Topic: Long-Term Bulls - page 5. (Read 10501 times)

It is possible that money started as commodity - but the point is that what differentiates money from commodity is that it has much higher 'exchange value' then 'use value'.  This is really what defines money - so when you have something that has only exchange value and no use value - then it is kind of 'pure money'.

Dollars, like all other fiat money, originated as a commodity backed currency, either with direct backing of a commodity, or indirect backing of a commodity by being backed by another currency that originated as a commodity backed currency.  Bitcoin is not a commodity in itself (only directly serviceable goods can become a commodity), and has no direct or indirect commodity backing it.

Wow, did all of you miss this line?

"Even assuming you had full trust in me and my ability to keep the ledger accurate and secure, "nums" still provide no direct service to anyone."

The same is true of Bitcoin.  Despite having full trust in the Bitcoin system, a bitcoin is not a directly serviceable good.

EDIT: To clarify, it was irrelevant as far as my the argument I was making was concerned.  It seems many of you got hung up on something other than the argument that I was making, like the probability of my service gaining wide-spread trust.  However, trust was irrelevant, because even if I were trusted by everyone just as much as they trust the Bitcoin network, the "nums" still would not be a directly serviceable good.

I still disagree that the ability to pay taxes is not a direct service. I know that I need to pay a certain amount of taxes. So, for me, the dollar is backed: this 1000 dollar bill will be able to pay off 10% of my taxes, so if I get 10 of them they have served a direct service (me not being in jail).

Currently, Bitcoin is not backed this way. However, it can be. That's the extent of my argument.

Yes, your ledger services would be valuable.  The service would solve at least a couple problems including:
- the double coincidence of wants
- time preference for consumption

However, you would need to convince a critical mass of people that your "nums" are somehow superior to other peoples' "nums" such that people would feel confident that the "nums" they control will be worth something at the time they need to trade them for something.  Given that your system has a weak, centralized point of failure and there are better alternatives, it's unlikely your "nums" will gain widespread adoption.

Banks almost work as you describe, except that they introduce new "nums" by lending them at interest (which creates a whole other set of problems).

You are right that it all revolves around trust.  The fact that you can buy something for dollars (or gold) is because other people trust that whey they in turn need something they'll be able to turn the dollar they received into something else.  This is the same case with bitcoin.   Dollars don't provide any what you call 'direct service' (if you don't use them as a wall paper that is), or 'use value' (in Marks terms I think), they only value is 'exchange value'.  

Exactly

Nah; it's totally relevant, otherwise people wouldn't use Bitcoin.

Your system requires that people trust you as a third party. Bitcoin requires no such trust.

A transaction system which requires no trusted party - this is as revolutionary as email... and like email, it'll take a while for people to realize the ramifications.

The Bitcoin system, which is a very ingenious system, has the potential to provide a direct service, but does a bitcoin itself provide a direct service to people?  The only direct service the Bitcoin system that one could argue it currently provides is to "send" bitcoins to others.  But if a bitcoin does not provide a direct service, why are people willing to exchange goods for them?  I believe there is among Bitcoin users a widespread misunderstanding of Bitcoin, and after so much discussion on this thread, a misunderstanding of the concept of money itself.  This calls into question the value of the Bitcoin system since it's only direct service is to allow people to "send" an alleged good which provides no direct service.

I could create a ledger with some paper and a pencil, calling the numbers in the ledger "nums", and after someone fulfills some requirement I can write +50 "nums" to their account.  Then, for example, they can then have me write -25 "nums" to their account and +25 "nums" to someone else's account.  But what direct service do "nums" provide?  Why would anyone want to pay a cost (whether it's meeting some arbitrary requirement or offering a good) to acquire any "nums"?  The only difference between "nums" and bitcoins (and this difference is actually irrelevant) is one of who or what is trusted.  Even assuming you had full trust in me and my ability to keep the ledger accurate and secure, "nums" still provide no direct service to anyone.  My ledger service has the potential to provide a direct service, but the "nums" it keeps account of do not provide any direct service, so would my ledger service actually be providing a direct service to people by keeping account of "nums"?  I don't think so.

Who's talking about belief?  I'm talking about people agreeing to abide by a certain set of rules.

It's not about who said it, but rather about what they said and whether or not it is logically sound.  My reference to that wiki page was not an appeal to authority, but was an attempt to point people towards further arguments that have already been analyzed and expanded on by many economists (and others have failed to refute).

The rules of mathematics are not subject to belief. But the technical details of the bitcoin system makes no assertion of value, only authenticity. According to Mises, bitcoin is perhaps not money. But Ludwig von Mises is dead. We should not extrapolate from what he once said before computers existed to what he might say today.

The bitcoin protocol does provide a serviceable good. But there are very few whose benefit from that service was greater than the cost of that service. In other words, today it is a pain in the ass to obtain bitcoins and very few people have made a transaction for which that difficulty was worth it, in and of itself. Once we have a bunch of bitcoins, acquired due to fascination, then perhaps we begin to see some later benefit. But I think things get interesting if/when anyone who currently offers services on the net can reasonable expect to receive bitcoin and spend them on goods or services the same day without an account on an exchange.

Some interesting statements from http://wiki.mises.org/wiki/Money (please read the sources cited for further study):

(emphasis added)

All government fiat currencies originated as commodity backed currencies (whether directly or indirectly) before governments broke their promises to make them redeemable in the commodity.


The rules of the Bitcoin system (maximum block sizes, total number of bitcoins, block generation, how people "send" Bitcoins, etc.) are a social contract that anyone can freely agree with or not.

This is where I have to disagree. Dollars cannot be worthless due to the tax backing, because there is always demand. Bitcoin, in contrast, does not have guarenteed demand because you cannot excange Bitcoin for electricity.

Agreed; +1

The Chinese seem to be dumping their dollars as fast as they can.

Oh, then surely you know very well that a dollar in China is worth more than a dollar in the United States.

I currently live in China - a wink is legal tender here.

I would think the cost gets smaller as the price decreases and confidence diminishes. I have dreamed up numerous strategies, but I honestly don't know, and I'd love to see an intelligent discussion on the topic.

That IS an inherent utility value! However, I question whether it is a scarce utility. Numerous (even inferior) alternate chains can provide these utilities. Perhaps the bitcoin network will make it more secure and its size will make transactions more obscure, such that its network effect will make alternatives worthless, but I am not yet sure.

I don't give that any chance of being implemented, effective, nor trusted.

You are being silly. Perhaps exchanging a dollar has extra costs, but I promise if $1000 landed in your pocket, it would be worth several fine dinners and toys where ever you are. I don't use dollars every day either, but I won't pretend it has no value to me today.

I'm not an American so 'dollar' has no real value to me - no one where I am has to accept dollars - I've never actually seen a real dollar except on Miami Vice (or was it Kojak).