Suppose you wanted to start a geographically localised bitcoin economy

cbeast

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Quote from: unclescrooge on April 19, 2012, 04:21:18 PM

I like this topic.

First starter, we must have easy physical payment system: bitcoin credit card system, mobile phone system, bitcoin bill?

The problem with the first is that it's difficult/expensive to develop.

The problem with the second if that if it uses smartphone, not everyone will be able to use it. It could be sms based, but that's not very convenient/secure

Then ther's the third option. I don't find it very convenient (but i've never liked cash anyway), but that would be the best option.

What d'you think?

Paper bitcoin bills will have a lot of flexibility to offer. For one thing, they can be complex documents. I imagine that bills will have script transactions encoded as QR. For instance, a checkbook can be created that escrows a balance to a check that is secured by a m-of-n (i.e. 2-of-3) transaction with a personal keycard. The vendor cashing the check scans the bit check and keycard, then sweeps the change to the next check in the checkbook and gives you a receipt. Your money is completely private and secure.

from this thread: https://bitcointalksearch.org/topic/paper-wallet-clients-74978

Etlase2

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Quote from: hazek on April 22, 2012, 10:06:13 AM

Inflation != rising prices of goods sold for bitcoins
Inflation = increase in supply of bitcoins

Before you do any more thinking, you should recheck your foundation and make sure it's correct.

How many times is this going to appear on this board? There are two definitions. Yours is not right, they both are. It is almost always possible to determine from context to which form of inflation someone may be referring. This is so inanely pedantic and is such a waste of everyone's time to read.

hazek

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Quote from: fergalish on April 13, 2012, 09:39:14 AM

Even if you think the bank is unnecessary, is it possible that initial localised adoption might trigger increased localised bitcoin velocity and therefore inflation?

Just thinking.

Inflation != rising prices of goods sold for bitcoins
Inflation = increase in supply of bitcoins

Before you do any more thinking, you should recheck your foundation and make sure it's correct.

If prices actually rose it wouldn't be bad for the merchants because they wouldn't lose money by charging more bitcoins, they'd actually increase their purchasing power. Rising prices would be bad for their potential customers holding national and other currencies because suddenly they wouldn't be able to afford those goods anymore. But even this would get solved eventually as the merchants who now charge higher bitcoin prices and are increasing their bitcoin balance sheets can pay their employees more bitcoins who can then in return afford the higher prices again. Also eventually other merchants elsewhere would see the benefit of charging in bitcoins and would start to compete with that local economy which would drive the prices back down..

The key here is there is no one out there robbing these economies by creating more bitcoins out of thin air.

unclescrooge

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I like this topic.

First starter, we must have easy physical payment system: bitcoin credit card system, mobile phone system, bitcoin bill?

The problem with the first is that it's difficult/expensive to develop.

The problem with the second if that if it uses smartphone, not everyone will be able to use it. It could be sms based, but that's not very convenient/secure

Then ther's the third option. I don't find it very convenient (but i've never liked cash anyway), but that would be the best option.

What d'you think?

fergalish

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Quote from: Seal on April 16, 2012, 08:59:09 PM

There's a lot of good threads in this post... How did the eurozone countries eg Greece for example transition to the euro in the first place? Would that be a good model to switch countries to bitcoins?

This is exactly what I'm asking about. The Greek govt (and by proxy, the Greek people) implicitly trusted the EU not to flood Greece with worthless euros. I guess they were also hoping that all of europe wouldn't suddenly go to Greece and spend their euros there. There are no such guarantees with bitcoins. If some Greek community decides to adopt bitcoin instead of creating their own local currency, then ALL of bitcoindom could start buying there (e.g. online shops etc), and the area will be flooded with bitcoins, making it hard for regular traders to find equilibrium prices.

So, my opinion, is that the switch to euro involved a trusted central bank authority.

cbeasts solution is similar to what I suggested above, except he wants to continue using the electronic nature of bitcoins, whereas I suggested using 'the athenian bitcoin bank' which issues paper currency backed by its bitcoin reserves. Both systems assume that traders will honour the local bitcoin pseudo-currency, and either refuse or impede transactions with 'foreign' bitcoins. (this is what would give the 'green' bitcoins greater value - in the geographical zone of interest, more traders are willing to accept them, therefore their value increases).

Seal

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There's a lot of good threads in this post... How did the eurozone countries eg Greece for example transition to the euro in the first place?

Would that be a good model to switch countries to bitcoins?

cbeast

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Let's talk governance, lipstick, and pigs.

Quote from: 3phase on April 16, 2012, 01:15:15 PM

Quote from: cbeast on April 15, 2012, 05:23:01 PM

1. Buy virgin blocks of bitcoin from a miner and transfer all of them to a green address
2. Create casascius style physical bitcoins. They just need to be very hard to counterfeit.
3. Develop customized hardware/software that separates your green bitcoin from "tainted" bitcoin
4. Declare the value of your green bitcoin much higher than the bitcoin market.

Could I ask for a little more explanation?

Why would they need green addresses?

If you want a local Bitcoin economy, you want to keep your island of Bitcoin separate from the rest of the network.

Quote from: 3phase on April 16, 2012, 01:15:15 PM

Would they accept only BTC coming from the green address to circulate? What happens when someone brings in BTC from somewhere else?

Outside Bitcoin would be like trying to spend any foreign currency within your borders.

Quote from: 3phase on April 16, 2012, 01:15:15 PM

Why should they artificially increase the value of bitcoin from their green address?

Because it would deter someone from spending it outside your "green zone."

Quote from: 3phase on April 16, 2012, 01:15:15 PM

Would that be an "isolated" blockchain? Could they drop the existing blockchain altogether and fork a new one, starting with a genesis block containing only the original bitcoins in the green address?

No. It would be the same block chain every one else uses. It would still have a globally based resistance from attack.

Quote from: 3phase on April 16, 2012, 01:15:15 PM

How would that be different from starting another alternative cryptocurrency?

Your country would be to weak to create a strong enough network to resist other great powers. Besides, all other cryptocurrencies are inferior to Bitcoin.

Quote from: 3phase on April 16, 2012, 01:15:15 PM

I am really intrigued by these thoughts, and I've seen you mention them in another thread too. Have you written more about it anywhere else?

I don't even remember all the stuff I write. I've almost responded to my own postings.

3phase

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Third score

Quote from: cbeast on April 15, 2012, 05:23:01 PM

1. Buy virgin blocks of bitcoin from a miner and transfer all of them to a green address
2. Create casascius style physical bitcoins. They just need to be very hard to counterfeit.
3. Develop customized hardware/software that separates your green bitcoin from "tainted" bitcoin
4. Declare the value of your green bitcoin much higher than the bitcoin market.

Could I ask for a little more explanation?
Why would they need green addresses?
Would they accept only BTC coming from the green address to circulate? What happens when someone brings in BTC from somewhere else?
Why should they artificially increase the value of bitcoin from their green address?
Would that be an "isolated" blockchain? Could they drop the existing blockchain altogether and fork a new one, starting with a genesis block containing only the original bitcoins in the green address?
How would that be different from starting another alternative cryptocurrency?

I am really intrigued by these thoughts, and I've seen you mention them in another thread too. Have you written more about it anywhere else?

Thanks in advance.

benjamindees

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Velocity is just a crude approximation of economic interdependence and thus complexity. It is not an end in and of itself.

Etlase2

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Quote from: JusticeForYou on April 16, 2012, 12:46:41 AM

So comparing Economics to Newton might not appropriate in this case.

Sure if you want to use a scenario that fits within Newtonian mechanics. But that defeats the purpose of the example, now doesn't it?

JusticeForYou

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Quote from: Etlase2 on April 16, 2012, 12:24:09 AM

I never said that printing money is necessary to make people spend money, so I don't know what you're disagreeing with.

Too many people confuse economic theory with "predicting the future" when it reality all it does, and (honest) economists do not claim otherwise, is fit the facts into an equation.

Saying it isn't scientific or is a social science is really tired. Just as with physics, the models have gotten better and the equations more complicated over time. However, in some senses, predicting what the universe will do is much easier than predicting what people will do. This, again, does not invalidate economic theory. Just like Einstein did not invalidate Newton--he made a better model. It just means that all of the variables are not obvious.

I see your points. However, there are two schools of thought on economics. Sociology is sometimes more apt than statistics.

i.e. Given enough data you 'might' be able to tell me where I will spend $5 tomorrow to within a certain degree. There are to many unknown unknowns to be very precise. However, if I drop an apple from 6 feet it will hit the ground in the same amount of time when I do the same thing the next day.

So comparing Economics to Newton might not appropriate in this case.

Etlase2

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I never said that printing money is necessary to make people spend money, so I don't know what you're disagreeing with.

Too many people confuse economic theory with "predicting the future" when it reality all it does, and (honest) economists do not claim otherwise, is fit the facts into an equation.

Saying it isn't scientific or is a social science is really tired. Just as with physics, the models have gotten better and the equations more complicated over time. However, in some senses, predicting what the universe will do is much easier than predicting what people will do. This, again, does not invalidate economic theory. Just like Einstein did not invalidate Newton--he made a better model. It just means that all of the variables are not obvious.

cbeast

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Quote from: Etlase2 on April 15, 2012, 11:23:47 PM

Quote from: cbeast on April 15, 2012, 11:01:35 PM

That's because like most economic hypotheses, they are correlative, not causative relationships and do not make accurate predictions for future observations.

They don't have to be "causative" to have significance. Correlation still matters, and there is several hundred years' worth of history to back up this correlation. Sure the US government could match everyone's salary (pretend no fractional reserve) and everyone could do absolutely nothing with that extra money and prices could remain the same. But that isn't what is going to happen. Yes this involves "printing" more money, but you can come up with more convoluted scenarios where the same dollars are used, just much more frequently.

I'm not discounting correlation, just pointing out that money science (economics) is not really very scientific at all. Like any other social science, studies are mostly relevant to the population studied and do not generalize very well. I disagree that "printing" money is necessary to make people spend money. They would spend money more wisely and the market may instead respond by acting more wisely. Instead of a race to the bottom as we have experienced with slavery, mercantilism, and now consumerism, we may instead make wiser choices in what and how we produce.

Etlase2

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Quote from: cbeast on April 15, 2012, 11:01:35 PM

That's because like most economic hypotheses, they are correlative, not causative relationships and do not make accurate predictions for future observations.

They don't have to be "causative" to have significance. Correlation still matters, and there is several hundred years' worth of history to back up this correlation. Sure the US government could match everyone's salary (pretend no fractional reserve) and everyone could do absolutely nothing with that extra money and prices could remain the same. But that isn't what is going to happen. Yes this involves "printing" more money, but you can come up with more convoluted scenarios where the same dollars are used, just much more frequently.

Quote

Why would more bitcoins in circulation mean a lower value?

you would not likely see someone ask this question with "bitcoins" being replaced with "dollars".

cbeast

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Let's talk governance, lipstick, and pigs.

Quote from: Etlase2 on April 15, 2012, 10:16:11 PM

Shocking how few understand the velocity of money portion of a money's value.

That's because like most economic hypotheses, they are correlative, not causative relationships and do not make accurate predictions for future observations.

Etlase2

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Quote from: fergalish on April 13, 2012, 03:16:15 PM

There are two interesting things here. People are, and should be, responsible for the debts of their elected government. BUT, not for the debts of private banks which is actually how it has worked out in many countries. The elected officials either jumped on the bandwagon and are milking the system, or else they thought the economy was too systematically dependent on the banking sector to let it collapse. Second, I'm really curious to see how things pan out in Europe where, if I understand correctly, the new EU tax treaty will allow the European Commission to dictate the budget of any member nation that can't get it's own budget under control. Now, suppose you're... let's say Spanish. Right now your economy is fairly messed up, but suppose the Spanish government messes it up even more so the Eurocrats step in and dictate tax rates, healthcare budget, education budget, the works. And suppose the Eurocrats mess it up even more. Now who pays? The Spaniards pay for the mistakes of non-elected European officials? The EU is, I think, by and large a positive thing, but this really has the potential to be a disaster. Sorry - this bit is off topic. If you want we can start a separate topic to discuss this.

If we stopped this atrociously idiotic idea that money has to be backed by debt then this would not ever be a problem. Take away more and more services that the people pay taxes for so that their taxes can go to paying interest to the wealthy elite. Right on!

Etlase2

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Shocking how few understand the velocity of money portion of a money's value.

cbeast

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Let's talk governance, lipstick, and pigs.

1. Buy virgin blocks of bitcoin from a miner and transfer all of them to a green address
2. Create casascius style physical bitcoins. They just need to be very hard to counterfeit.
3. Develop customized hardware/software that separates your green bitcoin from "tainted" bitcoin
4. Declare the value of your green bitcoin much higher than the bitcoin market.

FreeMoney

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Strength in numbers

If the coins are worth more other places they'll just flow to those other places. But if there are a bunch of merchants who really want coin and make it easy and/or give discounts then coins will flow in to your area.

Realpra

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Quote from: fergalish on April 13, 2012, 11:06:43 AM

@Realpra: suppose someone suddenly came along and bought up half of all Danish crowns. They would suddenly be worth twice as much. Likewise, if someone suddenly floods the market with them, they become worth less. That's the basis of currency exchange.

That is correct, HOWEVER unlike DKK you can NOT "flood" the market with BITCOIN.

To introduce them in a region you would first have to drive up demand and buy some for your people.

The only thing that COULD lower the value would be if the Athenians dumped them as soon as they got them - the BTC value would then go back to normal, not lower though.

This is however unlikely to happen as BTC has a wide range of good qualities.

Quote

if a merchant sees demand for bitcoin priced objects increase, he will increase his bitcoin price.

This is incorrect:
1. The cost of converting from BTC to say EUR is pretty low.
2. A BTC merchant may thus only increase his price with the amount of that conversion cost.
3. Should he increase FURTHER people will just convert to EUR and go to his competitors.

Quote

So... to get back to the topic. What do ye think then, better to use actual bitcoins, or better to institute a bank which issues as much currency as it has bitcoins in reserve.

Actual bitcoins, most likely on smart cards, would be best:
1. Bitcoin does not hold value in the minds of REGULAR folks yet - a BTC reserve would not impress anyone into accepting the bills.
2. Gold is the go-to reserve/currency builder, in this use it may even beat BTC, at the moment anyway. Additionally, they (Greece) already hold gold! (For now)
3. A BTC backed bill could be taken off the BTC standard and inflated to pay for an oversized government, just as happened with the dollar.

That said physical bills from a government might be some use, like Casascious coins on huge scale.

Topic: Suppose you wanted to start a geographically localised bitcoin economy (Read 3322 times)