Topic: If bitcoin succeeds....so what? - page 2. (Read 4184 times)

Any mechanism to do that is susceptable to manipulation.  US $ were pegged to gold, until someone decided to get greedy (Morgan, Loeb, etc.) when they made the Fed.

The beauty of BitCoin is that no central authority can manipulate it.  When enough people use it for transactions, it will stabilize.  Right now it is in pure speculation mode.

The solution to this is to peg the value of the coins to something with stable value like gold. I think this should be possible without introducing any form of centralized authority.

So what?

Choice, that's what.

The best thing is that banking secrecy will have real meaning.  Plus Ben Bernanke can't just steal the value of everyone's savings by counterfieting more money.

It's not about the integrity of the currency, it's about the real world in which the currency operates (or doesn't).

If someone on ebay asks you to pay using Western Union, they are almost certainly trying to defraud you.  Western Union itself is completely legit and has good integrity.

And that's not even considering law enforcement's potential presumption of guilt by association with bitcoin.  It's not hard to imagine a scenario where using a bitcoin exchanger tends to get you audited by the IRS even if you are 100% legal.  It would be wrong, but it's the world we live in, not the world as we wish it were.

reputation of "the bitcoin" only matters as much as the integrity of the currency, not what its used for.

People need to quit associating the use of the bitcoin with "illegal" stuff as a bad thing, or just say the same thing about all currencies

Bitcoins - are used to buy to buy drugs and guns, and good stuff too, like video cards and everything else in the trade section
Euros - are used to buy to buy drugs and guns, and good stuff too, like video cards and everything else in the trade section
USD - are used to buy to buy drugs and guns, and good stuff too, like video cards and everything else in the trade section

What a currency is used for means nothing as to the integrity of the currency

I agree.  Bitcoin will not survive if it remains anonymous as drug/gun trade would tarnish its reputation and adoption.  Governments would ultimately aggressively pursue bitcoin users.

Let's just assume e.g. the US government. Of course, this would only affect US in the first place. But they could for example offer foreign (web) shops to register some receiving address to the US list of 'legal' addresses in order to allow US citizen to legally transfer money to them. This would be no big deal for a foreign web shop to do, because they can still keep all their other addresses away from US regulation so they loose nothing from this. But on the other hand they can open their shop for a big market with 300 millions of people by doing so. If this works, the US government could establish their regulation concept without hurting international trade too much, even if other nations would not cooperate.

But I can easily imagine that other governments will like bitcoin regulation and surveillance a lot. So I don't see any reason why there should not be similar regulations in most countries of the world or even international agreements on bitcoin regulations (like for money laundering).

I don't say that this scenario will happen. I'm only saying that it's not unlikely to happen.

Very curious to know your training in economics.

Yeah, but which government? You're forgetting BTC is an international, Earth currency, not one directly tied to a country.

Also, there's nothing stopping you from sending money from an "unregistered" address to a "registered" one. How can the receiver "refuse" to accept the payment (well, unless you're using the "authorized" client)?

If bitcoin really succeeds, I guess it will be regulated in a way that it becomes at least very difficult to use it anonymously. A 'worst case' scenario which comes to my mind:

The government creates a new law which makes it mandatory to register all your bitcoin addresses at a newly founded bitcoin regulation office. They'll put all those addresses into a database which then can be accessed publicly via the internet so that everybody can check if an address is properly registered or not (the names of the address owners will not been published, but some governmental institution like e.g. the tax authorities will of course have acces to them). Then it will be made illegal to transfer money to or receive money from non-registered bitcoin adresses. So if you create a bitcoin address without properly registering it, it's not only illegal, you'll also have trouble to find people to accept bitcoin transfers from this address (because they will check the public address database before e.g. accepting you as a customer in your shop).

To make things easier in everyday life, the government could start to distribute a 'secure bitcoin client' which automatically complies to these rules. For instance, if you create a new address, the client registers it immediately. If you send money, the client automatically checks the public database and only allows the transaction if the receiving address is also a registered one.

Given the existence of such a government database which relates all legal bitcoin addresses to the actual names of the owners, the architecture of the bitcoin network will turn the currency into a perfect tool for surveillance. If authorities want to have a list of the things which I bought on the internet within the last ten years, they don't have to bother with getting data from online payment services etc. They just look up my bitcoin address(es) from my database and check the blockchain ...

the way i see it:
main disadvantage: infinite inflation - which isnt necessarily always good.
main advantage - decentralizing the currency can do a lot of good to a lot of people, mainly outside the usa and Europe

naorai

Graduate degree in econ and the OP is what you have to show for it? The education system have failed you miserably or the troll university you attended have done you much good.

Yes they have value because they are desired.  Tulip bulbs were valuable because they were desired, and desired because they were valuable.  My problem is that if a thing is ONLY desired because other people want them, then no rational price exists.  Tulip bulbs could be $100 or $1000 or $10,000 and none of these prices is any more rational than any other price.

Actually, there is a rational price, which is the commodity value.  If it has no commodity value then it is zero.

Even if the rational price is zero, it can still have numismatic value.  Old stamps have value because people want them, and people want them partly because they have value to others but also because they derive joy from owning old stamps.  I'd say this is not rational value but it is value nonetheless.

In the case of bitcoins I think people derive a similar kind of non-rational value from believing that they are escaping the system.

"I spent $1000 on this rare T-shirt as an investment and all I got was this lousy T-shirt"

To the OP: if bitcoin really succeeds, like, becoming the main currency of a nation, such nation would be able to prosper considerably as a result of it.
The damage caused by central banks is tremendous. Lots of capital is destroyed on economic cycles they cause, and besides that, money printing is an endless source of financing to governments. All this at the expense of hard working people.
Much less wealth would be destroyed by governments if they could not inflate the monetary base as they can today.

Can you explain how you came to the hyperinflation conclusion?

I don't get it... you're doubting bitcoin has value? Isn't that crystal-clear already? Even thieves are after them!

Scarcity alone is not enough, but being scarce + being desired by some people is enough to attribute value to any resource.

Governments and others with power use normal money to control the majority of people. It would be much harder for them to do that with Bitcoin, so it would at least happen a lot less often. Banks are an anti-democratic force and Bitcoin is a democratic force, spreading power to everyone. Bitcoin allows the funding of free speech like Wikileaks which allows people to organize on large scales to change the world.

Why would I keep my Bitcoins in a bank when the peer to peer network already functions as a bank?

I tend to think of Coase's Theorem in terms of property rights in a micro framework, but, yes my suspicions are that bitcoin will not alter the wealth distribution aside from creating a few rich people.  Another response earlier provided a good example of how the same result has occurred with the internet.  I don't see evidence yet that bitcoin represents a fundamental shift aside from an adventurous monetary policy change.

Clearly that's a Keynesian idea, but it's just an example.  I'd rather not get into politics.  The key point is the bitcoin economy is decentralized and we don't know what that will do in the long run.