Topic: ECB paper on Bitcoin and virtual currencies - page 8. (Read 16899 times)

molecular

I've been arguing that bitcoin is a virtual currency and that fiat is not a virtual currency but I like you point.  If fiat is actually the virtual what is bitcoin it can't also be a virtual currency as it implies they are both the same thing which they are not.


Digital - yes.   a commodity - yes.   money  - in what sense?  is stores value?  it has value, it certainly has a perceived value.

a digital comedity money ?   too much  too academic.  

Needs to be more clear.   But you are on to something!

I have to speak more of my mind on this paper. The reception has been too positive (I do agree it's well researched):

They got it all backwards with the naming concept. I think the connotations of the terms they use are quite misleading.

They contrast "virtual" vs. "real" (bitcoin: virtual (not really real), EUR: real, money of the "real economy").

In my mind, bitcoin is way more real than FIAT money. I wouldn't use "virtual" at all, because it implies "not really existing, just hot air". As for the terms they use for the Euro, they're very unfitting: it's neither "real" nor is it "money".

I'd suggest to use the following terms:

bitcoin and precious metals are "real money" or "commodity money" (bitcoin being a "digital commodity money", while FIAT currencies are, well, "virtual currencies" or just "currencies": mere units of account, unfit for storing wealth in the long run.

Since I know the above is controversial, here's a categorization of types of money taken from "The Creature from Jekyll Island" which I like:

• commodity money
• receipt money
• fractional money
• fiat money

The characterizations of these are much more relevant to the functioning of a money and the implications of its use in society than wether or not a money scheme has in-/outflow to/from a certain FIAT currency.

Again: I don't think calling it a "virtual currency scheme" does bitcoin justice. It's a money for heavens sake!

My approach would be ... tell them nothing, let them do the leg work to figure it out.

Central Banks are past masters at keeping their servants (the public) in the dark and bull-shitting them for decades ..... what goes around, comes around.

Kind of surprised the ECB hasn't got it's too hands full with the massive cock-up they have wrought on the 400 million minions of Europe with the Euro centralised currency rort ... to be writing fluff pieces about virtual currencies threatening their system ... they seem a little panicked, like they are losing legitimacy.

Realpra,

Bitcoin holders and active Bitcoin users are a totally different statistic. We were talking about the relatively active userbase which probably is somewhere between 50 000 and 150 000.

I agree with you that the amount of people who own bitcoins is much larger. Most definitely over 1 million. I know so many people around me who own at least some coins. Some of the people I know have even invested significant amounts. But they have literally never used Bitcoin, some of them perhaps once or twice.

So there are different types of users, some Bitcoin holders have simply tried it out and hold some bitcoins and some have invested in bitcoins and hold a lot of bitcoins. Neither of these user groups actually use Bitcoin for transacting with it. So these are different demographics entirely.

I think it's smart to separate Bitcoin holders and Bitcoin users since there are probably ten times more holders compared to those that use Bitcoin occasionally or regularly.

I think about 1 million people are using Bitcoin based on the valuation that would be 200$ on average which seems plausible.

Some have a lot, others just change from free outlets, but most perhaps 200$ as experimentation or for buying a few drugs.

Myself I have ~10 times that. Even 100k users would mean an average of that (2.000$) which I find hard to believe as many still see this as experimentation and I am from a richer country than most.
An average of 20.000$ as would be implied by 10k users would be crazy. Most of us are normal guys with costs, wives and stuff - we might be able to access that kind of money, but not for an experiment our wives/family don't get/hate

Likewise an average of 20$ is too low as it is troublesome to get so few BTC through a wire transfer without huge percentage costs.

1 mil also kinda fits with the various numbers of users here and there put together and corrected for a couple of double accounts etc..

Also BTC value comes from its usage - 100k or 10k hoarders would not be worth 200 million dollars or generate so much activity I'm guessing.

I will inform everyone here in BIG LETTERS .

One the one hand it's pretty sad for comunity to not even be able to determine its own size. One the other hand, of course, this is a feature, not a bug.

Am I understanding this correctly as: "If these guys would print more serious amounts of money, that would inflate the EUR money supply, because these linden dollars / bitcoins are being used a tokens for Euros, yet used directly as if they where "real money" (similarly to when back in the days receipts of gold deposits where used as money)?

I mean, if merchants accept both bitcoin and EUR for payment, then bitcoin actually _does_ inflate the FIAT money supply, right? For example: let's say there €100 money supply. Now one bitcoin is mined and people value it at €10 for whatever reason and all merchants accept it as payment just like a €10 bill. Didn't we then just effectively inflate the money supply to €110?

Could this be the "reputational danger" they're talking about? People see price inflation as a result of money supply inflation (this will be the case anyhow, I think) and will then blame it on the central bank, even if they didn't do all the inflating themselves? After all, part of their job is to "regulate the money supply". This would also explain why they consider virtual currencies to fall into their domain. Will they then even try to blame the price inflation on the "issuance" and use of virtual currencies?

Good points molecular. Remember that with the node count the numbers go both ways. One node can actually represent thousands of users in some cases. My best guess for the userbase is something like 100 000, anyways. 10 000 is way too low, we can all agree on that.

Here are the sources for my earlier data, for those who are interested.

Unique (by IP) Bitcoin nodes in late 2011 (3 month period) = 800 000
http://blogs.umb.edu/williamfleurant001/2012/01/13/bitcoin/

Bitcoin Reference Client downloads in 2012 = Over 600 000
http://sourceforge.net/projects/bitcoin/files/stats/timeline?dates=2012-01-01+to+2012-10-30

Mt. Gox userbase = Over 200 000 (by now)
https://mtgox.com/press_release_20120831.html

Bitcointalk.org userbase = 70 000
https://bitcointalk.org/index.php?action=stats

Blockchain.info My Wallet userbase = Over 30 000
http://blockchain.info/about

Reddit Bitcoin subscribers = Over 11 000
http://www.reddit.com/r/Bitcoin/

If you can find any other good ways of trying to estimate the userbase, please inform me.

I can't wait for the ECB to try to buy 3,000,000 btc  

Of course, some teenager in Ukraine is going to hack their wallet the next day and steal all that loot back  

Bitcoin is there waiting for an opportunity, their ENTIRE fancy plan for 2010-2020 (and beyond perhaps) is adding a more centralized and corporatized EU to their control through the ECB and their printing press first.

They can't control the EU through the euro if people start running to bitcoin.

A "flash crash" is what they fear where overnight fiat currency is obliterated. ONE wrong story goes viral, one case of hyperinflation where Bitcoin is accepted (ANY country) and their power is GONE.


I LUVE this thread!

your numbers are inflated:


I am probably responsible for about 512 of these. (dynamic IP address)


I never downloaded, but "git pulled" probably 20 times.


I have 2 accounts, probably many deceased.


also: many puppets, forgotten pws, people that left without ever getting coins,...


I made about 5 of these


that one, I don't know. It might not be so heavily inflated.

Still, 10,000 is way too low. Probably 30-50,000

The Bitcoin Magazine #2 had a very in-depth article about that. Around 700,000 estimated.

I am very interested. I would really like to see a good estimate of how many Bitcoin users there are worldwide.

IMHO 10 million users is the key threshold to pass before going totally mass market.

My own rule-of-thumb guesstimate is to multiply the forum members (68k) x10 = 680k active users.

It's not wrong, it's just not possible to implement for Bitcoin. If such a law is implemented anyway it might for instance make it illegal to trade bitcoins.

We published a thorough response to the study on our blog:  http://blog.bitinstant.com/blog/2012/10/30/the-ecb-report-on-bitcoin-and-virtual-currencies.html

I was quite happy with the ECB's study. They did a far better job than the average journalist in trying to really understand Bitcoin from a philosophical point of view. I was also very pleased that they discussed how cash is comparable in many of the risks of Bitcoin (money laundering, drugs, fraud, theft, etc). Kudos to the ECB - they did as well as a central bank could be expected to do.

It depends on the virtual currency.

For Linden Dollars the report is right. Your interpretation is only part of the story since it could make sense for a central bank to hold reserves of Linden Dollars; however I believe the intent in the report is a legal requirement on Linden Labs to hold minimum reserves of USD, EUR, CAD or some other convertible currency.

For Bitcoin the report is wrong and your interpretation is the only reasonable course of action for the central bank to take; namely hold reserves of Bitcoin.

I'm not finished reading, but I think the report is actually very good.  It details Bitcoin in a way that is fairly easy to understand and does seem to try to be balanced.

My fav quote thus far:


All of you who are already donning your conspiracy theorist caps (assuming you ever take them off), you should try to refrain from doing so.  I feel that this is a big opportunity to silence critics and be like, "See, this very official document published by people who have every reason to be openly hostile to Bitcoin thinks you're wrong".

Well, they need to find sellers for those substantial reserves first.



Is the report wrong and I'm interpreting it incorrectly or vice versa?

Cross posted from the Speculation forum.

What if they can implement a concerted actions in cooperation of several big banks to buy and hold substancial reserves of BTC to be able to organize protective/regulative (sell offs) mesaures against other market participants? So called open transations window?