act as a broker and will sell people some of mine, but I'm not trying to cash out of bitcoin for fiat so I then go do a bitinstant transaction to refill as soon as possible.  As long as I do this quickly enough I'm not taking much risk of the market moving in price.  I charge a suitable commission to cover my cost and risk and I explain this to new users.  I'm also happy to show them how to fund through bitinstant, coinbase or other methods themselves if they prefer.  Of course, those times I need a little fiat in my pocket all I have to do is choose how much bitcoin to buy as a refill, if I buy less than I sold then I keep the fiat difference.  Right now I'm deriving a decent side income from this as a business, enough to pay for lunch out most days at least.  And remember, this is only in one small community.  There's a lot of room to grow the user base.

The growing transaction volume will, in time, present a significant challenge to the system.  With blocks only every 10 minutes and the blocksize limited, we will sooner or later run into problems keeping up.  The system is going to have to grow and evolve to meet the demands placed on it, but I'm confident that bitcoin has attracted some of the best minds on the planet to bring the innovation required.  If bitcoin ultimately fails, its deficiencies will be corrected in the next system until we have something that does succeed.  I know other crytocurrencies exist, but right now bitcoin has such a market lead that it's basically bitcoin's race to lose.  Unless there's a major problem with it, most of the money seeking a new virtual currency home will find its way into bitcoin because it's more widely distributed and mature than any of the alternatives.

Great thread. The big question I have is... when? When will the river card flip with the chips on the table? Schiff said last year things would collapse during the middle of this year. How long will people have to make a move? What will the final warning signs be?

My friends are starting to wake up as well. The Matrix is being pealed back. Just weeks ago, some of them thought their bank actually stored the money they deposited. Now they are asking me how to get into Bitcoin.

My company is trying to help in any way we can. Last week we (FoxyCart.com) launched support for a  Bitcoin payment gateway. I've also blogged about Bitcoin. I encourage others to do the same and share the post with your friends.

I do still have concerns about how easily the market will be manipulated. Prices going all over the place certainly will not help promote stable commerce... then again, if we're talking thousands of dollars per BTC and we're doing commerce with fractions of a BTC, it might be OK.

I am newly aware of Bitcoin (1 week now ) and believe it has many appealing characteristics as a future currency. Although I don't agree with most of the pasted opposition, there was one point made (quoted above) that has me conflicted. For a crypto-currency to ever become successful in the normal operation of society, transactions must be conducted rather quickly, if not instantaneously. I'm finding it rather difficult to even obtain BTCs let alone imagine them one day being used in normal commerce with literally millions of global transactions occurring every second. I'm sure this has been discussed in detail many times on this forum, so someone please provide the prevailing wisdom to this problem.

Great post slilley, I snipped it to identify some key points.

One point 1 about gold and silver being suppressed, this is documented fact that since Bretton Woods, the US has tried to hold gold at 35 dollars per ounce.  Once it was allowed to float in the 1970s, it rose, but they controlled it via leasing schemes.  And on this point I wanted to ask if anybody here has read Jim Rickard's analysis of how the Chinese might perhaps be secretly behind a lot of the Cayman/Bermuda gold leasing front companies, and how at some precise moment, China could demand physical, while also triggering their secret hedge funds to do the same?

Jim's theory would surely result in GLD being halted, and probably FOREX itself would implode.  However, not a lot of paper longs realize that the law allows them to be paid of in USD when and if the exchange implodes.  That's a fact which came up in the Potato Squeeze Default of the 1970s, anybody who is long paper, when the exchange is squeezed, can be settled out in USD if default occurs.  I doubt many of the GLD investors know this, they think they will have some sort of recourse when China destroys the GLD forex market.  But no, they will get USD as a settlement, no gold will be available.  Jim's scenario is absolutely correct, imo.  Its straight up financial war endgame, when the Chinese demand physical delivery and reveal their secret hedge funds.  BOOM goes forex, and the tears of all the paper longs will be a huge river, as they have to accept a devalued (by what % nobody knows) USD, on the day/week that this all goes down.

As to point #2 above, yes you made great points about this with cash sniffing dogs and so forth, when the other shoe drops and the elites grab for the bank accounts here in the US, cash will be essentially like carrying drugs and stop and frisk, roadside confiscations, etc, will escalate.  Naturally this is where bitcoin will have a distinct advantage, as one can store their wallet on a micro-SD card, or even a physical paper wallet which folds into roughly the same size.  Easily hidden on the body.  And again, this means that the stop-and-frisks and the vehicle searches, will become far more invasive as a result, since that all-powerful microsd card, is the needle in the haystack for the future asshead authority who has the power to search you and/or your children, because they also might have something on their person.  I am being purposefully overt here, as to what the searching powers will do, to make the point that frankly, you probably already know.  But one element that makes it truly frightening is how the masses will put their heads down and submit to absolutely ANYTHING, to get through that checkpoint.  They will submit utterly, and yes, they will allow their children to be privately strip searched, anything at all, just to save their lives and get through the checkpoint.  So those who are operating on your level, will have to think several moves ahead, as you already know.

Your third point above, wherein you describe the idea of a whole town that runs on bitcoin, makes me consider the dangers of clustering, and also the dangers of the least-informed or weakest link, in the community:  You said you have read the "I am a Central Bank" thread here at this forum, and so have I, I recently replied to it.  The OP of that thread is correct when he describes the ends, that the money-issuing class will go to, to make bitcoin submit. 

Therefore, I would say that it is prudent to proceed with caution as to how sunny the world will be, when the shit hits the fan.  I mean, frankly, the simple tactic I would use if I were gameplaying a commander against your bitcoin mecca, would be to have a sniffing drone above your town, and dialing in the VPN or just wait for someone on the fringes to not use a VPN, and then after x number of days when I have a good IP thumbprint of the town and specifically, the nature and size of the bitcoin wallets of the town, I could just destroy it utterly, and use the previously captured data to then collect from the bitcoin wallets of the dead. (I also do have a plan to defeat this, PM me for details if you want to talk further )

Sure this is mad max type gameplay, but its important not to underestimate the nature of a covert war which is being waged all around us.  I am saying that when this war goes hot (when US depositors at street level have their bank accounts frozen), the evil powers will conduct war using low-morality warfighters (or imported Hessians) who are told that whatever they kill, they can keep.  So since you describe yourself as being already in the correct defensive mindset, I am sure you are having your friends assume the same mindset.

Probably when the US decides to pull a Cyprus event, they will try to roll it slowly, so that the majority of the people think to themselves "Oh well sucks for them, but MY bank is still safe!" although this contagion may or may not be controllable, as banks scramble.  But the point is that with Cyprus, we have crossed the rubicon, and there is no way to go back.  Depositor confidence has been wrecked.  But my point is that when there is wealth that cannot be hidden (like bitcoin traffic), it is sure that there will be Sheriff of Nottingham types on the hillside, who will know that by taking your town, they can make their gold pile richer.  As a commander who understands how to field armies that live on booty collected, I could assume that collecting data on the town ahead of time, would be the key point, such that once I have a few private keys sufficient to pay my soldiers, I can lay waste to the whole town.  So make sure to keep your people informed as to how they engage with their bitcoins.  If they are not discreet, the scent of money might call the wolves, and if their private key can be gotten, then their elimination could be seen as more likely.

At least some creative thought was used. I liked the read. I agree completely as long as people aren't buying bitcoins instead of food... unless they're fat.

what the crap did i just read?

Again, thanks to everyone for the replies.  Debate is a healthy thing and anyone who is so hardened in their ideas that they aren't willing to listen to contrary points of view has a problem, in my opinion.  It is a sign of intelligence and maturity to consider that you might not know everything and be open to new information.

That said, I think the ultimate argument in favor of bitcoin adoption by the masses, in the near future, is that THE TITANIC IS SINKING.  Just ask people in Cyprus if they wish they had known about an alternative, ANY ALTERNATIVE, prior to their money being stolen.  Bitcoin has flaws.  It's not a perfect system.  Perhaps others are better, and as time goes on its limitations will become more clear.  Hopefully with the collective intelligence and effort of the community we can overcome the limitations as they appear and make it a usable tool for the masses in the future.  However, right now it's the "least worst" alternative currency system in existence and as such the leading candidate for the masses of panicked people concerned about the safety of their assets to panic into.  No doubt gold and silver will get some of the money flow, but gold and silver don't enable modern electronic commerce to continue the way bitcoin does.  In the above-referenced article regarding the small IT business in Cyprus, they didn't say that they were planning to start paying employees in gold or silver, they planned to start paying in bitcoin.  Why?  Again, I think it's obvious that as a payment system bitcoin has tremendous advantages over the precious metals, while also acting as a store of value.  Also, it's hard to argue with the fact that as an investment, the precious metals might have an appreciation potential of 10-20x in dollar price.  Yes, gold and silver are heavily manipulated and suppressed and ample evidence exists to support that theory.  Market demand will eventually overwhelm the price suppression scheme, leading to some fantastic gains in dollar value.  But on the other hand, bitcoin has an ultimate appreciation potential of perhaps 1000x or even more.  There could easily be another 10-20x appreciation just this year.  Also, just try crossing any border in the near future with large amounts of precious metals (and the definition of large amounts is changing rapidly).  Bitcoin alleviates all those problems.  If you're a panicked investor or even regular joe looking to get out of the banking system AND you're informed about bitcoin enough to understand these things, where are you going to put your money?

The fact of the matter is that we will find out soon enough which of all the theories is correct.  The crisis of confidence in the banking system brought on by the debacle in Cyprus is, in my opinion, a bridge too far.  I think the fuse has been lit, and although it will take a while to play out in all its facets, ultimately now the public has been put on notice that they can't really trust the system any more.  If trust is destroyed, why use a bank at all?  I personally came to the conclusion more than two years ago that the banking system was untrustworthy, so I set out to find alternatives.  First I started banking like an illegal alien, cashing all checks at the originating bank if possible, asking for cash whenever possible, getting money orders to pay bills.  I obtained a prepaid debit card and began to use it for all online purchases, funding it with cash immediately prior.  I don't leave quantities of money anywhere except in my personal possession.  I still have a traditional bank account from before and it occasionally comes in handy, but mostly to me they are just a check cashing service and it irks me every time I have to wait for a check to clear before I can withdraw the money.  When the banks close they will get very little of my assets.  As a side note, I also did the mental arithmetic early on that this lifestyle necessarily leads to having significant quantities of cash or other assets in one's personal possession.  I have a legal state-issued concealed carry permit and the only place I am not armed is the shower.  Anyone wanting to "acquire" my assets will have to do it the old fashioned way, at considerable personal risk.

My research into money and the banking system led me to an understanding of fiat currency and fractional reserve banking.  It became apparent to me that the whole thing, all of global finance, is just one massive ponzi scheme pulled over the eyes of humanity to blind them from the truth.  It is destined to fail, and like all ponzi schemes will fail shortly after the redemption requests begin to exceed new money inflows.  This happened in 2008 and of course the money pumps were turned on to keep the ponzi going, but this is not without side effects and consequences.  Now we are seeing the beginning of the endgame.  Hopefully most everyone on this forum knows all this already, so I won't rehash it any more.

But my research also led me to bitcoin.  I was stunned.  I spent a good two days back in 2011 just trying to wrap my mind around the concept so I could get an understanding of how it worked.  I scrounged every last penny I could get my hands on to buy in with.  Literally: I cashed in my change jar $50 and $100 at a time and bought bitcoin with it.  Now I'm pretty pleased with how my spare change has done.  I started mining too but only came out slightly ahead versus my initial investment on that score.  For the first time ever, instead of being chained to the deck rail of the sinking Titanic, now there was a LIFEBOAT to get into.

Now we're at the place where Joe Q. Public is close to where I was several years ago.  The banking system is looking shaky and more people are slinging around terms like "fiat currency" and "fractional reserve banking" in conversation.  Even out in public now it's not uncommon to overhear conversations like this going on.  So the ground has been plowed and is ready to be planted with the seeds of knowledge that people need to hear.  What I'm doing is trying to save as many as I can and hopefully have a whole (small) town with the nucleus of a functioning bitcoin economy before the banks close here.  All I can do is plant seeds, but right now the bankers and the evening news are doing a great job of watering them and helping them grow.  I want this town to be a "bitcoin Mecca" to coin a phrase, one that will continue to function in the collapse that's coming.

I am now contemplating running an anonymous bitcoin public service announcement in the local newspaper, something like "Haven't heard about bitcoin yet?  Go to weusecoins.com and find out!"  I want to prime the pump and get people ready.  My personal friends and family have already heard all this from me directly, but there's a bunch of other folks here that haven't.  Some of them will google "bitcoin" or visit the weusecoins website and begin educating themselves.  Perhaps not many, but each one that begins learning is a seed that's growing and will then reach out and touch their circle of friends, family, and associates.

If my experiment in "bitcoinizing" this town is successful, then perhaps eventually some of the other bitcoin early adopters might prefer to relocate to a place where they are wanted and appreciated, and their bitcoin assets will stimulate the local economy at a time when most everything else is falling apart.  I want to become the "Zimbabwe" in my earlier example and emulate the historical example of the "Miracle of Worgl", which occurred in Worgl, Austria from 1932-1933, in the middle of the Great Depression.  This town successfully dealt with unemployment and poverty by issuing a local currency even while the towns around them were suffering badly.  The experiment ended when the central bank shut down their currency, and they went back to being just as miserable as everyone else.  For more information, see:

http://ingienous.com/?page_id=6673
https://en.wikipedia.org/wiki/W%C3%B6rgl

Here in this small rural Texas community we have significant agricultural production, so as long as the farmers can keep farming the town will be able to eat regardless of how bad the economy gets.  I personally eat our own home-grown pork, beef, chicken, and eggs.  It's free range, grass fed, hormone free beef.  I can look out my window and count my cows and decide which one will become dinner next.  So all of you other bitcoin people that enjoy your city lifestyle, what will you be eating when the banks close and the grocery stores go empty?  Dried beans and rice?  Perhaps you might consider a move.  Here your bitcoin might buy you a real steak dinner, for the moment at my house if nowhere else.

david graeber is great
it seems that much gnarly shite will go down in the next 20 years- will bitcoin or cryptocurrency survive?  max keiser's theory that bitcoin could take over is pretty nice, I like the idea, I like the idea of the establishment just sort of killing over nice and easy as we turn our backs on it, giving way to a common sensical means of open source human evolution..

^^^ To respond to the cut and paste above, this guy is talking about felony and laws and so forth, and a good percentage of the population knows that that's all bullshit, since weed should be legal.  Lawyers are performing violence against the human race, and this guy is either rich and can afford to use law as a weapon or shield, or he's not able to see that a lot of laws are just controlling bullshit.

His points about transactions being recorded, are somewhat salient, but not enough to stop what bitcoin represents.  I hate lawyers, and I love guns, so what does that say?  Many people will never agree with me.  Crypto, from the outset, has been seen as an enabler of crime.  But in fact, the very essence of crime is, doing what the authority says you can't do.  In Russia or China, the government is the biggest criminal, and the USA is tilting down that road as well.  The minute the banks of the US get raided like Cyprus, pretty much all lawyers will have to run for cover, because guns and crypto will be far more valuable to them.

When the banks crash, as they must, the US military will be running the courts.  Traditionally, gold and silver were mostly used to pay soldiers in booty (See David Graeber's (sp?) fine youtubes on debt) and so the question essentially becomes this:  How many US soldiers, reservists, or militiamen, are bitcoin enabled and crypto proficient?  That's the only essential question for the next 20 years.  Lawyers as such, have inflated their profession beyond all human concern, and so they have in essence, debauched law itself.  Law, will have to find its own center after the banks collapse.  I think it will do so, but we will have to go through a sort of "Liberty Valance" type of era, where lawyers are mostly seen as vermin.  Just my two cents.

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Please help me understand what was written about Bitcoin on www.TickerForum.org

Today at 02:34:37 AM


 #1
 

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Take a look at what a blogger wrote regarding Bitcoin. If he's right then Bitcoin's future may not be bright.

I am re-posting a "Ticker" that the author/owner of a blog known as Tickerforum (www.tickerforum.org) wrote regarding Bitcoin.  He adamantly opposes Bitcoin and points out several "flaws" in Bitcoin. 

Based on what I have read on the BitcoinTalk forum, I believe that his logic is flawed, but don't know enough to negate what he's saying.  Can those of you who have a more thorough knowledge of the intricacies of Bitcoin take a look at what he wrote and share your thoughts?

His essay is titled "BitCon: Don't" and it is pasted below.

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http://market-ticker.org/akcs-www?post=219284

BitCon: Don't
   

Ok, I've been asked enough times, here it is -- my view and analysis of "Bitcoin", which I have taken to calling "Bitcon."  That probably deserves an explanation....

Let's first define what an ideal currency would be.  Currency serves two purposes; it allows me to express a preference for one good or service over another, and it allows me to express time preference (that is, when I acquire or consume a good or service.)

All currencies must satisfy at least one of these purposes, and an ideal currency must satisfy both.

The good and service preference is what allows you to, possessing a dozen eggs from a chicken, to obtain a gallon of gasoline without finding someone who has gasoline and wants eggs.  That is, it is the ability to use the currency as a fungible intermediary between two goods and services, one of which you possess and the other of which you desire.  Without this function in an economy you have only barter and poor specialization, with it you have excellent specialization and a much-more-diverse economic picture.

Time preference is the ability to choose to perform a service or sell a good now but obtain and consume the other part of the transaction for yourself later.  With a perfect currency time preference has no finger on the scale; that is, the currency neither appreciates or depreciates over time against a reasonably-constant basket of goods and services.  Since technological advancement tends to make it easier to produce "things" in real terms, a perfect currency reflects this and makes time preference inherently valuable.  This in turn forces the producers of goods and services to innovate in order to attract your economic surplus from under the mattress and into their cash registers, since not spending your economic surplus is in fact to your advantage.  Today's fiat currencies intentionally violate the natural time preference of increasing productivity, but even yesterday's metallic standards did a poor job of representing it.  The problem here is the State, which always seeks (like most people) to get something for nothing and what it winds up doing instead (since getting something for nothing is impossible) is effectively stealing.

Unfortunately Bitcoin, as I will explain in detail, also does a*****-poor job of satisfying either of these requirements.

But before I get to that, I want to first demolish the argument for using it that is going around in various circles and media these days -- the idea that it is stateless (that is, without a State Sponsor) and this is somehow good, in that it allows the user to evade the tentacles of the State.

This is utterly false and, if you're foolish enough to believe it and are big enough to be worth making an example of you will eventually wind up in prison -- with certainty.

All currencies require some means of validation.  That is, when you and I wish to transact using a currency I have to be able to know that you're not presenting a counterfeit token to me.  Gold became popular because it was fairly difficult to "create" (you had to find it and dig it out of the ground) and it was reasonably-easy to validate.  The mass and volume were easily verified and other materials of similar mass and volume had wildly-disparate physical properties and could be easily distinguished.  (The recent claims of "salted" bars with tungsten notwithstanding!)  With only a scale and a means of measuring displacement of a known thing (e.g. water) I could be reasonably-certain that if you presented to me something claiming to be one ounce of gold that it in fact was one ounce of gold.  It therefore was "self-validating."

Likewise, dollar bills are reasonably self-validating.  I can observe one and if it appears to be a dollar bill, feels correct and has the security features I can be reasonably certain that it is not counterfeit.  The Secret Service can determine with a fairly high degree of certainty (and very quickly too) whether a particular bill is real as they can verify the serial number was actually issued and that a bunch of the same serial numbers are not being seen in circulation, but for ordinary commerce this is not necessary; the bill itself has enough unique features so for ordinary purposes it is self-validating.

Bitcoin and other digital currencies are different -- they're just a string of bits.  To validate a coin, therefore, I must know that the one you are presenting to me is unique, that it wasn't just made up by you at random but in fact is a valid coin (you were either transferred it and the chain is intact or you personally "mined" it, a computationally-expensive thing to do), and has not been spent by you somewhere else first. 

In order to do this the system that implements the currency must maintain and expose a full and complete record of each and every transfer from the origin of that particular coin forward!

This is the only way I can know that nobody else was presented the same token before I was, and that the last transfer made of that token was to you.  I must know with certainty that both of these conditions are true, and then to be able to spend that coin I must make the fact that I hold it and you transferred it to me known to everyone as well.

Now consider the typical clandestine transaction -- Joe wishes to buy a bag of pot, which happens to be illegal to transact.  He has Bitcoins to buy the pot with.  He finds a dealer willing to sell the pot despite it being illegal to do so, and transfers the coins to the dealer.  The dealer must verify the block chain of the coins to insure that he is not being given coins that were already spent on gasoline or that Joe didn't counterfeit them, and then he transfers the pot to Joe.  There is now an indelible and permanent record of the transfer of funds and that record will never go away.

This creates several problems for both Joe and the dealer.  The dealer can (and might) take steps such as using "throw-away" wallets to try to unlink the transfer from his person, but that's dangerous.  In all jurisdictions "structuring" transactions to evade money laundering or reporting constraints is a separate and unique crime and usually is a felony.  Therefore, the very act of trying to split up transactions or use of "throw-away" wallets in and of itself is likely to be ruled a crime, leaving any party doing that exposed to separate and distinct criminal charges (along with whatever else they can bust you for.)

Second, due to the indelible nature of the records you're exposed for much longer that with traditional currencies to the risk of a bust and in many cases you might be exposed for the rest of your life.  In particular if there is a tax evasion issue that arises you're in big trouble because there is no statute of limitations on willful non-reporting of taxes in the United States, along with many other jurisdictions.  Since the records never go away your exposure, once you engage in a transaction that leads to liability, is permanent. 

Third, because Bitcoin is not state-linked and thus fluctuates in value there is an FX tax issue.  Let's say you "buy" Bitcoins (whether for cash or in exchange for a good or service you provide) at a time when they have a "value" of $5 each against the US dollar.  You spend them when they have a "value" of $20 each.  You have a capital gain of $15.  At the time of the sale you have a tax liability too, and I'm willing to bet you didn't keep track of it or report it.  That liability never goes away as it was wilfully evaded and yet the ability to track the transaction never goes away either!

Worse, most jurisdictions only permit the taking of a capital loss against other gains, and not against ordinary income taxes.  This really sucks because it's a "heads you pay tax, tails you get screwed" situation. This is the inherent problem that gold and other commodities have as "inflation hedges"; the government always denominates its taxes in nominal dollars, not inflation-adjusted ones.  The only currency against which there is no FX tax exposure is the one the government you live under uses and denominates its taxes in.  That is why the government's issued currency will always be the preferred medium of exchange irrespective of all other competing currencies.

Incidentally, all of this exposure which you take with Bitcoin is very unlike transacting a bag of pot for a $100 bill -- or a gold coin.  Unless you're caught pretty much "in the act" once the pot is smoked and the dealer spends the $100 the odds of an ex-post-facto investigation being able to disclose what happened and tie you to the event fades to near-zero. 

This never happens with a Bitcoin transaction -- ever.

If that dealer is caught some time later, but still within the statute of limitations for the original offense, you could get tagged.  And if the statute of limitations has expired you're still not in the clear if you had a capital gain on the transaction.

There isn't any way to avoid these facts -- they're structural in all digital currencies.  And they don't just apply to buying or selling drugs -- they apply to any act that is intended to evade a government's currency or transaction controls.  The very thing that makes Bitcoin work, the irrefutable knowledge that a coin is "good" predicated on digital cryptography, is the noose that will go around your neck at the most-inappropriate time.

Those who are using Bitcoin as a means to try to foil currency controls or state prohibitions on certain transactions are asking for a criminal indictment not only for the original evasion act itself but also the possibility of a money-laundering indictment on top of it, and the proof necessary to hang you in a court of law is inherently present in the design of the currency system!

Now let's talk about the other problems generally with all such currency systems in terms of an ideal currency and how Bitcoin stacks up.

First, the ability to use Bitcoin to express good and service preference.

Here the fundamental problem of wide acceptance comes into view.  This is the problem that the proponents of the system are most-able to address through various promotional activities.  Unfortunately it also leads to deception -- either by omission or commission -- of the flaw just discussed.  To the extent that the popularity of the currency is driven by a desire to "escape" state control promotion of that currency on those grounds when in fact you are more likely to get caught (and irrefutably so!) than using conventional banknotes is an active fraud perpetrated upon those who are insufficiently aware of how a cryptocurrency works.

Cryptocurrencies have a secondary problem in that because they are not self-validating there is a time delay between your proposed transaction using a given token and when you can know that the token is valid.  Bitcoin typically takes a few minutes (about 10) to gain reasonable certainty that a given token is good, but quite a bit longer (an hour or so) to know with reasonable certainty that it is good.  That is, it is computationally reasonable to believe after 10 minutes or so that the chain integrity you are relying on is good.  It approaches computational impracticality after about an hour that the chain is invalid.

This is not a problem where ordering of a good or service and fulfillment is separated by a reasonable amount of time, but for "point of transaction" situations it is a very serious problem.  If you wish to fill up your tank with gasoline, for example, few people are going to be willing to wait for 10 minutes, say much less an hour, before being permitted to pump the gas -- or drive off with it.  This makes such a currency severely handicapped for general transaction use in an economy, and that in turn damages goods and service preference -- the ability to use it to exchange one good or service for another.  What's worse is that as the volume of transactions and the widespread acceptance rises so does the value of someone tampering with the block chain and as such the amount of time you must wait to be reasonably secure against that risk goes up rather than down.

Then there is what I consider to be Bitcoin's fatal flaw -- the inherent design and de-coupling of the currency from the obligation of sovereigns.  Yes, obligation -- not privilege.

Bitcoins are basically cryptographic "solutions."  The design is such that when the system was initialized it was reasonably easy to compute a new solution, and thus "mine" a coin.  As each coin is "mined" the next solution becomes more difficult.  The scale of difficulty was set up in such a fashion that it is computationally infeasable using known technology and that expected to be able to be developed in the foreseeable future to reach the maximum number of coins that can be in circulation.  Since each cryptographic solution is finite and singular, and each one gets progressively harder to discern, those who first initiated Bitcoin were rewarded with a large number of easily-mined coins for a very cheap "investment" while the computational difficulty of "extracting" each additional one goes up.

That means that if you were one of the early adopters you get paid through the difficulty of those who attempt to mine coins later!  That is, your value increases because the later person's expenditure of energy increases rather than through your own expenditure of energy.  If that sounds kind of like a pyramid scheme, it's because it is very similar to to how the "early adopters" in all pyramid schemes get a return -- your later and ever-increasing effort for each subsequent unit of return accrues far more to the early adopter than it does to you!

The other problem that a cryptocurrency has is that it possesses entropy. 

Entropy is simply the tendency toward disorder (that is, loss of value.)  A car, left out in the open, exhibits this as it rusts away.  Gold has very low entropy, in that it is almost-impossible to actually destroy it.  It does not oxidize or react with most other elements and as such virtually all of the gold ever dug out of the ground still exists as actual gold.

Fiat currencies, of course, have entropy in both directions because they can be emitted and withdrawn at will.  We'll get to that in a minute, and it's quite important to understand.

Bitcoin exhibits irreversible entropy.  A coin that is "lost", that is, which the current possessor loses control over either by physically losing their wallet or the key to it, can never be recovered.  That cryptographic sequence is effectively and permanently abandoned since there is no way for the entity who currently has possession of it to pass it on to someone else.  This is often touted as a feature in that it inevitably is deflationary, but whether that's good or bad remains to be seen.  It certainly is something that those who tout the currency think is good for the value of what they hold, but the irreversible loss of value can also easily lead people to abandon the use of the currency in which case its utility value to express goods and service preference is damaged, quite-possibly to the point of revulsion.

This is not true, incidentally, for something like a gold coin.  The coin can be lost or stolen but unless it's lost over the side of a boat at irretrievable depth it can be recovered and the person who recovers it can spend it.  What constitutes "irretrievable depth" has a great deal to do with exactly how many coins might be there too -- what's impractical for one coin is most-certainly not when the potential haul reaches into the thousands of pounds!

I mentioned above about fiat currencies being able to be issued and withdrawn.  There is often much hay made about the principle of seigniorage, which is the term for the "from thin air" creation of value that a state actor obtains in creating tokens of money.  Seigniorage is simply the difference in represented value between the cost of emitting the token (in the case of paper money, the paper, security features and ink) and the "value" represented in the market.  There is much outrage directed at the premise of fiat currency in this regard but nearly all of it is misplaced because people do not understand that in a just and proper currency system the benefit of seigniorage comes with the responsibility for it as well, and it is supposed to be bi-directional.

That is, in order for time preference to be neutrally expressed, less the natural deflationary tendency from productivity improvement, the government entity issuing currency gets the benefit of seigniorage when the economy is expanding.  But -- during times of economic contraction they also get the duty to withdraw currency (or credit) so as to maintain the same balance, as otherwise the consequence is inflation -- that is, a generalized rise in the price level and the destruction of the common person's purchasing power.

That this is honored in the breach rather than the observance does not change how these functions are supposed to work, any more than the fact that we have bank robbers means we shouldn't have banks.  This, fundamentally, is why currency schemes like Bitcoin will never replace a properly functioning national currency and are always at risk of becoming worthless without warning should such a currency system arise, even ignoring the potential for legal (or extra-legal) attack.

Simply put there is no obligation to go along with the privilege that the originators of a crypto-currency scheme have left for themselves -- the ability to profit without effort by the future efforts of others who engage in the mining of coins.

Those who argue that state actors creating currencies get the same privilege are correct, but those state actors also have the countervailing duty to withdraw that currency during economic contractions associated with their privilege, whether they properly discharge that duty or not.

For these reasons I do not now and never will support Bitcoin or its offshoots, nor will I accept and transact in it in commerce.  I prefer instead to effort toward political recognition of the duties that come with the privilege that is bestowed on a sovereign currency issuer in the hope of solving the underlying problem rather than sniveling in the corner trying to evade it.

The latter is, in my opinion, unworthy of my involvement.

Good start I guess.  Thanks!

Wow! Here is a true Bitcoin evangelical preaching to the converted!


See what you are describing, that is the classic scenario for a market cornering bull trap. Just one big player consistently ensures that the price increases constantly, eventually all the little piggies come flooding in looking to make a fast buck. Some of them get on and off the train timely enough to do so, but most are slaughtered when the puppet master pulls the bottom out of the market.

Impossible you cry, the surge of mass demand from millions of little piggies will keep the price always afloat!

But keep what afloat?

In case everyone has forgotten. Bitcoin was not intended as an investment vehicle, but as an alternative currency. Any currency that can fluctuate in value by as much as 25% in any given day, without such a fluctuation being seen as abnormal, is no currency at all. In short, this wild upsurge and the accompanying volatility is an impediment to the growth of the economic activities that underpin the value of Bitcoin, and that is with Bitcoin on the up, when Bitcoin is on the way down, it will wipe out many individuals conducting a business using Bitcoin as a means of transferring value in real world economic transactions.

I personally don't believe that this upsurge has come about as a result of the free market in the ideal sense of the word, but rather as a result of market manipulation. Here is a great thread discussing a very plausible agenda as to why Bitcoin is being manipulated: https://bitcointalk.org/index.php?topic=160512.40

Whilst this insane upward price discovery is great for all of those who have got into Bitcoin even as recently as just 2-3 weeks before now, Bitcoin is NOTHING without the economic activity (predominantly black market) which underpins it. And if the volatility being manipulated into the market successfully kills off that, then all those rushing in with $50K, will be left holding a big bundle of digital '18th century Dutch Black Tulip Bulbs' that are no good for nobody. Perhaps many little men can greatly enrich themselves before the day of reckoning comes and perhaps Bitcoin will increase in value multiple times before then also, but people really shouldnt delude themselves with their own wishful thinking as to the nature of this beast.

The concept of Bitcoin, has at least in theory, the power to liberate mankind. But Bitcoin in reality, has been infiltrated, hi-jacked, and is being sabotaged.