Some Things Almost All Anti-Bitcoiners Have In Common

December 12th, 2013   Submitted by Seth King

oldpeopleThere is a trend to be seen amongst the anti-bitcoin crowd that I feel needs to be pointed out, even at the risk of sounding insensitive. I’m throwing this out there because I believe that once a person better recognizes the cause of the problem, they can better address it. I would like to preemptively make the disclaimer that there are always exceptions to the rules, however, I feel the generalization is true enough that it should guide our actions.

There are three main traits I see time and again of the typical anti-bitcoiner. First, the anti-bitcoiner is often old. And this doesn’t surprise me at all. Should it really shock anyone that a sixty year old can’t wrap their head around why a pseudonymous peer-to-peer digital currency created by an anonymous programmer with a distributed ledger system using public/private key cryptography could have value over fiat money? Most people over the age of forty that aren’t technically savvy don’t even know what most of those terms mean.

Second, the average anti-bitcoiner has never used Bitcoin, not even once. Now, I’m not necessarily going to rely on the proverb “don’t knock it ’till you’ve tried it” because I can think of many things I’ve never tried that I’m perfectly happy to knock. I’ve never injected heroin into my veins. I’ve also never killed an innocent human being. I feel confident in knocking those things because I’m not really down with poisoning my body or committing unethical crimes that will stain my soul forever. So, that proverb isn’t a good defense against the anti-bitcoiners. That being said, the difference between my examples of something I would knock and Bitcoin is night and day. Instead of Bitcoiners suffering from a burdened soul or life debilitating addiction, Bitcoiners seem to be happy, intelligent, and prospering individuals.

The problem with never having tried Bitcoin, is that it can be very difficult to wrap your head around, especially without having ever used it. Imagine trying to understand what music is without ever having heard it. People would be telling you how great it is. They’d try to explain it by saying it’s like sound, but with different vibrations, in certain rhythms, at varying pitch and volume, that is pleasing to the ears. Huh?

Third, anti-bitcoiners cannot explain what Bitcoin is or how it works. I’ve never met a person in meatspace, or seen a person on the television, that fully understands exactly what Bitcoin is and how it works and still doesn’t like it. Never. Not once. Anti-bitcoiners are always attacking Bitcoin from a position of ignorance. I would be much more likely to respect an individual’s anti-bitcoin stance if they fully understood Bitcoin and could give a valid reason why they still do not like it. But they do not and cannot.

These traits in anti-bitcoiners have helped me to refine my Bitcoin evangelism. First, I’m done trying to convert people over the age of sixty. The amount of time and effort attempting to teach Bitcoin to one old person could teach twenty young adults. Frankly, old people aren’t going to save the world. They’re most of the reason we’re in the mess we’re in. So, my attitude is that if they have their nest egg in precious metals, fine. They’ll weather the coming Dollar collapse and use Bitcoin once the rest of the world has converted. If their nest egg is in fiat, well, tough shit. They lose. Thanks for playing.

Second, if I confront a person under the age of sixty that doesn’t like Bitcoin I will challenge them on the fact that they’ve never used it and cannot explain it back to me. Politely getting the point across that their opinion is worthless considering they have no idea what they’re talking about seems to be the most appropriate strategy.

Ultimately, though, I think the best strategy is to ignore the old curmudgeons that are willfully ignorant and focus on the younger generation, particularly the productive class. Ignore the statists receiving welfare checks, employed or not. Those people aren’t interested in honest money.

Bitcoin is for the productive class, not the parasite class. With Bitcoin the producers of the world can boycott fiat and slough off the parasite class in one fell swoop. Let’s focus our energies on those people that really matter and let the rest drown in fiat.

 

147 Responses to “Some Things Almost All Anti-Bitcoiners Have In Common”

  1. BobNo Gravatar says:

    > They’re most of the reason we’re in the mess we’re in.
    > Bitcoin is for the productive class, not the parasite class.

    Wow, you truly feel that everyone over 60 is in the parasite class?

    You don’t know how good you have it. Holy crap, you sound like an entitled, whiny kid. Go fight a World War or live through a depression and report back to me.

  2. MacianoNo Gravatar says:

    Old, ignorant, clueless.

    I’d also add: “other-directed personality”.

    Antibitcoiners tend to follow the rest of the hurd. No way are they going to change their mind, take a risk and face the crowd. They want to be liked more than think freely.

    Oh, I can’t stand Gary ‘Y2Kbug’ North either.

  3. Martin BrockNo Gravatar says:

    I’m a skeptic of Bitcoin and also a skeptic of the gold standard for similar reasons that we can discuss. I don’t expect to discuss the reasons here, because many Bitcoiners have become a tribe reluctant to discuss their assumptions, but I can discuss the reasons. My skepticism is not a function of my age or ignorance or a curmudgeonly reluctance to accept a new way of thinking.

    I’m not anti-Bitcoin, and I do understand the system and have understood it almost from its inception, because I was a crytpo-anarchist long before Bitcoin existed and thus was aware of it very early. I favor a different sort of decentralized monetary system that we can discuss. I favored this other sort of system long before Bitcoin existed.

    Though I’m not a Bitcoiner, I am interested in Bitcoin. Satoshi’s principal contribution to crypto-anarchy was a decentralized solution to the double spending problem. The blockchaing is essentiall a decentralized title registry. Someone makes this point on a recent episode of Let’s Talk Bitcoin, and I make the same point in this forum a while back, when I suggest that while a Bitcoin (or a Satoshi) may not work ultimately as a monetary unit, it could work as the serial number in a title registry.

    If people agree that a particular item is my property, then I may associate title to this item with possession of a particular Satoshi, so that transferring this Satoshi amounts to transferring my title. In this way, the blockchain can track ownership of a house or an automobile or an ounce of gold in a warehouse as well as it tracks ownership of Satoshis themselves. Trade ultimately is about transferring titles to real property, not about trading monetary units.

    Yes, I think that recent Bitcoin appreciation is a bubble and ultimately a “tulip mania”, but if you simply dismiss me as an old man stuck in my ways, you’ll never understand why I think so. My thinking may be mistaken, but you can’t know that it’s mistaken by ignoring by dismissing me as an old man with a closed mind.

    • Seth KingNo Gravatar says:

      Have you ever used Bitcoin? Ever received Bitcoin from someone else and later used Bitcoin to purchase something?

      • Martin BrockNo Gravatar says:

        No. I have read Nakamoto’s paper on the double spending problem that led to Bitcoin, and I read Chapter six of Schneier’s Applied Cryptography and other discussions of digital cash protocols decades ago, and I have implemented a web based electronic money system myself (more like Ripple than Bitcoin), and I have studied Ripple in some detail, so while I’m not a Bitcoin user, as you are, I have other, relevant experience. I’m not ignorant of Bitcoin or simply opposed to it on ideological grounds or too old to change my ways.

        Again, if you want to understand something thoroughly, you should consider perspectives other than your own. I can explain many problems with the sort of decentralized monetary system that I favor, including the system I developed myself, because I am not a zealous believer in it either, even though it’s my preference.

        • Seth KingNo Gravatar says:

          So then you do fit into one of the three categories I’ve listed. You haven’t actually used Bitcoin.

          Thank you for clarifying this.

          • Martin BrockNo Gravatar says:

            And you’re very clear in the article that you’re happy to knock things that you haven’t tried, so I’m not sure why this confirmation is relevant. After all, if I have good reasons not to adopt Bitcoin, I wouldn’t adopt it for these reasons, so the fact that I haven’t adopted it seems an odd argument against my reasons for not adopting it.

            You seem more interested in avoiding contrary views of Bitcoin, by stereotyping people holding these views, than in exploring possible futures other than the one you imagine. If you want to believe that Bitcoin will rise until everyone on Earth uses it, that’s fine with me. You should use whatever system of exchange you prefer, and no state should impose a system on you by imposing a fiat currency.

            Could you not be blinded by a pro-Bitcoin bias peculiar to the young, because you can’t explain its shortcomings and the relative advantages of alternatives?

            • Seth KingNo Gravatar says:

              The article was simply about pointing out commonalities amongst the anti-bitcoin crowd. And considering you fall into at least one of those categories (note: I don’t know how old you are, but if you’re over 60 then you fall into two of those categories) then my article is correct.

              Now, to go off topic from the article, one thing I find funny about your situation, is that while you might have some technical issues with Bitcoin, it’s not like you have an alternative that you’re in love with. So, instead of using something that’s not perfect (note: nothing is perfect) you’re willing to keep using something that’s TERRIBLE, like fiat.

              Woe unto the man who did nothing because he thought he could only do little.

              • Martin BrockNo Gravatar says:

                No. The article purports to list qualities of “almost all” anti-Bitcoiners. I have one of the three qualities, one that someone skeptical of Bitcoin seems very likely to have, i.e. I haven’t used Bitcoin myself. I’m 51 and presumably older than you, but I’m practically the anti-thesis of your “anti-Bitcoiner” stereotype otherwise. I’m not ignorant of the system or fond of the status quo at all, so I don’t have the quality that you suppose the other qualities to indicate.

                If you simply dismiss people who haven’t used Bitcoin at this point, you avoid discussing the system with most people who are skeptical of the system, whether or not a skeptic has a good reason for his skepticism.

                The dollar is not my preference either, but switching to Bitcoin as a medium of exchange is not a viable option, because the transaction costs, when using it as a medium of exchange, are not competitive with my options, and I don’t want to bet on the appreciation either.

                I haven’t done nothing. On the contrary, I’ve invested a lot of my time in alternatives to both fiat money and Bitcoin.

                Answer me this question. Would you borrow the price of a car in Bitcoin today, knowing that you must repay the same price in Bitcoin over the next three years?

                • Seth KingNo Gravatar says:

                  I never said all anti-bitcoiners have all three of those traits. All anti-bitcoiners have at least one of those traits. OBVIOUSLY there are plenty of young people that are anti-bitcoiners as well, but they fall into at least one of the two categories of either not having used Bitcoin and/or not knowing what it is and how it works.

                  You fall into only one of the categories, namely not ever having used it.

                  Your opinion is worthless to me, because while you might have read all about music in a book, you’ve never actually listened to music and you’re trying to tell me music sucks.

                  Okaaayy! You have fun with your anti-music crusade.

                  • Martin BrockNo Gravatar says:

                    You’re right. You said “almost all”, and you included a trait that practically anyone with a good reason not to use Bitcoin would have. Yes, I fall into one of the categories. The question is: so what? That I fall into this category has no bearing at all on my opinion of Bitcoin. I don’t need to go through the motions of using Bitcoin once to understand the system.

                    Then you quickly conclude that my opinion is worthless to you. If buy a dollar’s worth of Satoshis today and contribute them to this web site, will my opinion then be worth much more to you? Do you imagine that going through these motions, which I can easily imagine, will change my opinion? You know that I’ll spend more than a dollar, not to mention more of my time, this way, right? I’ve already discussed my routine use of other electronic money transfer systems at this site and why these alternatives are less costly to me.

                    If you systematically ignore opinions differing from yours, you can’t possibly understand contrary opinions.

                    • Seth KingNo Gravatar says:

                      If you go on to Coinbase.com and purchase some Bitcoin, you’re going to pay a 1% fee for your purchase, and I will get 100% of whatever you send. If you already had Bitcoin from, say, earning them from a job, then there would be no fee. You cannot beat that. Period.

                      Also, I know about differing opinions. I was anti-bitcoin for a year before I got into them. I was well under the age of 60 at the time, but you know what? I didn’t know exactly how Bitcoin worked and I had never used them. Once I changed those two things I fell in love with it.

                    • Martin BrockNo Gravatar says:

                      I don’t have Bitcoins from a job. I can transfer any amount of money to my kids (who are in college) if I transfer it from my account at their credit union, and I can transfer any amount from my bank in another state for a flat fee, not a percentage of the transfer. I transfer $1500 to them each month for 0.2% of the total.

                      I must enter my bank account information a Coinbase. I might do that, but here’s the deal. If I send you $25 worth of Bitcoin, you must discuss my reservations about Bitcoin and my preference for alternatives with me here in the comments section. If I send you $100 worth of Bitcoin, you must post my skeptical view, not less than a thousand words, from a committed minarchist that practically anyone else would call an anarchist.

                    • Seth KingNo Gravatar says:

                      Tell you what. How about you buy $25 worth of Bitcoin from Coinbase. Send me $20, then send 5 different libertarian sites that accept Bitcoin $1 worth of Bitcoin each. Here are 5 possible sites I looked up for you. If you find other ones you wish to donate to, that’s fine. Just let me know which ones they are.

                      http://www.fee.org/donate/page/donate-bitcoins
                      https://mises.org/forms/104/Donate-Bitcoin-to-Mises-Institute
                      https://www.lewrockwell.com/donate/
                      http://freestateproject.org/donate
                      https://www.lp.org/make-a-bitcoin-contribution

                      Bonus points if you use a smartphone and pay by scanning the QR code.

                      If you do all that, and paste the transactions in the comments section with links to the blockchain.info showing your $1 donation each, I will listen to your anti-bitcoin arguments and your pro-whatever-else arguments with the most open mind I possibly can and give you my thoughts on the matter, the best I can.

                      If you do that and still don’t like Bitcoin, so much so that you’re still unwilling to use it from hereon out, then you’ll be the first person I know that is not old, knows exactly how Bitcoin works, and has used Bitcoin and still doesn’t like it. But keep an open mind when using it, please!

                    • Martin BrockNo Gravatar says:

                      A $1 contribution seems stingy, but I suppose it’s anonymous. I accept your terms; however, I could make the same contributions at the same cost with Dwolla, and if I doubled my contributions, the cost of Dwolla transactions wouldn’t change, while the cost of Coinbase transactions would double.

                    • Seth KingNo Gravatar says:

                      False. But you’ll just have to get some experience to see what I’m talking about. The goal behind the $1 transactions is for you to see how non-prohibitive microtransactions are.

                      Ideally you would take the bitcoins you purchase from Coinbase and put them into a wallet that’s on your computer, but that’s not a requirement. The Coinbase wallet isn’t bad, but it is a web wallet, which sort of defeats the purpose. Still, any use is better than no use.

                      I know it will take a few days to get set up. It’s easy to use Bitcoin once you’ve got them, but it can be sort of a jailbreak to get out of the dollar in the first place.

                      Let me know once you’ve got it all wrapped up.

                    • Martin BrockNo Gravatar says:

                      I understand the point of the $1 transactions. Have you used Dwolla? Transactions less than $10 cost nothing. Transactions over $10 cost 25 cents regardless of the amount, up to $5000 for a personal account. The other party in a transfer must also have a Dwolla account.

                      When I make funds available for transfer at Dwolla, I’m transferring money from my bank account to Dwolla’s account at Veridian Credit Union. When I transfer funds to another Dwolla user, money remains in Dwolla’s account, and Dwolla makes an accounting entry indicating that the other party may claim the funds from Dwolla’s account.

                      I don’t plan to hold bitcoins, so I’m not worried about the online wallet. I don’t hold funds at Dwolla either. I elected the slower account verification process for drafts on my bank account, so I should be able to buy bitcoins by Tuesday, maybe Wednesday. Dwolla uses the same account verification process and drafts my bank account similarly.

                    • Martin BrockNo Gravatar says:

                      To be clear, the recipient of a transfer technically pays the 25 cent transfer fee at Dwolla (for transfers over $10), so if I send you $20, you receive $19.75, but of course, if I want you to receive $20, I can send you $20.25.

  4. Martin, your title registry idea is brilliant! THANK YOU!!!

    • Seth KingNo Gravatar says:

      The title registry idea isn’t Martin’s. It’s been around a long time and is actively being worked on in the Bitcoin community. The term is called “colored coins.”

      • Martin BrockNo Gravatar says:

        You’re right that the title registry idea is not mine. As I said, one of the regulars on Let’s Talk Bitcoin discussed it recently. I don’t remember his name. He’s the other guy, not Adam Levine.

  5. Sam KingbusterNo Gravatar says:

    I come across plenty of young store clerks that when I mention bitcoin I get blank looks, they don’t know what I’m talking about. The younger generation is really holding bitcoin back.

    Concepts like peer-to-peer, public/private key cryptography, etc were invented decades ago by old people and the young ones just can’t seem to get their heads around it.

    • Seth KingNo Gravatar says:

      There are tons of young people that have never heard about it. You can’t blame them for having a blank look on their face the first time they hear about it.

      Those young people aren’t anti-bitcoin. They’re just unaware of Bitcoin. It’s the anti-bitcoiners that fall into at least one of my descriptions in the article.

  6. DisengageNo Gravatar says:

    There’s nothing wrong with directing your limited time and energy to areas where they will have the most impact. But I chose to discriminate based on what is said, rather than how much gray hair the speaker has.

    Personally, I ignore Bitcoin critics who don’t have technical arguments. A REAL bitcoin critic talks about things like the blockchain size, fee calculation, mining incentives, and the transaction size limit. They talk about real TECHNICAL problems that Bitcoin has to overcome in the near or intermediate term. None of these challenges has anything to do with the price of bitcoin, or whether bitcoin meets the definition of “money”.

    When I hear the words “Ponzi” or “tulip” I stop listening. I’m not going to spend any time challenging fools or trying to change the minds of people who don’t feed their brains with correct information before opening their mouths. Hell these people don’t even know the difference between a “ponzi scheme” and a “pump and dump” scam… and they certainly don’t understand that bitcoin (the currency) and Bitcoin (the payment network) are different things, or that wild speculation on the currency does not degrade the underlying protocol that is the real world-changer here. These people are arguing about whether you should use proper punctuation and capitalization in emails while completely missing the point that EMAIL EXISTS NOW!

    If it turns out that we both end up “writing off” the same group of people, then so be it. But I like to give people the benefit of the doubt, at least until they open their mouths (or touch the keyboard).

    • Seth KingNo Gravatar says:

      Well said, although while I might mention Bitcoin to old people now, I’m not going to get into the weeds explaining it to them. My attitude is that if they’re open minded AND intelligent enough to understand Bitcoin, then they can look it up on their own on the internet and learn it themselves.

      If they don’t have the skillset to do the research on their own, then no amount of my proselytizing is going to fix that.

    • Martin BrockNo Gravatar says:

      If someone suggests that the price of tulip bulbs in the Dutch Republic in the 17th century reflected a self-fulfilling mania for rising price, do you stop listening? Are you disputing the whole idea of a speculative bubble?

      • Seth KingNo Gravatar says:

        Comparing a perishable good like tulips to an indestructible, infinitely divisible, and instantly transferable good like Bitcoin is extremely intellectually dishonest.

        • Martin BrockNo Gravatar says:

          Since I haven’t compared a perishable good like tulips to an indestructible, infinitely divisible, and instantly transferable good, I don’t know how this point is relevant. I only asked whether Disengage is denying that the original “tulip mania” was actually a speculative bubble and whether he disputes the whole idea of a speculative bubble.

        • JdLNo Gravatar says:

          Comparing a perishable good like tulips to an indestructible, infinitely divisible, and instantly transferable good like Bitcoin is extremely intellectually dishonest.

          I’ve noticed that a lot of you young whippersnappers 😉 engage in sloppy language, which usually is reflective of sloppy thinking.

          . Bitcoin is “indestructible” IF a number of things hold, including: the algorithmic basis upon which it rests is not broken by new cracking tricks, and the government, which I think almost certainly will outlaw Bitcoin, does not succeed in stamping it out through its usual morally bankrupt and brutal methods.

          . Bitcoin is not infinitely divisible. To be sure, it divides up pretty far, and perhaps future patches can extend its divisibility, but “infinitely divisible” has a definite meaning and does not apply to Bitcoin.

          In the same sentence, you call Martin Brock “extremely intellectually dishonest”, which appears to be a completely unwarranted smear, though I admit to not having read all of his posts here. Everything I’ve read suggests that he’s bright, knowledgeable, and sincere. Would you care to consider revising your condemnation of him?

          • Seth KingNo Gravatar says:

            Just because there are artificial limits on the divisibility of bitcoins now doesn’t mean it will always be that way. In fact, I’d say it likely won’t be that way for very long.

            Also, Bitcoin remains even if the government outlaws it.

          • Martin BrockNo Gravatar says:

            He doesn’t call me dishonest. He calls an assertion dishonest, but the assertion isn’t mine.

            He does avoid answering the question that I posed to Disengage, and so does Disengage. Does either of them deny that speculative bubbles exist at all, or do they only deny that Bitcoin is a speculative bubble at this time?
            .
            If the latter, how can we distinguish a bubble from a rising price reflecting Bitcoin’s rising utility, either real or imagined, as money? These questions seem fair enough to me. I’m not denying that something like Bitcoin could become money. Hayek suggested such a thing decades ago. I only doubt that Bitcoin is such a thing. Proudhon suggested a stateless system of mutual credit centuries ago.

            Bitcoin is not infinitely divisible, but it’s more than divisible enough for the moment. The divisibility contributes to the speculative mania, because the rising price doesn’t create a barrier to market entry. Even at a million dollars per bitcoin, people can still buy a millionth of a bitcoin for a dollar hoping to sell at a still higher price later.

            Google’s share price is over a thousand dollars, but you can’t effectively buy a fraction of a share, so the market doesn’t similarly extend to ever smaller speculators. Regulatory barriers also exclude small investors from highly speculative investments. I oppose these barriers, but they do limit speculative bubbles to some extent.

            On the other hand, a mutual fund could hold Google shares and sell shares of the fund at a lower price. Similarly, Dwolla could transfer fractions of a cent. It can’t transfer a fraction of a cent to or from a bank account, but it could move a fraction of a cent from my Dwolla account to yours, as long as you don’t expect to move the fraction of a cent to your bank account.

            Most people are neither crypto-anarchists nor financial speculators. For these people, Bitcoin is not more useful than the currency they use now, so they won’t switch. Still, the world is full of people willing to speculate, particularly if they can risk small sums of money, and people are still discovering Bitcoin for the first time, so the Bitcoin bubble presumably isn’t over yet.

            • DisengageNo Gravatar says:

              I wasn’t avoiding your question; I didn’t even see it until I randomly stumbled across my name in your second post. This format isn’t ideal for back-and-forth discussions.

              As for your question: Do I deny that speculative bubbles exist or am I denying that Bitcoin is in one? My answer is neither.

              My personal opinion is that the bitcoin currency is in a speculative bubble right now. I expect the price to drop significantly in the short term… but not drop below the high of the previous bubble (around $260 USD). Afterward, I expect a return to the steady increases we’ve seen before until the next sudden spike upward, beginning the next bubble. If I woke up tomorrow and the BTC/USD price was down $400, my first reaction would be “whew… glad that’s over, now maybe all the amateur speculators will calm the hell down and we can get back to talking about IMPORTANT things.”

              But consider the following two points:

              ONE: I am not a day-trader. I am not a professional investor, economist, financial analyst, or historian. My opinion of the bitcoin currency’s future price is based on past events, and the opinions of other people about those events. Those other people are just random voices shouting on the internet, saying things that make sense to me. They could all be inmates in an insane asylum for all I know. Thus, my opinion is worth absolutely nothing as a predictive indicator. I could be totally wrong about the bitcoin currency being in a bubble. I thought this bubble had “popped” twice in the past few weeks, and have been wrong both times.

              Only history decides whether something was a bubble or not. Unless you are a psychic or have a time machine, every opinion on the future price of bitcoin is just that… an opinion. The difference between MY opinion and that of most other people on the internet is that I’m smart and honest enough to admit that I am not an expert and that my opinion means absolutely nothing. Anyone who claims to know whether bitcoin is (or is not) in a bubble right now is either a fraud, a fool, or a time traveler. All we have are opinions, and you know what opinions are like.

              TWO: None of this matters anyway. I answered your question because you called me out by name, not because I consider it relevant, important, or even interesting. A lot of people don’t seem to understand or believe folks like me when we say that We Are Not Interested In The Price Of Bitcoin. Period. To me, Bitcoin is about the protocol. The Technology. The network. And the disruptive effect that it might have on the current financial industry. The currency is useful and interesting only because it is used by the network, not because it may go up or down in price against some fiat currency. I suppose it is also interesting because, if the value goes up, it attracts interest from media and speculators, some of whom may take an interest in the Bitcoin protocol. But the protocol is always the most important part. If you are a speculator, then I can understand why you might be interested in arguing whether the bitcoin currency is in a bubble or not. But surely a speculator can understand why somebody who is NOT a speculator wouldn’t give a damn.

              As a non-speculator, I’m more interested in the number of vendors accepting Bitcoin or the number of transactions per unit of time on the network. Both are both MUCH better indicators of Bitcon’s success than the BTC/USD price. Does the price move in the same direction as these things? Probably, yeah. It makes logical sense that it would, but I’m not going to break out the calculator and graphing paper to prove the correlation. And I’m not going to listen to someone else do it, because… yawn… whatever.

              Why am I so excited about the protocol? Short version: We now have a decentralized internet protocol for sending money to anywhere where there is an internet connection. This is like “HTTP” for money. No, actually this is more like “bittorrent” for money. This did not exist before. There is nothing to compare it to. Not Paypal. Not Dwolla. If you’re honestly saying that Dwolla is comparable to Bitcoin, then you’re missing the point. Dwolla is Napster. Bitcoin is Bittorrent. What happened to Napster? Google “Liberty Reserve,” and look up the “Liberty Dollar” while you’re at it.

              You don’t have to agree with me about the transformative and disruptive potential of the Bitcoin protocol, or whether the end result will be good or bad. But, by the same token, I don’t have to agree with you that the BTC/USD price is at all interesting or worth discussing at this stage in the network’s development.. especially for non-speculators. . So maybe we’ll just agree to disagree.

              • Martin BrockNo Gravatar says:

                I withdraw “avoided”, and I agree that Bitcoin has (very limited) value as a peer-to-peer currency. The network has other uses as well; however, I don’t believe that Bitcoin’s value as a peer-to-peer currency explains its price, and that’s the problem with it. I don’t expect Bitcoin’s value relative to common goods ever to reach a stable equilibrium. I’m not saying that no stateless, digital currency can avoid this problem, and a better solution might employ the existing Bitcoin infrastructure, but the current Bitcoin model is flawed.

                Something like eGold with a Satoshi signifying ownership of a specified ounce of gold in a repository is another possible solution; however, this solution is also problematic, because gold doesn’t work well as a standard of value for extending long-term credit either. Credit is essential in a free market and accounts for a large proportion of currency transactions, so a successful monetary system must support a stable system of credit.

                A big problem with Bitcoin as a currency is that it cannot support a stable system of credit, and Bitcoin proponents often avoid this point. I ask Seth to address the point in this thread, but he doesn’t, and Bitcoin advocates typically will not address it. Since the objection seems valid to me, I must go on raising it until a Bitcoin proponent addresses it satisfactorily.

                I agree that Bitcon’s appreciation to date has been a series of speculative bubbles, and I also agree that the bubbly rise can continue for a while longer, but I ultimately expect the bubbly rise to cease, so the question is: what happens then? What happens when expectations of further appreciation cease? Does Bitcoin become a currency with a stable value, much higher than the current value, reflecting its practically universal use, or does its value collapse, or is there a third alternative? I expect the collapse, because I expect other monetary systems to prevail ultimately.

                I thought this bubble had “popped” twice in the past few weeks, and have been wrong both times.

                You weren’t wrong. A speculative bubble may inflate and pop repeatedly. Even people who believe that Bitcoin is only a speculative bubble bound ultimately to pop can choose to bet on the game. A lottery can go on forever, so this sort of speculative game could go on forever too, but I expect the Bitcoin bubble to pop finally when enough people realize that Bitcoin’s value as a currency is not competitive with alternatives.

                The most recent pop followed news that the Chinese state might limit Chinese demand for the game. I don’t want the bubble to pop for this reason, and since the news was misleading anyway, it didn’t; however, Chinese speculation on the rising price, not wider use of Bitcoin as a currency in China or elsewhere, nonetheless accounts for the recent rise. If you agree and if you buy Bitcoin because many Chinese and others have yet to discover the speculative opportunity, then you’re playing the tulip mania game, not the entrepreneurial investment game. These games are distinct, and we can’t understand Bitcoin without understanding its role in both games.

                Only history decides whether something was a bubble or not. Unless you are a psychic or have a time machine, every opinion on the future price of bitcoin is just that… an opinion.

                If markets are efficient, opinions of the future price of everything are only opinions. The future price of an iPhone 4 is only an opinion, but I wouldn’t say that the current price is a speculative bubble. Bitcoin has use as a peer-to-peer currency, just as an iPhone 4 has use as a smart phone, but Bitcoin also satisfies a speculative mania in a way that an iPhone does not. Practically everyone who buys an iPhone pays for its value as a smart phone, while only a few people buying Bitcoins pay for its value as a peer-to-peer currency.

                The only people who value Bitcoin as a medium of exchange are a few crypto-anarchists and people who really need the anonymity. Even some crypto-anarchists don’t value Bitcoin as a medium of exchange. I’m a crypto-anarchist, and I’ll buy some Bitcoin next week only to prove a point to Seth, not because Bitcoin is more convenient or less costly than alternatives. It is neither. Bitcoin is Seth’s choice, so if I want to contribute to his site, I must use Bitcoin. That’s fine with me, but I don’t expect Bitcoin to become money only because people refuse to use anything else ideologically.

                Anyone who claims to know whether bitcoin is (or is not) in a bubble right now is either a fraud, a fool, or a time traveler. All we have are opinions, and you know what opinions are like.

                I disagree, because “bubble” is not simply a matter of opinion, even if future price is. Bitcoin is a bubble because most people are buying it expecting its price to rise, not to use it as a currency or even expecting others to use it as a currency, while its use as a currency is the only other reason to buy it.

                Again, even Bitcoinstore doesn’t really use Bitcoin as its currency. Hardly anyone does. I could just as easily set up a “Google shares store”, where I simultaneously display prices in dollars and in shares of Google at the current market price of Google shares, and I could accept Google shares as payment, either holding the shares or reselling them as I please. Accepting Google shares as payment this way is not equivalent to using Google shares as money.

                A lot of people don’t seem to understand or believe folks like me when we say that We Are Not Interested In The Price Of Bitcoin. Period. To me, Bitcoin is about the protocol. The Technology. The network. And the disruptive effect that it might have on the current financial industry.

                I believe that Bitcoin interests you for this reason. It also interests me for this reason, but if people like us were the only market for Bitcoin, the market would be very small and remain very small.

                I’m not interested in the price of Bitcoin either. I’m willing to send Seth $25 worth of Bitcoin at some point next week, even though I prefer another medium of exchange, because I want to send him the $25 and he refuses other forms of payment. Aside from the inconvenience of setting up the Coinbase account, I don’t lose much. I could even ask Seth to pay Coinbase’s one percent brokerage fee, and he’d presumably do it. I wish I had thought of that before accepting his terms.

                I made a similar offer to Seth months ago, after he announced his Bitcoin-only policy for contributions. I offered to send him a contribution if he’d accept a currency of my choice rather than the currency of his choice. Why would Seth choose to pay one percent to Coinbase to receive a contribution from me when he could pay a flat 25 cents per contribution over $10 and nothing for contributions under $10? He’s free to do as he pleases, of course, but I don’t expect sellers of goods generally to operate this way.

                As a non-speculator, I’m more interested in the number of vendors accepting Bitcoin or the number of transactions per unit of time on the network.

                So am I. How many vendors accept Bitcoin, as opposed to using an intermediary like BitPay in order to accept payments in other currencies? If you understand the difference, then you know that “Lamborghini dealer sells car for Bitcoin” is very misleading in this article:

                http://www.latimes.com/local/lanow/la-me-ln-lamborghini-bitcoin-2 0131212,0,847450.story#axzz2nT6hCwwP

                The article actually describes someone selling Bitcoin for dollars, to someone buying Bitcoin with dollars, and then using the dollars to buy a car. The Bitcoin seller presumably is taking a profit in Bitcoin speculation to buy a car, and the Bitcoin buyers presumably are buying Bitcoin expecting further appreciation. The Bitcoin seller in this case has a hundred thousand dollar car, but the buyers lost much of their investment a few days later and have yet to recover it. The seller of the car didn’t accept Bitcoin at all, so the Bitcoin transactions tell us nothing about Bitcoin’s use as money.

                Both are both MUCH better indicators of Bitcon’s success than the BTC/USD price.

                Right. But I don’t know where to find these statistics. Do you? I can’t rely on the L.A. times, because it tells me that people are selling cars for Bitcoin when that’s not really happening. How do I compare the volume of Bitcoin exchanged for currencies with the volume exchanged for other goods? If you have this information, I’d like to see it.

                Why am I so excited about the protocol? Short version: We now have a decentralized internet protocol for sending money to anywhere where there is an internet connection.

                The decentralized protocol also interests me, but I’m a geek. Most people have no problem with a centralized title registry, like Dolla’s. They only care about the cost of using the payments system.

                This is like “HTTP” for money. No, actually this is more like “bittorrent” for money

                It’s neither until people actually start using Bitcoin as money, and very few people seem to be doing it. If you want “HTTP for money”, the Ripple protocol seems closer, but Ripple has its problems too.

                This did not exist before. There is nothing to compare it to.

                Digital money protocols have been around for decades, and banking systems already use them. Bitcoin is one of many approaches to digital money, and people will compare it to alternatives. Comparison shopping is what markets are all about.

                Dwolla is Napster. Bitcoin is Bittorrent. What happened to Napster? Google “Liberty Reserve,” and look up the “Liberty Dollar” while you’re at it.

                Now, you’re speculating wildly. If the Feds try to ban anything, they’ll try to ban Bitcoin, not Dwolla.

                But, by the same token, I don’t have to agree with you that the BTC/USD price is at all interesting or worth discussing at this stage in the network’s development.. especially for non-speculators. So maybe we’ll just agree to disagree.

                Whether or not the price interests you, the price motivates practically all of the media attention, and the media attention explains the growing speculation. If you want to talk about the protocols and why I don’t agree that the Bitcoin protocol is a game changer in monetary terms, I prefer this discussion too, but we can’t discuss the problems with Bitcoin as money while ignoring the potential for speculative manias. The related volatility is a big problem with the protocol.

                • Martin BrockNo Gravatar says:

                  I misplaced a blockquote tag above, and I can’t fix it, because I can’t edit posts here. This problem cries out for a fix, like Bitcoin’s volatile price calls out for a fix.

                • Andrew CriscioneNo Gravatar says:

                  “Bitcoin is a bubble because most people are buying it expecting its price to rise, not to use it as a currency or even expecting others to use it as a currency, while its use as a currency is the only other reason to buy it.”

                  Any investment in gold, at any point in history, is purchased with the expectation that gold prices will rise: Has gold been in a bubble at every point in history? And gold is NOT used as a currency nowadays, so don’t even try throwing that at me.

                  • Martin BrockNo Gravatar says:

                    Bitcoin is not gold. Gold need not be a currency to have value, because it has other uses, including its use as an inflation hedge. The Bitcoin network has other uses, and I expect similar networks to persist, but a bitcoin itself has no use except as a medium of exchange and a speculative vehicle, and it’s useful as a medium of exchange only insofar as it’s someone’s best option. I transfer thousands of dollars electronically every month, and I can’t justify using Bitcoin for these transfers, because the cost is much higher than my alternatives.

                    Bitcoin is the best option for a medium of exchange in a few cases, largely in black markets, like Chinese people trying to skirt Chinese currency controls, and that’s fine with me, but Bitcoin is not the best option for most people, so I don’t expect most people to adopt it. Some people have ideological reasons for using Bitcoin, unrelated to its cost effectiveness as a medium of exchange, but this market is extremely limited.

                    Outside of black markets and ideological Bitcoiners, I expect little use of Bitcoin as a payment system, because I expect few people willing to pay more to use it. Even if you want to speculate on Bitcoin, you’re financially better off using another payment system, because using another payment system saves money that you can spend on the Bitcoin you want to hold speculatively.

  7. In fairness, I’ve run into a number of PRO-Bitcoiners who have never used Bitcoin (they just like the idea) and who cannot explain how it works (they like what they THINK the idea is).

    I’m pro-Bitcoin and minimally resemble that last characteristic. That is, I’m not completely confident of my knowledge in all the geeky details (but when writing about it I try to be clear about what I do know and don’t know).

  8. WilliamNo Gravatar says:

    I am a owner of Bitcoin, have been for some time, I also own other coins and mine but I must say this article is a load of waffle. First off, Bitcoin is a great idea as a money transfer means, it serves many purposes greatly…bit this political agenda that many of its more unhinged supporters express has me a little worried. These is many logical reasons why civilised people have no desire for the Libertarian view of the world, main one being is that it is insane, and very poorly thought out. It goes against the most basic of typical human behaviour and to think that 6 billion people will work better under a system that only a few are obsessed with is laughable at best. So, cut the crap, lets enjoy Bitcoin while it is here, hopefully make some money and the eventually let it be regulated. This might bother some of the fringe loons, but lets face it, unless they can have the world to fit their own narrative view then they are always going to be shooting their ill-informed selfish mouths off.

    • Michael HendricksNo Gravatar says:

      Would you care to back your assertions? Are you familiar with the literature? What do you think Libertarianism is?

  9. Bring it on, Bitcoin babies. The first thing you are going to have to do for this 62 year old is to explain to me why I sould want to spend money on something that is so volitile when the only way to be anonymous is to go peer to peer which takes too much time.

    • Michael HendricksNo Gravatar says:

      Bitcoin is peer to peer.

      • Martin BrockNo Gravatar says:

        As the old geezer clearly understands, a Bitcoin transaction can be anonymous if it is peer to peer. A Bitcoin transaction using Coinbase, rather than a direct transfer from my personal wallet on my node to your wallet on your node, is no more anonymous than a dollar transaction using Dwolla, and the Coinbase transaction is more costly, assuming that the dollar is actually your unit of account.

    • toaNo Gravatar says:

      I suppose I am a baby in comparison to you. I do like bitcoin, and would like to see everyone using it, but personally I think it would be completely irresponsible for most people that are close to retirement to put a significant proportion of savings into bitcoin. That said, it wouldn’t be a bad idea to put a little, like as much as you are comfortable losing, but more importantly learn to use it as it is supposed to be… as a currency.

    • BrodieNo Gravatar says:

      Going from $14 to $850 in less than 12 months is volatile. You are right. You should stay away from it. Staying anonymous by going peer to peer for something that went up by 6000% in less than a year is definitely a waste of your time.

      • Martin BrockNo Gravatar says:

        People get rich in speculative bubbles. Other people get poorer. This fact is not an argument in favor of Bitcoin as a medium of exchange and unit of account. In reality, Bitcoin is not money at this point, because it’s not really anyone’s unit of account. Even Bitcoinstore prices its goods in dollars, not Bitcoins, so the dollar price is fixed while the Bitcoin price varies from minute to minute.

        If you want to play the speculative game, I have no problem with it. I don’t want to ban speculative bubbles or even to discourage them through regulations limiting trade, but if I wanted to speculate on something, I’d invest in an emerging technology that I’d love to own, like eVolo’s manned multicopter or one of the exotic battery technologies that could enable it to fly long distances or aeromobil’s roadable aircraft or even something as speculative as focus fusion.

        Digital money is a good thing, and fiat money is a bad thing, but Bitcoin is not the only possible model for digital, stateless money, and I don’t think it’s a likely model either. In reality, all monetary systems, including fiat monetary systems, already support digital payments. The cost of digital payments in dollars has fallen and continues to fall and is already lower than the cost of using Bitcoin, unless you happen to be paid in Bitcoin and buy everything you want with Bitcoin from vendors accounting directly in Bitcoin without currency conversions. In reality, hardly anyone fits this description.

        Bitcoin did not rise ten-fold in price over the last quarter because demand for Bitcoin as a medium of exchange rose similarly. In fact, I strongly suspect that demand for Bitcoin as a medium of exchange (in transactions other than currency exchanges reflecting speculation on the rising price and selling to take profits) hasn’t risen much at all. I even suspect that it has fallen, since people holding both Bitcoin and another currency, and expecting the price of Bitcoin to rise in the other currency, will hold Bitcoin and spend the other currency.

        If we want to discuss Bitcoin’s utility as a medium of exchange, we must distinguish this role from its role as medium of speculation. For me (and for practically everyone else on Earth), using Bitcoin as my medium of exchange is more costly than using the dollar or another currency. Anyone can verify this fact by investigating Dwolla for five minutes, so unless I’m accumulating Bitcoin expecting the price to rise further, I have no reason to buy it.

        If I buy Bitcoin expecting to hold it while the price rises further, rather than to use it as medium of exchange myself, them I’m speculating on a bubble, not on a wider use of Bitcoin as medium of exchange. People should be free to speculate however they like, but the speculation makes Bitcoin a poor unit of account, and a poor unit of account cannot become money.

        • BrodieNo Gravatar says:

          I’ve never seen a definition of money requiring it to be a unit of account. But you go ahead and keep defining things however you like.

          • Martin BrockNo Gravatar says:

            Here’s one:

            http://en.wikipedia.org/wiki/Money

            “The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment.”

            If I were dropping one of these roles, I’d drop store of value, not unit of account. Most people realize that the dollar is not a long-term store of value, but hardly anyone refuses to call it “money”.

            • BrodieNo Gravatar says:

              You are right, money is also a unit of account. “People get rich in speculative bubbles. Other people get poorer. This fact is not an argument in favor of Bitcoin as a medium of exchange and unit of account” Who said that it is?

              • Martin BrockNo Gravatar says:

                I don’t know your point above, with reference to the rapid rise in the $ price of Bitcoin. I only say that it isn’t an argument in favor of Bitcoin as money.

                • BrodieNo Gravatar says:

                  Martin, I was replying to this:
                  Steven VanderveldeNo Gravatar says:
                  December 13, 2013 at 9:29 am

                  Bring it on, Bitcoin babies. The first thing you are going to have to do for this 62 year old is to explain to me why I sould want to spend money on something that is so volitile when the only way to be anonymous is to go peer to peer which takes too much time.

                  • Martin BrockNo Gravatar says:

                    O.K. If you’re telling Steven to buy Bitcoin because its price has risen rapidly, then you’re telling him to speculate on the rising price, not to use Bitcoin because it’s a better medium of exchange for Steven than the dollar or whatever Steven is already using.

            • toaNo Gravatar says:

              I am not bitcoin fanatic, but I do value its usefulness. At the moment, you are correct that it isn’t as useful as dollars, but I disagree about your point of it not being a unit of account. That is in a nutshell exactly what it is, a public ledger. An accounting book that anyone can read.

              While I agree that people tend to “price” goods and services based on it’s “usd value” at the given time. That does not mean it isn’t a unit of account. It is merely a function of dollars being more useful then bitcoin. As you said and I agree, bitcoin is not something at the moment that you can only transact in… at least not very easily if at all. If bitcoin fails to meet criteria of money it is on the grounds of a store of value as it is way to volatile.

              Speculation in bitcoin is based on it’s perceived future usefulness, and it does help to create a store of value, as well as providing liquidity. It also helps to make news and get the word out about it quicker, when it starts rising at unrealistic rates. Of course volatility attracts more speculators, and the variations start to drop as there is more competition in providing the spread between asks and sells. It is a commodity style money, with it’s only value being a network. As more people get into speculating, and more developers start programm for it, and as speculation becomes less profitable, it is possible that it finds a wider audience and adds to it’s usefulness. At the moment it is still quite useful for many purposes that no other commodity are. Namely as a way to hold value anonymously. It is not too different then having an old school swiss bank account. Offshore value.

              However, that value is pretty volatile, but is still trending higher. And it has proven rather resilient at maintaining a fairly close value with it’s previous highs… granted that can be upwards of 50%. But it has dropped 50% of its value many times, and tends to regain that ground in a matter of months. How long that continues is anyone’s guess, but it is establishing a equilibrium and a resilience. It is more like a speculative bubble at the moment, in the sense that a stock is a speculative bubble. It is purchased higher then it’s current earning evaluation if you believe it has good prospects. Bad news for a stock drops that evaluation and good news increases it. It is a bet that the infrastructure is being produced to make it more useful.

              • Martin BrockNo Gravatar says:

                That is in a nutshell exactly what it is, a public ledger. An accounting book that anyone can read.

                The blockchain is a public ledger of title exchanges, but that doesn’t make Bitcoin a unit of account. Stock markets maintain ledgers of title exchanges, but shares of Google are not money. People don’t commonly record the value of their assets and liabilities or price the goods they sell in shares of Google stock.

                While I agree that people tend to “price” goods and services based on it’s “usd value” at the given time. That does not mean it isn’t a unit of account.

                That’s precisely what “unit of account” means. Bitcoin does not meet the definition.

                Speculation in bitcoin is based on it’s perceived future usefulness, …

                That’s the question, not the answer to the question. Many people now buy Bitcoin only to speculate on its rising price. They may or may not care about its future as money. Some Bitcoiners clearly believe that Bitcoin can become money, and this belief certainly motivated its creation, but I doubt that demand for an alternative currency explains most, or even very much, of the current demand.

                At the moment it is still quite useful for many purposes that no other commodity are. Namely as a way to hold value anonymously.

                Gold serves the same purpose, but gold is not money either. People can and do anonymously exchange dollars for gold and gold for dollars.

                However, that value is pretty volatile, but is still trending higher. And it has proven rather resilient at maintaining a fairly close value with it’s previous highs… granted that can be upwards of 50%.

                You’re right, but these facts don’t distinguish Bitcoin’s rise from the Dutch tulip mania. Tulip bulb prices rose precipitously for several years before the bubble burst. The rise wasn’t entirely irrational. Tulip bulbs really are valuable things, but after while, expectations of further rise became a self-fulfilling prophecy. Do you doubt the possibility of this sort of bubble?

                But it has dropped 50% of its value many times, and tends to regain that ground in a matter of months.

                That’s true too, but I also expect a speculative bubble to behave this way. This behavior doesn’t imply that the price rise is a speculative bubble, but it doesn’t distinguish the rise from a speculative bubble either. You’re talking about a two or three year period here, and most people had never heard of Bitcoin only a year ago.

                How long that continues is anyone’s guess, but it is establishing a equilibrium and a resilience.

                It hasn’t established an equilibrium in fact, and I don’t believe it ever will for reasons we can discuss.

                It is a bet that the infrastructure is being produced to make it more useful.

                For some people, it is. Most people only care about the infrastructure enabling them to buy and sell bitcoins with their currency.

                • toaNo Gravatar says:

                  I think we are dancing around the same meaning, but for different reasons. There is no reason why stock certificates couldn’t be used in trade… in fact they are, but again priced in fiat currency. That is only due to the usefulness of fiat currency being greater. If everyone in the world accepted google stock certificates, but only 5% of people accepted dollars. People would be trading dollars and pricing them in google stocks. So my point is, the underlying unit of account tends to be the most easily exchangeable commodity. That is why I don’t account for bitcoins value in yuan or euros… yes they are exchangeable but usd is much easier for me. Where as other countries people are pricing btcs in their local fiat. Another way of looking at that would be to say, people are pricing fiat based on btcs, but would prefer the spendability in their own fiat.

                  Yes, many people speculate in bitcoin without a care in the world whether bitcoin makes it as a currency. I am sure that is a true statement. The volatility alone is attractive to speculators. And as speculators get into it, the spread thins and volatility lowers. This is a useful function whether they care in the long run or not. But that also creates a much more useful infrastructure for business’ accepting bitcoin. The liquidity is pretty sizeable, and you can accept local fiat or bitcoin, and nearly instantly and safely convert to local fiat. This is a trading infrastructure. And the more business that accept it, due to the liquidity, the more useful it can be to hold and use.

                  If you have looked at bitcoin fluctuations then it is undeniable that bitcoin has been through many bubbles. Extreme exuberance, and also extreme pessimism. Is bitcoin in a bubble now? Can you tell me what bitcoin price should actually be? There isn’t an underlying source of revenue to bitcoin to base earnings vs leverage like housing, or dot com business’. It is a completely voluntary medium of exchange. There are no dividends or rent payments. The value of bitcoin will be completely dependent upon what it is accepted for. But that isn’t terribly different then with any good or service. One plumber can charge twice as much usd then another for the same work. It is dependent on what he is accustomed to. And the resilience in bitcoin isn’t too dissimilar. A high is reached, it drops in value, and people get accustomed to it’s valuation and are more comfortable with a rise.

                  “For some people, it is. Most people only care about the infrastructure enabling them to buy and sell bitcoins with their currency.”

                  That is an infrastructure to accept bitcoin without worry whether it is a bubble or not. It is increasing it’s sellability. You can accept bitcoin and nearly instantly convert it to something you are more comfortable with. And if you do accept it as value, if only to convert to usd or another fiat, you are increasing the value of bitcoin as a currency.

                  The common arguments against bitcoin to me should list… People trying to argue it’s shortcomings for being the one and only currency in the world. I know some people actually think it will be. We can just classify those as exuberant expectations. But there is no reason for extreme pessimism either. And finding faults for it not being the one and only currency at the moment, or in the future is just as silly as the expectation that it will be. It is a voluntary alternative. One of many. And I am sure that in a free money market, stock certificates could just as easily be used as a money as well. If the market is setup to create liquidity into other assets.

                  “Gold serves the same purpose, but gold is not money either. People can and do anonymously exchange dollars for gold and gold for dollars.”

                  Try carrying all of your bars of gold through customs, or traveling with them through a foreign country, You could probably do it sometimes. But I am sure as hell not going to try it.

                  • Martin BrockNo Gravatar says:

                    >There is no reason why stock certificates couldn’t be used in trade… in fact they are, but again priced in fiat currency.

                    Right. That’s why the currency is the money and the shares are not. My point here is that the shares are not the money, and Bitcoin is not money at this point either for similar reasons.

                    >So my point is, the underlying unit of account tends to be the most easily exchangeable commodity.

                    Ease of exchange is only one criterion. Google shares can be as easily exchangeable as dollars, but Google shares cannot become money, because their value is not stable enough. A stable value is necessary for credit, and credit is necessary for money. No one promises to pay 20 Google shares over the next five years for a car, because neither side of the bargain knows the price of the shares well enough over five years.

                    >That is why I don’t account for bitcoins value in yuan or euros… yes they are exchangeable but usd is much easier for me.

                    That’s also why the USD is your money, not yuan or euros or bitcoins. You could also speculate on the $/€ exchange rate by buying euros and holding them, and people do that all the time. Some of these people may also use the dollar as their money, but they are not using euros as money. A single good can be money to one person and a speculative investment to another person.

                    >But that also creates a much more useful infrastructure for business’ accepting bitcoin.

                    It creates a more useful infrastructure for people speculating on Bitcoin, but I’m not sure it makes the currency more attractive to vendors. Again, I don’t see many vendors accepting Bitcoin. I see many people accepting contributions in Bitcoin, because the price volatility doesn’t discourage these people. If a contribution worth $20 today is worth only $10 tomorrow, that’s still better than no contribution at all, and if the price is rising, accepting these contributions looks even better.

                    Bitcoinstore actually accepts Bitcoin, though Bitcoin still is not its money. The store doesn’t actually price its goods in Bitcoin, but it does accept the currency arbitrage risk. Stores “accepting” Bitcoin through Bitpay actually accept dollars or another currency, so someone else is taking the arbitrage risk. This distinction isn’t obvious to someone seeing a “Pay with BitPay” button at a web site, but it’s a crucial distinction.

                    >And the more business that accept it, due to the liquidity, the more useful it can be to hold and use.

                    Holding it is a separate issue. If you actually sell a hundred thousand dollar car for 100 bitcoins today, only to see the Bitcoin price fall from $1000 to $800 tomorrow, before you sell your Bitcoins for dollars, then you could be in a world of hurt, particularly if you need the hundred thousand dollars to pay your suppliers, as when you only hold the car on consignment from a manufacturer and must pay the manufacturer in dollars soon after you sell it. Money must circulate through an economy this way.

                    >Is bitcoin in a bubble now? Can you tell me what bitcoin price should actually be?

                    No. I can never tell you what the price of anything should actually be. I can only tell what I’m willing to pay myself. Prices are subjective. A speculative bubble does reflect people’s actual, subjective desire for a speculative bubble. My point here is that the current price of Bitcoin does not reflect people’s actual, subjective desire for an anonymous, digital, peer-to-peer currency, and desire for a bubble is the only other thing it could reflect.

                    >There isn’t an underlying source of revenue to bitcoin to base earnings vs leverage like housing, or dot com business’. It is a completely voluntary medium of exchange.

                    To be clear, a .com business with an underlying source of revenue can be as voluntary as Bitcoin. The trade in tulip bulbs in Holland in the 17th century was voluntary, and tulip bulbs had real value too, but the tulip mania was a speculative bubble nonetheless.

                    Bitcoin could have more value as a digital payment system than competing systems, and the value of this payment system could account for the rising price of Bitcoin, but that’s not what’s happening. That’s my claim in this discussion anyway.

                    >But that isn’t terribly different than with any good or service.

                    You’re right, and it’s not what makes Bitcoin’s price rise a bubble.

                    >One plumber can charge twice as much usd than another for the same work.

                    Can he? Competing with the other plumber in a free market? For the same work, same quality and everything? I doubt that.

                    >That is an infrastructure to accept bitcoin without worry whether it is a bubble or not. It is increasing it’s sellability.

                    A growing market for Bitcoin increases its saleability, whether it is a bubble or not.

                    >You can accept bitcoin and nearly instantly convert it to something you are more comfortable with.

                    Right. But that’s not using Bitcoin as money, and it’s not what vendors accepting Bitcoin through BitPay do either. With BitPay, someone who wants to buy a car with Bitcoin must find someone else (not the car seller) willing to buy his Bitcoin for dollars (or another currency) before he can buy the car, because the car dealer is accepting dollars, not bitcoins. This distinction is crucial.

                    >And if you do accept it as value, if only to convert to usd or another fiat, you are increasing the value of bitcoin as a currency.

                    No. I’m not using Bitcoin as a currency at all in this scenario. I can also sell Google shares for dollars then to buy a car in dollars, but no one says that Google shares are my money in this scenario.

                    >And finding faults for it not being the one and only currency at the moment, or in the future is just as silly as the expectation that it will be.

                    I don’t expect it to be a niche currency (in the online black market) in the future either, though it is one now. I rather expect a more stable alternative, that nonetheless preserves the anonymity, to prevail over Bitcoin in this niche. This alternative might be a variation on Bitcoin, a Bitcoin 2.0, that uses the same infrastructure. I have no problem with this outcome at all. I very much want something like Bitcoin to succeed, but I don’t expect people to get rich simply by holding Bitcoin 2.0.

                    And I have no problem with people getting rich. That’s not the point. I want the guys at eVolo to get very rich very quickly for example, but if I expect to get rich simply by holding something, then I don’t expect this thing to be money. I’m also happy for people investing in Bitcoin infrastructure that morphs into Bitcoin 2.0 infrastructure to get rich, but I’m not sure that’ll happen.

                    >And I am sure that in a free money market, stock certificates could just as easily be used as a money as well. If the market is setup to create liquidity into other assets.

                    No. Again, the issue is price stability. We don’t expect the price of stock certificates to be stable, for good reason.

                    >Try carrying all of your bars of gold through customs …

                    Why would I carry millions of dollars worth of gold on my person? I wouldn’t keep millions of dollars worth of Bitcoin in a single wallet on my mobile phone either. I could keep billions of dollars worth of Bitcoin in a single wallet on my mobile phone in theory, and this feature of Bitcoin is interesting, but it does not make Bitcoin more attractive as a currency.

                    If you don’t understand that keeping Bitcoin in a wallet on your mobile phone, without a backup, is extremely perilous, you might have a very sour impression of Bitcoin after losing the phone.

                    • toaNo Gravatar says:

                      “Right. That’s why the currency is the money and the shares are not. My point here is that the shares are not the money, and Bitcoin is not money at this point either for similar reasons.”

                      I am perfectly ok with you not accepting that bitcoin is money. I would appreciate as well as many other I believe, if you convinced the governments of that. Not being a money would make it much more flexible. I actually don’t care about personal technical reasons why one person or another sees something as a money or not. If it can be used to trade goods and services, it is ok by me. Again I iterate that most of your technical observations of bitcoin not being a money are due to it’s acceptance as money on a wide scale. Obviously bitcoin is not as widely accepted, hence less useful, hence it is subject to being scaled by more widely accepted monies.

                      “Bitcoinstore actually accepts Bitcoin, though Bitcoin still is not its money. The store doesn’t actually price its goods in Bitcoin, but it does accept the currency arbitrage risk. Stores “accepting” Bitcoin through Bitpay actually accept dollars or another currency, so someone else is taking the arbitrage risk. This distinction isn’t obvious to someone seeing a “Pay with BitPay” button at a web site, but it’s a crucial distinction.”

                      I understand the distinction you are making, but it is the point I am making as well. As the speculators take the arbitrage risk, bitcoin is made more widely useful as the liquidity in other currencies increase. Thus making it more widely accepted and closer to attaining what you want to define as money.

                      In a competing money system, I suspect lots of different systems. Googles stocks would make a fine money whether the value is subjective or not, if there is a level of liquidity and a cheap exchange rate. Why would I reject a customer who has only google stock, if I can accept it and instantly convert to another currency I prefer? Secondly, the usd value is also subjective. And your point about plumbers is ridiculous… there are wide range of prices for plumbing and many other services. Personally I have seen bids range as much as 3x’s…. and even the companies that bid 3xs higher then other people stay in business. In fact they tend to be the largest business with the most overhead, and do the most business.

                      “Why would I carry millions of dollars worth of gold on my person? I wouldn’t keep millions of dollars worth of Bitcoin in a single wallet on my mobile phone either. I could keep billions of dollars worth of Bitcoin in a single wallet on my mobile phone in theory, and this feature of Bitcoin is interesting, but it does not make Bitcoin more attractive as a currency.

                      If you don’t understand that keeping Bitcoin in a wallet on your mobile phone, without a backup, is extremely perilous, you might have a very sour impression of Bitcoin after losing the phone.”

                      I wouldn’t recommend keeping billions on a cell phone. You can also just keep a passphrase in your head, and regenerate the key based on your passphrase.

                      As far as making it more useful as a currency, I don’t really care one way or another what you view as a currency. But to be able to convert usd, have a passphrase in your head, travel to another country, create the wallet, and convert to local fiat is far more then interesting to me.

                      Why would you like to carry millions of dollars worth of gold with you? If you were planning on leaving. If capital controls were enacted… if you didn’t want to be a sitting duck guarding your pile of gold.

                    • Martin BrockNo Gravatar says:

                      >Again I iterate that most of your technical observations of bitcoin not being a money are due to it’s acceptance as money on a wide scale.

                      My observations have nothing to do with the scale of acceptance. Bitcoin could be money among a small community, but I don’t see it playing this role in fact.

                      If only one person uses Bitcoin exclusively, or even primarily, as a medium of exchange and unit of account, Bitcoin is this person’s money. If a thousand people use Bitcoin this way, even if these people are spread all over the world, Bitcoin is the money of this community, and I’ll be thrilled to see a stateless currency develop this way if and when it happens.

                      If people use Bitcoin as a unit of account and medium of exchange only for particular goods, like drugs in the online black market, Bitcoin is money in this niche, and though it isn’t really a unit of account in this niche, I will say that Bitcoin is money in the niche.

                      But I don’t see Bitcoin playing a monetary role outside of the online black market. Even vendors like Bitcoinstore don’t use Bitcoin this way, and mining operations, Bitcoin exchanges and services like BitPay don’t facilitate this usage of Bitcoin particularly.

                      If you only wanted a decentralized stock market enabling peer-to-peer title transfers, you’d build the same infrastructure. No one would call a decentralized stock market a monetary system, and at this point, the Bitcoin network is a decentralized system of title transfers, transferring title to only one thing, bitcoins.

                      >As the speculators take the arbitrage risk, bitcoin is made more widely useful as the liquidity in other currencies increase. Thus making it more widely accepted and closer to attaining what you want to define as money.

                      This development doesn’t move Bitcoin any closer to becoming money. That’s the problem. Again, people could create online Google stock exchanges. They could even use the blockchain for this purpose.

                      I can transfer title to a share of stock to you without using a stock exchange. People do it all the time. The transfers could easily be digital, and the blockchain could play a role that we’ve discussed in this thread, but even if an infrastructure for easily transferring titles to stock over the internet, peer-to-peer, existed, Google shares could not be money. The issue is price stability, not the ease of transferring title.

                      >Googles stocks would make a fine money whether the value is subjective or not, if there is a level of liquidity and a cheap exchange rate.

                      No. You’re missing the point. Liquidity and small transaction costs are not enough. The value of Google shares is not stable enough for the shares to become a unit of account or a standard of value in credit transactions.

                      >Why would I reject a customer who has only google stock, if I can accept it and instantly convert to another currency I prefer?

                      You wouldn’t. That’s not the point. You can barter for anything and account for the cost of reselling whatever you accept in trade, including the arbitrage risk. Bartering for something this way doesn’t make it money.

                      You can also use pay a broker, like BitPay, to arrange such a transaction for you, but these arrangements don’t make Bitcoin money. You might as well say that anything with a market value is money.

                      >Secondly, the usd value is also subjective.

                      I’m not advocating the dollar over Bitcoin. I am saying that the dollar is money for a lot of people, and Bitcoin is money for hardly anyone.

                      >And your point about plumbers is ridiculous… there are wide range of prices for plumbing and many other services. Personally I have seen bids range as much as 3x’s…. and even the companies that bid 3xs higher then other people stay in business.

                      If companies charging three times as much stay in business, why do their competitors, offering the same service in the same market with the same timeliness and quality and everything else, willingly work for a third of price? What you’re saying here violates every assumption on which the theory of free market economics is based.

                      >In fact they tend to be the largest business with the most overhead, and do the most business.

                      So if I want to do a lot of business, I should have a lot of overhead and charge a lot more than my competitors with less overhead? This business model sounds very enticing. Where do I sign up?

                      Maybe, I can’t sign up. Are you discussing closed markets with vendors earning monopoly rents here? There’s plenty of that.

                      If you’re not, if the big guys can charge a lot for overhead because they offer a lot more quality control or insurance or redundancy for example, then you’re comparing apples with oranges.

                      >I wouldn’t recommend keeping billions on a cell phone. You can also just keep a passphrase in your head, and regenerate the key based on your passphrase.

                      I agree, but I can also keep dollars in a bank this way, and most people in my neck of the woods do, so what’s supposed to persuade them to switch to Bitcoin? High overhead and higher costs?

                      >But to be able to convert usd, have a passphrase in your head, travel to another country, create the wallet, and convert to local fiat is far more then interesting to me.

                      I travel a lot in my work. I’ve worked for weeks or months at a time in Canada, the U.K., Italy, Spain, Denmark, Taiwan, the UAE, Argentina and Chile. I have a drawer full of currencies from these countries. When I travel, I typically get the local currency from an ATM using my debit card.

                      >Why would you like to carry millions of dollars worth of gold with you? If you were planning on leaving. If capital controls were enacted… if you didn’t want to be a sitting duck guarding your pile of gold.

                      If I had millions of dollars in gold, I’d charter a flight or just buy my own plane. I should be so fortunate.

  10. Ethan GloverNo Gravatar says:

    I don’t think you’ve read much about BitCoin. It sounds like you don’t pay a lick of attention to the legitimate concerns out there. And really, you sound like the average, everyday fiat supporter.

  11. FranzNo Gravatar says:

    I would like to suggest that the proportion of people in the over-60 cohort with technical backgrounds or educations is at least as high as the under-60 cohort, and the over-60 crowd are perhaps the noisiest about the need to replace worthless fiat currencies. It is also the over-60 crowd who lived through the era of “mass-libertarianism” (to exaggerate a bit) in the 1960s and early 1970s. If you want to look for libertarians and Bitcoin adopters, look to those over 60. — From a lifelong radical libertarian, well over 60 years old, Bitcoin holder and user, and with US patents in wireless cryptography.

  12. BrodieNo Gravatar says:

    My reply posted in the wrong section so reposting:
    I have to disagree with you that old people are the problem. I work at a helpdesk with a lot of younger technically savvy people. I told them about bitcoin at the first of the year. All of them were nay sayers. There was even one guy that had purchased a bunch of them at $10 a piece who was a nay sayer. He spent all but one of his bitcoins. Why? Because they don’t understand economics. Being technical does not make someone financially savvy. The people I have the most success with are business owners.

  13. Jeff BerwickNo Gravatar says:

    Great article Seth!

  14. KathyNo Gravatar says:

    I liked it.

  15. JdLNo Gravatar says:

    Should it really shock anyone that a sixty year old can’t wrap their head around why a pseudonymous peer-to-peer digital currency created by an anonymous programmer with a distributed ledger system using public/private key cryptography could have value over fiat money? Most people over the age of forty that aren’t technically savvy don’t even know what most of those terms mean.

    Most people of any age don’t know the meaning of those terms, and plenty of us old farts are among those that do. Just because pathetic Gary North is clueless doesn’t warrant smearing an entire generation. You missed the bullseye by about 180 degrees, Mr. King.

  16. Martin BrockNo Gravatar says:

    I sense a rising tide of disrespected elderly resenting youthful hubris here, and I resent being counted among the elderly myself!

  17. JdLNo Gravatar says:

    I sense a rising tide of disrespected elderly resenting youthful hubris here, and I resent being counted among the elderly myself!

    Yes, you have nine years to go before Mr. King officially considers you over the hill, and not worth talking to, though from his shrill denunciations of your posts, it appears he’s willing to move you up to elderly status in spite of your meager years.

  18. MacianoNo Gravatar says:

    The article reflected the truth. Older people just don’t jive in same numbers w/ the web as young people, bitcoin is no exception.

    It’s best to separate the rising exchange rate from the network, not enough people seem to see this. The network grows exponentially (users, merchants, transactions) and as long as that’s the case, the value of the network will rise & thus the exchange rate will rise. The moment the network stops expanding or reverses, that would be a good time to sell your BTC holdings.

    Nobody will deny the internet or Facebook have no intrinsic value, even though they sure started out the same way as bitcoin did: nothing but a few people coding a service & a few public servers running on their dime.

  19. Ben StoneNo Gravatar says:

    Seth,
    Nice article. I have to agree. Of course there are exceptions to any rule, but largely I see the same pattern among the true Bitcoin haters.
    I haven’t read the many comments on this thread, I’m just going by people I encounter and prominent Bitcoin haters who seem to be personally offended at the existence of Bitcoin.
    Keep up the good work Seth!

  20. MacianoNo Gravatar says:

    For the bubble-sayers some info.

    Why Bitcoin’s growth is normal: https://www.youtube.com/watch?v=qHUPPYzzZrI
    Exponential Function: https://www.youtube.com/watch?v=u5iFESMAU58

    • Martin BrockNo Gravatar says:

      Bitcoin’s growth is normal for a new good or service with rapidly a growing market, like Facebook, but it is also normal for a speculative bubble, so the question is: which is it?

      Bitcoin’s use as money is not growing at the same rate, and many reports of Bitcoin being used as money are misleading. For example, businesses “accepting Bitcoin” through BitPay are not actually accepting Bitcoin. BitPay is a brokerage service, not a Bitcoin payment service. No one needs a Bitcoin payment service to accept Bitcoin from other people with Bitcoin.

      The overwhelming volume of Bitcoin transactions involve people buying or selling Bitcoin, exchanging bitcoins for dollars or another currency, rather than people exchanging other goods for Bitcoin. In other words, the volume of people using Bitcoin as money is not growing as rapidly as the volume of people buying and selling Bitcoin. I believe that the bubble role dominates the money role for this reason, not because I’m an old geezer stuck in my ways.

      The overwhelming number of Bitcoin transactions, other than exchanges for currency, are contributions, not conventional purchases. That’s not what I expect from something that’s becoming money.

      • Seth KingNo Gravatar says:

        I hate to keep engaging you in debate considering you’ve yet to actually use Bitcoin, but your false statements must be pointed out.

        You write “Bitcoin’s use as money is not growing at the same rate…”

        How do you know? Can you prove that? People see the recent rise of Bitcoin from $100 to $1000 in a few weeks and thinks it’s a bubble, but in reality it was at $266 in April. So, really Bitcoin has only quadrupled in value over a 7 month period. Do you really think there are NOT 4 times as many people using Bitcoin now than there were in April?

        Look at the number of subscribers to the Bitcoin subreddit. It’s exploding in numbers every day. Follow the number of new businesses accepting Bitcoin as payment at coinmap.org. Every day about 40 new brick and mortar shops, not internet only shops, brick and mortar shops are accepting Bitcoin as payment. Then you’ve got a ton of new online businsses every day that accept Bitcoin.

        Later you write “No one needs a Bitcoin payment service to accept Bitcoin from other people with Bitcoin.”

        That is also false. Right now in order to accept Bitcoin as a payment on a website you need to be able to create new addresses for each new purchase. The only way to do that on your own is to be able to run a bitcoind client on a server, but since the vast majority of online businsses are hosted through third parties, and not on VPS’s, they are not allowed to run bitcoind. So, they MUST use a company like Coinbase or Bitpay to process the transactions for them.

        Your problem is that you have a few preconceived notions of how things are and how they should be, and you’re completely wrong. And you’re wrong because you’re not actually IN the Bitcoin space. Again, I shouldn’t really even waste my time defending Bitcoin against somebody who has never used it, but for the sake of defending myself and my article on a public website, I do.

        But if this were in meatspace with nobody paying attention, I would have ignored you and gone to greener pastures a long time ago.

        I know it will take you a few more days to get your Bitcoin. I’ll be waiting.

        • Martin BrockNo Gravatar says:

          Again, my use of Bitcoin is irrelevant.

          >>You write “Bitcoin’s use as money is not growing at the same rate…”

          >How do you know? Can you prove that?

          Here, you suggest that I don’t know. Above, you insinuate that the statement is false. That I can’t prove a statement does not imply that the statement is false. How do you know that it’s false?

          My statement is based upon a statement heard on a recent episode of Let’s Talk Bitcoin asserting that most Bitcoin transactions, other than transactions for currency at exchanges, are contributions. You can find the episode yourself.

          >Do you really think there are NOT 4 times as many people using Bitcoin now than there were in April?

          Depends on what you mean by “using Bitcoin”? I only claim that the volume of Bitcoin exchanged for currency (buying and selling of Bitcoin) has grown more rapidly than the volume of Bitcoin exchanged for other goods. Someone buying Bitcoin to speculate on its future price is using Bitcoin, and I have little doubt that the number of these people is rising rapidly, but these people are not using Bitcoin as money.

          >Look at the number of subscribers to the Bitcoin subreddit. It’s exploding in numbers every day.

          And what are they discussing? Their purchases of real property with Bitcoin or their investments in Bitcoin?

          >Follow the number of new businesses accepting Bitcoin as payment at coinmap.org. Every day about 40 new brick and mortar shops, not internet only shops, brick and mortar shops are accepting Bitcoin as payment. Then you’ve got a ton of new online businsses every day that accept Bitcoin.

          Does this figure include businesses using a brokerage service, like BitPay? These businesses need not accept Bitcoin.

          >Later you write “No one needs a Bitcoin payment service to accept Bitcoin from other people with Bitcoin.” That is also false. Right now in order to accept Bitcoin as a payment on a website you need to be able to create new addresses for each new purchase.

          “Also false” suggests that my previous assertion is false, but you haven’t established that. Even if your measure of new businesses accepting Bitcoin excludes businesses using BitPay and similar brokerage services, which I doubt, the number of businesses accepting Bitcoin is not a good proxy for the volume of Bitcoin exchanged for goods other than currency.

          I don’t understand your assertion here. Why must I create new addresses for each purchase to enable someone to send Bitcoins to my wallet? You accept Bitcoin. Do you use a service like Coinbase or BitPay?

          >So, they MUST use a company like Coinbase or Bitpay to process the transactions for them.

          BitPay is not simply a payment service. It’s a payment/brokerage service. A vendor using BitPay need not accept Bitcoin. It may accept dollars or another currency from BitPay. BitPay in turn uses an exchange to sell Bitcoins for dollars before transferring dollars to the vendor.

          >Your problem is that you have a few preconceived notions of how things are and how they should be, and you’re completely wrong.

          You throw around terms like “extremely dishonest” and “false” and “completely wrong”, but here’s what BitPay itself says about its service to merchants.

          “BitPay guarantees the exchange rate during the checkout process using our Bitcoin Best Bid (BBB) rate calculation from multiple exchanges.”

          What exchange rate? If the merchant specifies a price in Bitcoin and accepts this price for its good, what’s the exchange rate?

          If a merchant species a price in dollars and BitPay guarantees this price in dollars, then BitPay, not the merchant, accepts the arbitrage risk. In other words, the merchant is accepting dollars for its goods, not Bitcoin. Describing this transaction with “merchant accepts Bitcoin” simply ignores the fact that the merchant has contracted with BitPay to accept the arbitrage risk.

          “If you choose to receive settlement in your local currency, BitPay will sweep a direct deposit to your bank account every business day to clear out your accumulated balance.”

          So BitPay is not simply accepting Bitcoins for merchants. It’s selling Bitcoins for the merchant’s local currency and then transferring the local currency to the merchant. A merchant using BitPay this way is not accepting Bitcoin.

          >And you’re wrong because you’re not actually IN the Bitcoin space.

          Here again, you say I’m wrong because I’m an outsider, but you don’t seem to understand BitPay’s service yourself.

          >Again, I shouldn’t really even waste my time defending Bitcoin against somebody who has never used it, but for the sake of defending myself and my article on a public website, I do.

          You may do you what you like with your time, of course, but I intend to honor our bargain, and I hope you’ll honor your end of it. Specifically, I hope that you’ll answer direct questions, like my question concerning extensions of credit in Bitcoin.

          I’m not your enemy, Seth. We both want to weaken, if not entirely eliminate, the state and to remove money from its purview entirely. That I’m not a Bitcoin enthusiast doesn’t change this fact, because many stateless alternatives to Bitcoin exist.

          >But if this were in meatspace with nobody paying attention, I would have ignored you and gone to greener pastures a long time ago.

          You clearly want to ignore me, but you haven’t actually demonstrated the falsehood of any of my statements, even while you assert categorically that the statements are false and insinuate that I’m dishonest. I don’t mind the disagreement, but I wish you wouldn’t impugn my honesty.

      • MacianoNo Gravatar says:

        Martin,

        It’s not either/or. It’s a growing network going through sometimes speculative phases. A bubble is when asset prices rise without a deeper underlying reason, for example: housing prices. The economist Schiller is pretty good on this. Exponential is how human populations grow & consume, or how Facebook/Twitter conquered the world. Or how flatscreen TVs conquered the living rooms. Now, look at Bitcoin. Do you think the exchange rate reflects a stock or exponential adaption of new technology? I’d say the latter.

        I’m not going into explaining why and how you’re wrong, because I haven’t got the time to educate people in a forum-saga. Besides, Seth already tried and you seem to be of the variety: first see, then believe. Fine, I’m all for all empiricism. Then don’t suspect from us to give you conclusive logic-deductive answers, because such answers will never satisfy you.

        • MacianoNo Gravatar says:

          suspect = expect. (Excuse)

        • Martin BrockNo Gravatar says:

          I agree that it’s not either/or, but a housing bubble is not either/or either. While a housing bubble inflates, some people are buying houses for completely legitimate reasons.

          Even while the price of tulip bulbs exploded in Holland in the 17th century, people actually wanted tulips, and tulip farmers wanted tulip bulbs, but at some point, demand for tulip bulbs as a speculative vehicle exceeded demand for the bulbs to produce tulips for sale to people who wanted tulips. That’s why economists call the speculative demand a “mania”. The mania is a feedback effect of a rapid rise in price that might be perfectly rational at first.

          That’s the theory anyway, and I buy it. I could be mistaken. If you doubt this theory, explain your doubts to me.

          Similarly, some people prefer Bitcoin as a medium exchange. They value anonymity very highly for example. For these people, converting another currency to Bitcoin and spending the Bitcoin, or accepting Bitcoin for other goods only to convert it to another currency, is a rational end in itself, regardless of the price of Bitcoin. These people constitute a real demand for Bitcoin as a medium of exchange, I don’t deny it.

          Bitcoin is simultaneously a vehicle for speculation. This speculation could be completely rational, i.e. it could reflect rational expectations of future demand for Bitcoin as a peer-to-peer currency. I don’t deny that at all; however, speculative bubbles reflecting a speculative mania are also real IMO, so I can’t simply assume that the rapid rise in the price of Bitcoin reflects a rational expectation of future demand for Bitcoin as a currency.

          I’m now part of the Bitcoin-as-medium-of-exchange market myself. I really want to send Seth some money, and he refuses any other medium of exchange, so I’m willing to buy some Bitcoin only to send them to him. If he’d accept dollars instead, I could send him the money at lower cost, but I don’t have this option, and I’m willing to bear the cost to send him the money.

          Because I’ll only send $25 with Bitcoin, the cost mostly involves my time and effort to arrange the transfer, but if I were sending a thousand dollars, the cost of sending Bitcoin through Coinbase would be far greater than the cost of sending dollars through Dwolla. You can verify this fact for yourself.

          So why do I believe that the rapid rise in Bitcoin’s price reflects a speculative mania rather than rational expectations? That’s a fair question, and I’ll answer it. You say that I can’t be convinced, but I can be convinced, and I’ll tell you how you can convince me.

          I also send each of my kids, who are college students, $500 each month electronically. I don’t use Bitcoin for this purpose, because using Bitcoin is substantially more costly and also less convenient. I’m more than happy to use Bitcoin if it’s my least costly alternative, but I won’t use it otherwise.

          As an individual user of electronic money transfer services, I personally send $1500 to my kids every month, and I don’t use Bitcoin for entirely self-interested reasons. I assume that other people desiring a money transfer service are similarly self-interested. Very few people will pay more to use Bitcoin only because they’re in love with the idea of Bitcoin. That’s my assumption.

          I also send $50 each month to Antiwar.com and $20/month to the Scott Horton Show and $10 a month to the Quixote Center, and I pay countless other bills electronically each month as well, and I buy things from Amazon.com and so on. I’m a big user of electronic payment services now.

          I spend thousands of dollars every month electronically without using Bitcoin, and my reasons have nothing to do with an anti-Bitcoin bias. I’ll spend $25 this month using Bitcoin only because Seth gives me no other option. I don’t expect many people to limit my options this way.

          I’m beating a dead horse here, but I’ll repeat the point one more time, because it’s a simple point, and it’s the only point I need to make. I’m only choosing my least cost alternative here. My kids and my electric utility and other recipients of my electronic transfers don’t demand Bitcoin exclusively, as Seth does, so I’m free to send them dollars at lower cost to me, and I do so only for this reason.

          If I were paid in Bitcoin myself or if I already had Bitcoins for other reasons, sending Bitcoin might be a less costly alternative ultimately (though I doubt it), but I’m not and I don’t.

          Eventually, Bitcoin mining will cease to be profitable, and I’ll then need to pay transaction fees to use the Bitcoin network, as I pay fees to use Dwolla now for example. I have no reason to believe that, in the future, the cost of sending Bitcoin will be less than the cost of sending dollars using Dwolla now.

          Are my circumstances unusual? I don’t think so. If you can show me that my circumstances are unusual, that many other people actually want to use Bitcoin as a medium of exchange because Bitcoin is the lowest cost option, without assuming that people make money simply by holding Bitcoin, I can be persuaded.

          If people benefit by using Bitcoin only if they benefit from the price appreciation by holding Bitcoin, not because Bitcoin is more valuable as a currency than alternatives, then a speculative mania seems to be their reason for using Bitcoin, not a rational belief that Bitcoin is now or ever will be a least cost method of sending money electronically.

          Here’s how you can convince me:

          1) Show me, now, how I can send my kids $1500/month each month using Bitcoin for 25 cents. I can do it now with Dwolla. I’m a totally selfish seeker after money. Show me a less costly option, and I’ll switch today; however, you can’t tell me that I’ll make money by holding Bitcoin. I’m interested only in the cost of using the Bitcoin network to transfer funds.

          or

          2) Show me why the cost of sending Bitcoin, after miners no longer benefit from mining and must charge fees, will be lower than the cost of Dwolla’s approach.

          • MacianoNo Gravatar says:

            You really don’t seem to understand that the bitcoin payment network could potentially substitute many of the functions of financial services, such as banks, creditcards, PayPal, micropayments, international money transfer, precious metals, but also professions that are needed for 3rd party trust, escrow, stockbrokering, notary/legal ownership documents, mediation. People are working on many, many more applications. Dwolla might be a great service, but it’s utility is negligible compared to the bitcoin network.

            Out of the top of my head, these services already exists.
            – Bitcoin “hot”wallet -> PayPal, creditcards, Dwolla, micropayments
            – Bitcoin “cold”wallet/Armory -> storage for value/function of gold as a hedge, bank for the 5 billion unbanked in this world
            – Bitcoin ATM -> Remittances, safe long distance transfers/Forex
            – Blockchain + Proofofexistance.com -> registration of unique ownership (notary/mediation/escrow/author right)
            – Bitcoin + Colored Coins -> trade in stocks, foreign valuta, goods
            – Bitcoin exchanges -> free speculation/best trading school you’ll ever experience!
            – Fixed amount BTC + pseudonymous -> safety against capital controls, FED QE/inflation, agorist businesses

            You’ll say: “yeah, right, like that will happen…” I don’t blame you. You won’t hear my say that bitcoin will push out gold or banks

            I was one of those people who claimed Twitter was about stupid useless 140 character messages centering on narcissism. Like Seth said, I was ignorant, because I didn’t use it, I didn’t experience the potential. When I first used Twitter in 2009, it really wasn’t that big of a deal yet: slow, boring & chaotic.

            For example, I didn’t see that it was a means to:
            – ‘befriend’ people (for personal contact or similar interests),
            – follow personalized news feeds,
            – follow news directly 24/7,
            – make lists of interesting people or developments to educate yourself,
            – promote your own organization for free (free PR, commerce, advertising),
            – see how much your views resonate with a larger audience
            – micro-blog (to let the steam off or troll annoying opinion makers)
            – make a public window for people to contact you (info on website, telephone, mail, address, BTC address)
            – open up journalism even more
            – use Twitter for newsbots (combination with OpenDapper, YahooPipes, IFTTT – all free services)

            That’s a big deal. I learned all that, when I started using Twitter.

            • Martin BrockNo Gravatar says:

              I explicitly state that the Bitcoin network is a decentralized, title transfer ledger that could be used to transfer titles of all kinds, not only title to bitcoins, so I clearly do understand this potential.

              I still think that Twitter is about stupid, 140 character messages centering on narcissism. There’s clearly a lot of demand for that.

              I gave you two different options for persuading me that Bitcoin’s price reflects rational expectation of Bitcoin’s growing use-value as money, rather than a speculative bubble, and you ignored both of them.

              I agree that the Bitcoin network could morph into all sorts of other things, but these other uses do not imply a rising price of existing bitcoins, so they aren’t relevant to the question.

              • MacianoNo Gravatar says:

                I ignored them, because they miss the point I’m interested in addressing.

                You want me to prove that bitcoins are cheaper/safer than Dwolla for someone somewhere today (i.e. you, & totally subjective), while the real value is in the growing network. You want bitcoin to serve your narrow purpose and b/c you don’t see immediate advantage you prefer Dwolla. OK, fine, your choice.

                Anyway, I’ve honestly tried to explain why bitcoin makes sense. If you don’t see value in it. Don’t use it. Bitcoin is voluntary, unlike fiat, something you are obligated to cooperate in. I also can’t think of a better punishment for naysayers than that won’t join bitcoin payment network.

                • Martin BrockNo Gravatar says:

                  I don’t dispute the point you’re addressing now. I repeatedly make the same point in this thread. The Bitcoin network could find other uses, and I think that’s great.

                  In fact, Bitcoin has already morphed into Peercoin and other alt-coins. Peercoin uses much the same source code that Bitcoin uses, so Peercoin evolves directly from Bitcoin.

                  As other uses of these networks emerge, like other title transfers, I expect people to prefer other, competing networks, like Peercoin or Ripple, for these uses. Bitcoin’s potential for speculative mania is a disadvantage for most purposes other than the mania as an end in itself.

                  People should be free to pay as much as they want for Bitcoin, even if they have no use for the payment system and no expectations of its future uses and only hope to sell their Bitcoin later at a higher price. I’m not disputing that.

                  >You want me to prove that bitcoins are cheaper/safer than Dwolla for someone somewhere today (i.e. you, & totally subjective), while the real value is in the growing network.

                  I want you to show that Bitcoin is cheaper/safer than Dwolla as a payment system, because I’m discussing the source of demand for Bitcoin now driving up the price of a bitcoin. I’m not ignorant of other potential uses of these systems, in spite of your assumptions, but I suppose most people diving into Bitcoin right now are.

                  All sorts of networks are growing at the moment, and any of these networks can find uses other than the use that people now make of them. These facts are not relevant to my point.

                  >You want bitcoin to serve your narrow purpose and b/c you don’t see immediate advantage you prefer Dwolla. OK, fine, your choice.

                  Of course. Am I supposed to use Bitcoin for your purposes?

                  >I also can’t think of a better punishment for naysayers than that won’t join bitcoin payment network.

                  Well, I am joining it, to send a contribution to Seth, but I won’t be using it otherwise unless it’s a more cost-effective payment system for me. Bitcoin is not a cause I’m supporting charitably, and I’m not interested in the speculative opportunity either, because speculating on the price of Bitcoin is not speculating on the future utility of the network’s other potential uses. If I wanted to speculate on the latter, I’d invest in the infrastructure.

          • BrodieNo Gravatar says:

            Martin Brock: “1) Show me, now, how I can send my kids $1500/month each month using Bitcoin for 25 cents. I can do it now with Dwolla. I’m a totally selfish seeker after money. Show me a less costly option, and I’ll switch today; however, you can’t tell me that I’ll make money by holding Bitcoin. I’m interested only in the cost of using the Bitcoin network to transfer funds.”

            Show me how I can send someone $1500 internationally for less than it costs to send Bitcoins.

            or

            “2) Show me why the cost of sending Bitcoin, after miners no longer benefit from mining and must charge fees, will be lower than the cost of Dwolla’s approach.”

            The fee is for faster transaction time. You can still send for free, it will just take a lot longer.

            Regardless, the current price could very well likely be reflective of mostly speculation. What speculation though? The speculation that it becomes widely accepted money. At that point, you won’t need to convert it to fiat dollars. So you won’t need to use Coinbase to send them.

            • Martin BrockNo Gravatar says:

              >Show me how I can send someone $1500 internationally for less than it costs to send Bitcoins.

              I don’t send much money internationally anymore, but I have sent large sums to the U.K. in the past, when I had a fiancee there, and the fee was not a percentage of the transfer. I arranged transfers between my credit union in Alabama and another bank in New York and then from the bank in New York to my fiancee’s bank in the U.K. I don’t recall the fee, but it was more than this one:

              https://www.xoom.com/united-kingdom?_rt=kac-uk-unbranded-google-u nitedkingdomsearch-us-en&cid=ps_unb_dsk_uk_edwc_pd__gog_guks___ad _acq__us_&languageCode=en&gclid=CIXJmq3It7sCFawRMwodhzQABw

              This service charges a flat $4.99 for such transfers up to $2,999, at an exchange rate that’s locked in before the transaction. To do the same with Bitcoin using Coinbase, I must first convert the $1500 to Bitcoin. That costs me 1% or $15, and I still must convert the Bitcoin to pounds after the transfer, so the Bitcoin cost is far higher.

              That’s the first service that popped up in a Google search. I haven’t shopped around at all. I haven’t shopped for Bitcoin options either, but Coinbase was Seth’s recommendation. Let me know if you find a less costly route, because I’m eager to use the least costly option.

              >The fee is for faster transaction time. You can still send for free, it will just take a lot longer.

              The miners/double-spending-police don’t charge fees now, so how do you know what they’ll charge or the terms?

              I can believe that they’ll charge more for more rapid processing, but they’ll necessarily charge for transactions short enough to attract many users; otherwise, there’s no point in charging at all.

              This reply doesn’t address the question. Any payment system can offer slow transactions without charge as a loss leader, as Dwolla offers small transactions without charge. The question is: why will the Bitcoin network’s fees me smaller than alternatives?

              • BrodieNo Gravatar says:

                You keep on talking about the cost of converting local currencies into and out of Bitcoin. Yes you are right that transmitting small amounts of currency is more costly using Bitcoin, even internationally. However, I would imagine transferring large amounts of currency using Bitcoin is less expensive. But that is really irrelevant to the future use of Bitcoin, once it becomes the reserve currency of the world. Again yes, currently, the price of Bitcoin is probably mostly speculative. And I believe that is based on the belief that it will at some point in the future become the world reserve currency.

                >That’s a small part of the speculation.

                It might be. But I don’t think so.

                >Transferring funds through the Bitcoin network will involve fees long before acceptance is anything like universal, and the fees need not be less than competing payment systems. If transferring Bitcoin is more costly at this point, people exit the system, don’t they?

                Obviously not all.

                • Martin BrockNo Gravatar says:

                  >However, I would imagine transferring large amounts of currency using Bitcoin is less expensive.

                  I can imagine all sorts of things. Show me a service that charges a smaller commission for larger transfers using Bitcoin. I’ll then try to find a service that charges less without Bitcoin. If I fail, you win. That’s fair, right?

                  >Again yes, currently, the price of Bitcoin is probably mostly speculative. And I believe that is based on the belief that it will at some point in the future become the world reserve currency.

                  That’s a nice story to tell yourself while you’re speculating, but it’s not my idea of a rational expectation. You might as well tell me that I’ll see the the light when Jesus returns.

                  >Transferring funds through the Bitcoin network will involve fees long before acceptance is anything like universal, and the fees need not be less than competing payment systems. If transferring Bitcoin is more costly at this point, people exit the system, don’t they?

                  >Obviously not all.

                  I’m much too dense to reach the most obvious conclusions, so please explain yourself here.

            • Martin BrockNo Gravatar says:

              >What speculation though? The speculation that it becomes widely accepted money.

              That’s a small part of the speculation.

              >At that point, you won’t need to convert it to fiat dollars. So you won’t need to use Coinbase to send them.

              Transferring funds through the Bitcoin network will involve fees long before acceptance is anything like universal, and the fees need not be less than competing payment systems. If transferring Bitcoin is more costly at this point, people exit the system, don’t they?

            • Martin BrockNo Gravatar says:

              If the Bitcoin network (including the current limits on Bitcoin supply and related features of the system) proves more costly than other payment systems, doesn’t the price of Bitcoin ultimately collapse? I suppose it does, so I need you to show me that the cost of the Bitcoin payment system ultimately will be lower, even after mining is no longer profitable and Bitcoin users expect no gains from holding Bitcoin.

              • BrodieNo Gravatar says:

                >If the Bitcoin network (including the current limits on Bitcoin supply and related features of the system) proves more costly than other payment systems, doesn’t the price of Bitcoin ultimately collapse? I suppose it does, so I need you to show me that the cost of the Bitcoin payment system ultimately will be lower, even after mining is no longer profitable and Bitcoin users expect no gains from holding Bitcoin.

                Gains are not necessary for a currency to be viable. Only that it retains value. Given that supply will only decrease after 21 million, that pretty much ensures the value will only remain the same or go up.

                As for costs associated with transferring Bitcoins, those that hold a lot of Bitcoins will have a vested interest in maintaining the network. Plus miners will earn a fee on Bitcoin transfers that pay the fee. Whether or not it will be enough is anyone’s guess. But right now that is not a problem. I can’t show you, so if that is what you need, then please, wait and see.

                • Martin BrockNo Gravatar says:

                  >Gains are not necessary for a currency to be viable. Only that it retains value.

                  I agree that deflation is not necessary for a currency to be valuable. Some level of price stability is necessary, but retaining value over the long term isn’t necessary either. Peercoin is slightly inflationary by design.

                  >Given that supply will only decrease after 21 million, that pretty much ensures the value will only remain the same or go up.

                  Right. That’s a problem for price stability, so it’s problem for Bitcoin as a unit of account and standard of value in long term credit agreements. Since a large proportion of all monetary transactions involve credit, any widely accepted currency must work as a credit instrument.

                  >As for costs associated with transferring Bitcoins, those that hold a lot of Bitcoins will have a vested interest in maintaining the network.

                  You expect Bitcoin billionaires to subsidize the network to prevent Bitcoins from losing value?

                  >Plus miners will earn a fee on Bitcoin transfers that pay the fee.

                  Right. This expectation makes more sense to me, but payment processing services receive fees now. The question is: will the Bitcoin network be competitive these services?

                  >Whether or not it will be enough is anyone’s guess. But right now that is not a problem.

                  You’re right. The problem now is that using the network is much more expensive than alternatives for most people. If you’re using it now, you must rationalize the higher cost by holding Bitcoin expecting the price to rise, and even this rationalization is flawed, because you can hold Bitcoin for the expected gains without using the network to make payments.

                  If I want to send my kids $1500, so they can spend it, and I also expect Bitcoin’s price to rise, I can send my kids $1500 through the lower cost channel and also buy Bitcoin to hold it at the same time. If I expect Bitcoin’s price to rise, the latter strategy is makes more financial sense than buying Bitcoin, sending $1500 worth to my kids and holding the rest, because I can use the money I save on the money transfer to buy more Bitcoin.

                  >I can’t show you, so if that is what you need, then please, wait and see.

                  You can convince me with an argument favoring the Bitcoin network on efficiency grounds, as you might have convinced me a few decades ago that email would become more common than snail-mail by now. For example, you can explain to me why operating the Bitcoin network requires less energy or less labor, bandwidth, security, insurance or anything else costly.

                  Of course, Bitcoin is not the only possible digital payments system, not remotely, so you can’t simply compare Bitcoin to paper money. Bitcoin is not the largest digital money system by a long shot, and it’s not the least costly one either. Dwolla is less costly in part because it’s more centralized, and I’m not sure that the benefits of decentralization are worth the cost for most people for most purposes.

                  This difference has nothing to do with Dwolla accounting for a fiat currency. A free market without any fiat currencies can choose a more centralized solution over a less centralized solution.

  21. DaveNo Gravatar says:

    The only reason that I’m not that interested in Bitcoin right now is that, as long as the ever-growing monster of the state exists, why can’t they simply taking whatever they want, including Bitcoin? I’ve never heard anyone give a good response to this question.

    Hard commodities seem to me to be a little safer.

    I realize that this probably puts me into one of your categories above.

    • Seth KingNo Gravatar says:

      As beastly as the state is, it is not all powerful.

      Encryption is a victory won for freedom that I don’t see us losing any time soon.

      You owe it to yourself to spend more time looking into it.

      • FranzNo Gravatar says:

        It actually doesn’t take very long to understand the mechanics of Bitcoin, at all. It’s pretty simple. There are many YouTube videos on the subject, for example. If people would simply do a little research into Bitcoin technology, they could answer most of their questions rather than react out of fear, greed, emotion, or ignorance. (Look at all the people that lost their life savings on ‘hard’ commodities trades, by contrast). There is no way that the government can confiscate your Bitcoin wallet and its contents unless you use a poor passphrase, give them the passphrase, never assigned a passphrase to your wallet to begin with, left the passphrase out somewhere that it could be stolen, or foolishly left your wallet in a bank account instead of at home. The owner of Silk Road still has most of his Bitcoins because he refused to give the passphrase for his wallet to the government. The government cannot “crack” a well-constructed passphrase in the life of the universe, even if every atom in the universe were turned into a magical computer. (Do the math!)

        • Martin BrockNo Gravatar says:

          I have identified with crypto-anarchism from its earliest days in the nineties. I was discussing onion routing protocols in usenet groups long before Tor existed, using the same name (my real name) that I use here. If you find an archive going back far enough, you can verify that.

          So I’m an enthusiastic advocate for Tor and was an advocate for Silk Road before its demise. I’m thrilled that law enforcement apparently hasn’t cracked Ulbricht’s Bitcoin wallets, and I hope he can retrieve his Bitcoin when he leaves prison. Presumably, law enforcement doesn’t have the only copies.

          If the Feds successfully prosecute Ulbricht only for conspiracy to traffic in illegal drugs, he could spend years, even a lifetime, in jail, and his Bitcoins presumably would be locked up with him. He reportedly has five percent of all Bitcoins ever mined, worth hundreds of millions of dollars at the current price.

          I like to think that the attempted murder for hire charges are false, but I have little doubt that someone with hundreds of millions of dollars in Bitcoin could successfully contract for a murder on Tor, and the payer needn’t know who the murderer is. What do you think about that? Libertarians generally agree that murder should be unlawful.

          I support secure, pseudonymous networks for reasons we can discuss, despite the potential for criminal conspiracies (even because of it), and I also defend peer-to-peer title transfers and thus appreciate Satoshi’s solution of the double spending problem; however, I’m not a great defender of financial anonymity, particularly when credit is involved. A sound system of money and credit requires transparency, not anonymity.

    • BrodieNo Gravatar says:

      Dave,

      How do you think they can take “Bitcoin”?

    • FranzNo Gravatar says:

      The latest Kaiser Report, always entertaining, but particularly so this time around, interviews The Dollar Vigilante in the second half of the episode. Always good for a laugh, always good for education about financial (particularly central bank) shenanigans, and always good for learning about new sources of Anarcho-Capitalist activists, the Kaiser Report is a favorite of mine (episodes are downloadable from Russia Today’s website):
      http://rt.com/shows/keiser-report/episode-536-max-keiser-198/

  22. Martin BrockNo Gravatar says:

    Progress on my Bitcoin experience:

    I just purchased 0.04521 BTC for $25.39. I did not purchase precisely $25 worth of Bitcoin, because I rounded off the quantity of Bitcoin worth $25 at the time of my purchase, which changes by the minute of course. I’m not using a credit card at Coinbase, so the bank transfer requires 4 business days; however, Coinbase guarantees my purchase of this quantity of Bitcoin at this price. The Bitcoin should appear in my Coinbase account on 12/24.

    To be clear, I’m not accepting the arbitrage risk in this transaction. When I receive the Bitcoin, I’ll send Seth 4/5 of the Bitcoin (0.036168 BTC), and I’ll send a fifth of the remainder (0.0018084 BTC) to each of five libertarian organizations as specified in Seth’s comment above. These contributions may be worth more or less than $25 when I make them.

    Seth, Do you agree that I satisfy the terms of our agreement this way?

    • Martin BrockNo Gravatar says:

      Also, $25.39 is the amount of my bank draft, so it includes Coinbase’s 1% commission, which is roughly 25 cents.

    • Martin BrockNo Gravatar says:

      Update: My bank account now shows the $25.39 draft for my purchase of Bitcoin through Coinbase; however, my Coinbase account does not yet show the 0.04521 BTC. That’ fine, because Coinbase only promised delivery of the Bitcoin by Dec. 24. Possibly, the $ transfer hasn’t reached Coinbase’s bank account even though it appears in my account.

      I trust Coinbase, and I won’t lose any sleep over losing $25 in the worse case scenario, but the timing of these transactions raises interesting questions.

      First and foremost, has Coinbase actually bought the 0.04521 BTC on my behalf at this point? I suppose it has. I suppose Coinbase bought the BTC as soon as possible after I placed my order, even though my bank draft hadn’t cleared. In other words, I suppose Coinbase loaned me the $25.39 long enough for the funds transfer to occur.

      I suppose so, because I bought at $550/BTC and the price is now $650/BTC. If Coinbase buys my Bitcoin at this moment, $25.39 isn’t nearly enough to cover the cost, and the 1% commission isn’t nearly enough to cover the loss, so the commission must cover the cost of lending me dollars for a few days while holding my Bitcoin. One percent is not nearly high enough to cover the arbitrage risk, but it is high enough to cover the risk that my bank draft fails.

      My point here is that the dollar is actually the only money in these transactions. Coinbase buys Bitcoin with dollars immediately, even if it must borrow the dollars, rather than waiting for my dollars to buy the Bitcoin, because the dollar’s value is much more stable than Bitcoin’s value. Similarly, if I sell Bitcoin at a specified price in dollars, Coinbase presumably executes my sell order as soon as possible after I place it, because it can’t afford to wait.

    • Martin BrockNo Gravatar says:

      Update: Coinbase credited my account with 0.04521 BTC on the 24th as expected, and I sent Seth 0.036168 BTC on the 25th. Merry Christmas! I suppose Muslims may celebrate Christmas.

      • Seth KingNo Gravatar says:

        I received your payment. Can you give us the blockchain.info links for the other transactions?

        If you don’t know how. go to blockchain.info and in the search bar, paste the transaction id’s and then send us the links for each one.

        Also, I’m not Muslim. Davi is.

        • Martin BrockNo Gravatar says:

          Sorry about the religious mix up. Blog posts start to run together after a while. Needless to say, your religion is your business and none of mine as long as you don’t want to impose it on anyone else.

          This morning, I still don’t find the transfers to FEE, FSP and MI at blockchain.info, though Coinbase says each transaction is Complete. Also, the record of these transactions in my Coinbase account doesn’t specify the address. It only says “an external account”. For the LRC and LP transactions, which I can verify at blockchain.info, the Coinbase record does specify the address.

          If FEE, FSP and MI have Coinbase accounts, Coinbase might not register the title transfers in the blockchain immediately, instead recording the transfer in a Coinbase registry (as Dwolla does with dollar balances). On the other hand, Coinbase lists the destination for these transactions as “external accounts”. I can imagine other explanations for the lack of a record in the blockchain, but I’m not sure why Coinbase would list addresses in some cases and not others.

          I’ll keep checking, but at this point, half of my transactions seem to be lost in the ether, and if I hadn’t kept track of the addresses myself, I’d have no record. I couldn’t trust the system with larger transactions at this point.

          • Seth KingNo Gravatar says:

            Fair enough. You’ve fulfilled your end of the deal. I won’t hold Coinbase’s poor showing against you. Go ahead and start a new comment thread at the bottom. Tell me what you would like to see instead of Bitcoin, or rather, what about Bitcoin should be changed in your opinion to make it “good.”

    • Martin BrockNo Gravatar says:

      Update: Here is the link to blockchain.info describing the transfer to Seth’s address.

      https://blockchain.info/tx/533a4f9a7a8df61f434a01e3ee14f1f344bff3 a596108af56612a59735b288df

      I made the remaining contributions of 0.0018084 BTC to each of the following a few minutes ago, but I don’t see them yet at blockchain.info.

      FEE: 15wDJRfsyomAgvX2TdW32gdYtAWZtAd1ps
      Mises: 1HF7EcMX5u3cMBeo4NBeN7vym36cg7gS6v
      LRC: 1L14viqmZGGXasg1UyEUkKCvy6c5qcf1bq
      FSP: 18LDvu2nqr8a5AK9AHkkqDK6Z65dzbTgtn
      LP: 1s3rCUEw9iNmtgMF8Ceg536VG8P8RxVA6

      I’m surprised that an anarchist suggested the LP, but I have no problem supporting the other organizations.

      When I bought the Bitcoin last week, I also transferred funds to my Dwolla account for a contribution to c4ss, so I could make a side-by-side comparison. I’ll do that latter.

  23. jomamaNo Gravatar says:

    This over 70 guy is all for bitcoin.

    Bring it on.

  24. Martin BrockNo Gravatar says:

    First, I’m not making any sort of universal, moral judgment about Bitcoin. If people want to use Bitcoin, I have no problem with it. Bitcoin is not evil in any sense in my way of thinking. Murder is evil. Bitcoin is a preference. Choosing Bitcoin is no more good or evil than choosing Pepsi over Coke.

    To be clear, when I refer to Bitcoin below, I refer only to Bitcoin 1.0, the tokens and related network as currently regulated by the current protocols with all of the existing limitations on the supply of Bitcoin. Bitcoin could morph ultimately into something else, more like one of the existing alt-coins, and I think this outcome very likely. In this sense, I am not anti-Bitcoin at all. I only expect the system to evolve, but I won’t address how it could evolve or the alternatives I prefer in this post. I’ll do that later. I don’t expect you to carry on this conversation indefinitely.

    I’ll summarize the gist of an argument and elaborate on each assumption.

    1. Bitcoin is not money now, because it is not a unit of account.

    Even where Bitcoin is reportedly used as money, it often is not. The widely publicized purchase of a $100,000 Tesla “with Bitcoin” a few weeks ago (see above) is only one example.

    http://www.latimes.com/local/lanow/la-me-ln-lamborghini-bitcoin-2 0131212,0,847450.story

    Despite this headline, someone actually sold Bitcoin for dollars, near the top of a bubble, and then bought the car with dollars. Infrastructure (like BitPay) easing this sort of transaction does not make Bitcoin money.

    I do not think that the buyer of this car cheated anyone when he took profits in his Bitcoin holdings to buy a car. People may speculate however they like, but I don’t expect a car dealership to use a highly volatile, speculative medium as money.

    Car dealerships deal heavily in short-term credit, and a volatile medium is unfit for specifying terms of credit. I don’t expect a car dealership to contract for credit in terms of Google shares either, but I have no moral problem with Google or Google shares.

    2. Bitcoin is not a unit of account, because its value is not sufficiently stable.
    3. Bitcoin will never have a stable value above zero.

    Advocates of Bitcoin assume that its value will stabilize ultimately, and this assumption is my principle disagreement with them. I have other objections to Bitcoin, but I’ll focus on this one in this post.

    The instability of Bitcoin’s value is a consequence of its inelastic supply. A rising value has a feedback effect producing bubbles, and this effect will persist as long as the supply remains inelastic.

    Expecting a rise in the market value of a good to portend a further rise is irrational, but people often are irrational in this way. When people see the value of Bitcoin rise, many of them hold Bitcoins and use something else as money. Because the supply of Bitcoin is inelastic, this contraction of the circulating Bitcoin supply raises the price of Bitcoin in other exchange media with a more elastic supply, and this rise reinforces the propensity of people to hold Bitcoin, which further raises the price, until many people decide to take profits, whereupon the bubble bursts.

    That’s an “animal spirits” argument, but one such argument does not make me a Keynesian.

    Again, I have no general, moral problem with Bitcoin speculation, rational or otherwise. This game is not my choice, but I don’t think less of people who play it. Most Bitcoiners don’t believe themselves to be playing this game anyway, but this fact is not relevant to my point.

    I don’t often speculate on individual stocks or buy lottery tickets either. I oppose state lotteries, but I have no problem with lotteries in general. Whatever gets your motor running is fine with me.

    4. A good must be a stable unit of account to specify terms of credit and thus become money.
    5. Bitcoin will never be widely used as money and is useful otherwise only as a speculative vehicle with no intrinsic value, so its value will ultimately collapse and not recover.

    More Bitcoin boom/bust cycles may occur. I have no idea how many will occur or what the ultimate peak will be, but I won’t skirt the question entirely. Instead, I’ll make a prediction. Alternatives will prevail over Bitcoin in the market for digital money in this decade (before 2020), and bitcoins will have little value by the end of the decade unless the existing tokens are absorbed into a reformed system. I have no particular reason for this time scale, but if Bitcoin hasn’t crashed finally or morphed into something else by 2020, I’ll reconsider these assumptions.

    The remaining cycles can make more people rich (and other people poorer). I have no problem with this. If you want to ride these waves, that’s fine with me. I’m only telling you what I expect the ultimate outcome to be and why I expect it. Caveat emptor.

    Bitcoin could retain some value as a black market medium of exchange, but it isn’t ideal for this purpose either, so I expect alternatives to prevail over it in this niche ultimately. It could also remain a vehicle for speculation indefinitely, but I don’t expect this outcome. Speculative mania is inexhaustible, but speculation on a particular vehicle is not.

    While I have no problem with Bitcoin speculation in general, I expect the speculation to have consequences. I expect Bitcoin never to become money, and I expect the tokens to lose their value. Some people who champion fiat money then will claim that Bitcoin bubbles vindicate their theories of the business cycle and contradict the Austrian theory. I don’t agree, but many other people will believe the declarations of vindication, so Bitcoin will confuse and disillusion many people, particularly people who buy it expecting to enrich themselves. Unfortunately, this outcome is unavoidable.

    Again, I do not believe that Bitcoiners generally are defrauding anyone. I only think that their expectations are mistaken.

    I’ll stop there and address other points, like financial anonymity, in detail later. I don’t think much of financial anonymity, but this objection is more moral than technical. People should be free to choose the property rights they respect in my way of thinking, and anonymous transactions permit the accumulation of property that people may wish to disrespect, so I expect many free communities to rule out these transactions. This objection applies more to Bitcoin combined with Tor than to Bitcoin alone.

    • Seth KingNo Gravatar says:

      I’ll address things point by point.

      1. You know, there are lots of countries where businesses accept USD, but convert the money into their own country’s national currency. If they accept cash, they later change them at the bank. If they accept credit card, the USD amount is subtracted from the purchasers account and the local currency amount is added to the seller. So what? Does that mean that the buyer’s currency is not money because the seller isn’t holding it after the purchase? The answer is no.

      2. Bitcoin’s value, in terms of USD, has no effect on its unit of account. The value of USD, in terms of pork bellies, fluctuates all of the time. The same goes for the value of USD in terms of gold, silver, Yen, etc. Does that mean that USD is not a unit of account?

      3. I’ll agree that Bitcoin’s value is constantly fluctuating, in terms of all things. That doesn’t bother me one bit.

      4. Eventually, Bitcoin will have a closed loop economy. In other words, businesses will receive all of their income in Bitcoin. They will pay all of their employees in Bitcoin. They will purchase all of the goods and services from their suppliers in Bitcoin, etc. Once that happens, naturally loans and interest will have to be in terms of Bitcoin and they will have to take into account its rising value. The market adjusts to this. For example, right now nobody is loaning bitcoin because its value is rising too fast. But it’s like an S curve, eventually it will plateau and its value may only rise 10% per year. Or in other words, prises will FALL 10% per year. Interest rates will likely be very low because savings will be very high. Debt as we know it will be a thing of the past as most people will not need it to survive, like they currently do.

      5. You don’t give any evidence why Bitcoin will not be widely used as money. Furthermore, you’ve yet to give me any alternative that you prefer. I mean, right now people have a few choices as far as money goes: Precious metals, fiat, or cryptocurrency. Cryptocurrency wins hands down as far as I’m concerned. Are you telling me that fiat is better than cryptocurrency? If not, what is better than cryptocurrency, or bitcoin?

      Again. I still want to know what YOUR ideal currency would be like.

  25. Martin BrockNo Gravatar says:

    1. The answer to your question is no, but this answer is not relevant to my point. The dollar is money, and Bitcoin is not. A business in another country accepting dollars does not contradict this assertion.

    A business may accept USD and convert the currency into another currency, but the car dealership in this article does not accept Bitcoin this way.

    http://www.latimes.com/local/lanow/la-me-ln-lamborghini-bitcoin-2 0131212,0,847450.story

    The dealer never holds Bitcoin, even for a second. The article states as much, regardless of its misleading headline. The dealer did not offer the car for sale at a specified price in Bitcoin, wait for a buyer at this price or a similar price negotiated in Bitcoin and then accept Bitcoin in exchange for the car; therefore, Bitcoin was not the money in this transaction. Do you acknowledge this point?

    We can’t agree on Bitcoin’s status as money without agreeing on the meaning of “money”. Money is a unit of account as well as medium of exchange and a short-term store of value. A business borrowing and spending dollars, or holding dollars to spend, to buy raw materials or inventory and pricing its goods for sale in dollars is using dollars as money. Bitcoinstore doesn’t operate this way with Bitcoin, and I don’t know of any other business operating this way. Until businesses operate this way, Bitcoin is not money. If you disagree, will you offer another definition of “money”?

    A business subject to another, unstable fiat currency might use the dollar as money and obtain the other currency only as needed to pay taxes. In this scenario, the dollar is the business’ money and the other currency is not. This outcome often occurs when businesses are subject to an unstable fiat currency.

    2. Bitcoin’s value in terms of the USD is relevant to its status as unit of account, because the USD is a common unit of account. A common unit of account has a fairly stable value; otherwise, it ceases to be a common unit of account. Two common units of account thus have a fairly stable exchange rate.

    Bitcoin’s value in terms of silver and Google shares is not similarly relevant, because silver and Google shares are not common units of account. People exchange money for everything, including other monies, but everything for which people exchange money is not itself money.

    3. Bitcoin’s volatility doesn’t bother me either, any more than the volatile value of Google shares bothers me, but Bitcoin and Google shares are not money. My point is that Bitcoin is not money.

    4. How do you know that Bitcoin will have a closed loop economy eventually?

    That’s a rhetorical question. Neither of us knows the future. We have expectations, and we’re discussing our reasons for these expectations. Do you agree?

    If and when Bitcoin has a closed loop economy as you describe it, I will agree that Bitcoin is money within this economy; however, I cannot concede a point that simply begs the question.
    I don’t expect Bitcoin’s value to stabilize as you suggest, because I expect the feedback effect described above. You haven’t addressed this point. Do you not expect this feedback effect to occur? If not, why not?

    I associate the feedback effect specifically with the inelastic supply of Bitcoin, so a Bitcoin-like system with a more elastic money supply could avoid it. Peercoin is a Bitcoin revision (implemented by modifying the Bitcoin source code) designed to avoid it, but I’m no authority on Peercoin specifically, so I’ll call a hypothetical system with this goal Bitcoin 2.0.

    To address your last question, I prefer Bitcoin 2.0 to Bitcoin, but I prefer another system to both. I’ll discuss my favorite system if you want. It is like systems advocated by historical anarchists (mutualists specifically) long before Bitcoin existed, even before digital money was conceivable. I’m happy, even eager, to subject it to your scrutiny, because you could persuade me to alter it or even abandon my preference for it; however, defending a specific alternative is not my point now.

    In Bitcoin 2.0, the miners/double-spending-police change the protocols to permit more tokens to be mined. I’ll now call these people/machines “Routers” for the sake of brevity. The new protocols also expire tokens that do not circulate for a long period, so if you do not spend tokens after a period, 90 days say, your tokens lose value in trade through the network, because the Routers reject them. The new protocol might permit Routers to avoid fees indefinitely, since mining could remain profitable indefinitely.

    The new tokens are not “Bitcoins” in the original sense, but most holders of original Bitcoin accept them at parity in this scenario. Most holders can’t effectively distinguish one digital token from another anyway. Standard software makes this distinction for them. Some purists might claim that the Routers defraud holders of Bitcoin 1.0 in this scenario, but this claim is not relevant to my point.

    These changes in the protocol stabilize the value of Bitcoin, so that the dollar exchange rate varies only a little over short periods and slowly over longer periods, assuming that the dollar itself does not become unstable and remains a common unit of account. Dollars are not special in this story. Bitcoin 2.0 could stabilize the value of Bitcoin relative to a basket of common commodities instead, but I’m accustomed to thinking in dollars, so let’s say that the protocol changes stabilize the value of Bitcoin around $1000/bitcoin.

    Of course, many early adopters of Bitcoin remain very wealthy after this change. This fact is not relevant to my point. My only point is that Bitcoin might become a common unit of account with these changes. I expect Bitcoin to be successfully ultimately only with changes of this kind.

    So here’s a question for you. Would you refuse to use Bitcoin 2.0? Would you spend your existing stock of Bitcoin (now subject to the Bitcoin 2.0 protocols) and accumulate tokens in another, competing system retaining the Bitcoin 1.0 protocols? If so, why?

    People don’t need credit because prices rise and interest rates are high. People need credit, because they need means of production that they don’t own. Presumably, in the future you imagine, people are not born entitled to all of the means of production they need. Falling prices are great if you already have money, but if you don’t yet have money and own only your labor, you must earn money through trade by selling your labor.

    How does a deflationary currency help people without money obtain the means of production? In a generally deflationary economy, the price of your labor is also falling, and to make the most productive use of your labor, you need other capital, and to obtain this other capital, you need credit.

    5. I do give evidence that Bitcoin is not used as money now. Again, even Bitcoinstore does not use Bitcoin as money. It does accept Bitcoin, but it prices goods in dollars, so the dollar is its unit of account. The car dealership referenced above neither prices goods in Bitcoin nor accepts Bitcoin. You accept contributions in Bitcoin, but contributions are a poor indicator of the monetary role. Many organizations “accept used cars” as donations, but in reality, other organizations facilitate the liquidation of car titles for this purpose. Used cars are not money in this scenario, any more than Bitcoin is money when BitPay liquidates Bitcoins similarly.

    No. I’m not telling you that fiat money is better than cryptocurrency. I repeatedly state in this forum that I oppose fiat money. I don’t favor precious metals either.

    My favorite is roughly the system implemented here with common labor as the standard of value.

    http://www.favorati.net/

    I’ve linked this site here several times. Click on the link to “Common Labor” on the first page to see precisely how I define it. I have problems with this implementation myself, but I’ll defend it as such. I can’t precisely describe the system in a few words, any more than I can describe Bitcoin in a few words. It is more like Ripple than Bitcoin, but it differs from Ripple in significant ways that we can discuss.

    For the sake of discussion, I prefer to distinguish three types of currency, fiat, free backed and free unbacked.

    “Fiat money” describes a statutory legal tender commanded to circulate by a state spending, taxing and otherwise imposing rents, and trading entitlement to tax revenue in the currency. A metal or notes promising a metal can be a fiat currency in this sense, so the distinction between “metallic” and “fiat” is not clear. A cryptocurrency could also be fiat money, and I expect states to adopt cryptocurrencies as fiat money. The dollar presumably is morphing into a cryptocurrency already.

    A “free backed” currency is not fiat money and is backed by another good or goods. Silver or circulating notes promising silver, without any state encouraging their circulation by commanding people to collect them to pay taxes for example, is a free backed currency.

    Bitcoin is a “free unbacked” currency or wants to become one, but it’s not the only possible model or the best one in my opinion.

    I favor a free backed currency, but I have no fundamental problem with a free unbacked currency. I agree with Hayek that such a monetary system is possible in principle with or without cryptocurrencies.

    More generally, I favor a free currency backed by a non-durable, common good with an elastic supply, rather than a durable, scarce good with an inelastic supply. I oppose a gold standard for example, because gold is durable, scarce and has a relatively inelastic supply. I favor a standard of value like grade A whole milk over a standard like gold.

    Ideally, I favor a standardized labor (what I call “common labor” above) as a standard of value, but I understand difficulties with realizing this ideal, and I will discuss them.

    • Seth KingNo Gravatar says:

      Alright. I’m starting to understand a little bit. The problem here is that you and I have COMPLETELY different economic ideologies. I think money should be A and you think money should be B. You don’t like Bitcoin because Bitcoin is A.

      I’m not going to debate any longer what’s right with A and wrong with B, because frankly. that’s opening up a can of economic worms.

      Let’s take the debate in a slightly different direction. You want money B. The problem is that money B doesn’t exist right now. Why hasn’t money B been created yet? Are there other people like you who also want money B? If so, why hasn’t it been created yet?

      You have to understand, me, and lot of other people like me, were gold/silver bugs. And many of us, myself included, first thought Bitcoin was money B, and we didn’t like money B. We only liked money A. It wasn’t until we re-examined out premises that we realized that Bitcoin IS money A. And then we fell in love with it.

      My question to you is, you don’t like fiat money. Do you like it more than Bitcoin, though? If the answer is yes, then you and I really are on opposite ends of the spectrum. Because to me, pretty much any form of money is preferential compared to the STATE’S money.

      It seems to me that you would do well to use Bitcoin until your preferred money came into existence.

  26. Martin BrockNo Gravatar says:

    I’m starting a new thread with each post to avoid the creeping indentation problem.

    Comparing Bitcoin to a fiat money like the dollar is an apples to potatoes comparison. I can only prefer to apples to potatoes as fruits, because potatoes are not fruits. I can only prefer the dollar to Bitcoin as money, because the dollar is money and Bitcoin is not. I need money, and Bitcoin does not meet the need. I want an option other than a fiat currency, but Bitcoin is not this option, and without changes, it’s not becoming this option. I welcome these changes, and the changes do not turn Bitcoin into fiat money.

    I prefer B to A, but my objection to Bitcoin is not only that Bitcoin is A rather than B. Bitcoin lacks essential characteristics of money, namely an elastic supply required for price stability. Price stability is an essential requirement for a unit of account, and money definitively is a unit of account. If B also lacks essential characteristics of money, then B can’t become money either, but we haven’t discussed the practicalities of B yet. B is also subject to criticism, and I’m willing to discuss its defects.

    Too much abstraction (A’s and B’s) can obscure issues that need illumination. More specifically, I prefer Favorati to Bitcoin, but neither is my preference. I understand defects of Favorati, and I understand defects of Bitcoin, but I prefer a system more like Favorati than like Bitcoin.

    This system like Favorati doesn’t exist yet for reasons we can discuss. Some of the reasons are technological, but the technological barriers are falling or have already fallen. The same was true of Bitcoin only a few years ago, so you could have asked then why Bitcoin doesn’t exist. Everything potentially exists before it exists.

    Ripple is more like Favorati than like Bitcoin, and Ripple does exist. In fact, Ripple existed before Bitcoin. Ripple also existed before XRPs, and early implementations of Ripple used labor as a standard of value. I was aware of Ripple and discussed it with Ryan Fugger before Ripple Labs existed, so I don’t share your sense of Bitcoin as either the earliest or the most practical, stateless electronic payments system. Bitcoin has taken off faster for reasons we can discuss, but these reasons are not related to its role as money.

    Favorati exists as a prototype, but Bitcoin obviously exists much more fully than Favorati; however, Bitcoin is not a stateless monetary system, because it is not a monetary system and is not becoming one. Something more like Bitcoin than like Favorati could become a monetary system, but an improvement on Bitcoin that becomes money is not a system of credit, so it’s not a substitute for Favorati.

    Favorati is both a system of credit and a monetary system, because units of credit are its monetary units. Favorati requires a standard of value (a good like silver), but many different goods may play this role. Favorati supports four, optional standards, Gold, Silver, the Dollar and Common Labor. Originally, it supported only Common Labor, but I added the options to demonstrate that other standards are possible. I can easily add Bitcoin as another option. XRP is a cryptocurrency playing this role in Ripple.

    The problem is that Bitcoin cannot be an effective standard of value for extending credit, because its value is not stable enough, and the instability is not only a product of Bitcoin’s early stage. It’s a product of Bitcoin’s inelastic supply, and Bitcoin will always have an inelastic supply without changes in the system.

    A similar cryptocurrency without this defect, possibly Bitcoin 2.0 or Peercoin or XRP, could be a standard of value, but I don’t see the point. More intuitive standards with the necessary characteristics already exist. Ideally, a standard of value is something that common people already possess, like their own labor. This ideal motivated the earliest anarchists.

    The principle advantage of a cryptocurrency seems to be anonymous or pseudonymous transactions over a network, but I have reservations about these transactions. People have no natural or inalienable right to accumulate property rights this way. I’m not pressing this normative point here, but it’s a point worth discussing. People should have a right to choose the proprieties they respect in my way of thinking, and people cannot effectively exercise this right while people accumulate property rights secretively.

    If a pseudonymous transaction using a cryptocurrency permits one person to pay another person to kill a third person, without even the payer knowing the identity of the killer, this transaction is a problem. I feel no obligation to respect the killer’s right to the payment, regardless of the voluntary nature of the transaction. I would not hesitate to take the payment from the killer and refuse to return it to the payer, though I have no right to it myself either.

    A payment of this sort might cease to be money altogether. This outcome is possible with Ulbricht’s bitcoins, assuming he is guilty of the murder for hire charges, if the Routers accept changes in the Bitcoin protocols. These changes need not involve a central authority, except insofar as the Routers themselves are a central authority.

    Funny how the FBI doesn’t realize this possibility. If it has the only copy of Ulbricht’s wallet, it could simply destroy the wallet upon his conviction. Instead, it intends to liquidate the Bitcoin for its own benefit if possible.

    For that matter, since the dollar is a fiat currency, the United State could simply burn ill-gotten, monetary gains without affecting the supply of dollars. Destroying dollars this way does not adversely affect the money supply, because the banking system continually creates more dollars, in theory to meet the demand for money; however, state agencies prefer to confiscate ill-gotten gains. In other words, they prefer to replace killers as the beneficiary of killings.

    • Seth KingNo Gravatar says:

      I think we’ve reached an impasse, because your refusal to accept Bitcoin as money is stifling things. I’ve been using Bitcoin as money for a few years now. I can only imagine that in a few more years how much more prevalent Bitcoin will be in the marketplace, all the while you’ll be going “lalalalalalalala I can’t hear you. Bitcoin isn’t money! Lalalalallalaa”

      • Martin BrockNo Gravatar says:

        When you consider your assets and liabilities, income and expenses, do you tabulate the figures in Bitcoin, or do you use a currency in which prices are more predictable from week to week? If you use Bitcoin as a unit of account this way, you’re one of the few.

        When I say that Bitcoin is not money, I’m assuming a particular definition of “money”. By this definition, Bitcoin is not money as a matter of fact. I’m not simply stating an opinion. “Bitcoin is not money” states an empirical fact given common usage of the word “money”.

        If you disagree, I need to see some supporting evidence. Again, Bitcoinstore does not price goods in Bitcoin but instead prices goods in dollars and displays a Bitcoin price that changes from minute to minute. The evidence is at bitcoinstore.com. No economist says that Bitcoin is the money at Bitcoinstore under these circumstances.

        Again, a widely reported sale of a car for Bitcoin was no such thing in fact, because the reports themselves say as much beneath the headlines. The evidence is linked above, and only a little common sense is necessary to understand why a car dealership would not account for its costs in Bitcoin, use Bitcoin in credit agreements or accept Bitcoin in payment. Using BitPay to sell Bitcoin for dollars before buying a car with the dollars is not using Bitcoin as money.

        I asked for an alternative definition of money, and you haven’t responded. If Bitcoin is money, what sense of the word “money” are you using? Is silver also money? Are Google shares money? These are simple questions. If you refuse to address them, you are the one with hands over your ears. I’m not avoiding your questions here at all.

        I can describe all sorts of potential problems with alternative monetary systems that I prefer, and I will if you want to discuss these alternatives.

        • Seth KingNo Gravatar says:

          Money is what money does. And if it allows me to purchase goods and services then it’s money.

          I know a lot of people like to define money in their own obscure way, saying it needs these x number of properties to be money, yada yada yada.

          But that’s very narrow thinking. If I were to ask somebody 30 years ago what an automobile is, they would say things like, it has 4 wheels, two axles, an internal combustion engine, etc.

          But in today’s world, we see that new automobiles are battery powered, no internal combustion engine. Is that not an automobile? What if it has 6 wheels, two up front and 4 in the back. Is that not a automobile?

          Times change and so do definitions.

          • Martin BrockNo Gravatar says:

            Times change and so do definitions, but my definition of money is completely conventional. I quote it from Wikipedia above, and Brodie acknowledges the reality.

            By your definition, Google shares are money, because I can sell Google shares for dollars online before spending the dollars online. No service like BitPay facilitates this transaction, but a GoogleSharesPay is certainly possible, and this service would not make Google shares money. Since hardly anyone says that Google shares are money, your definition is obscure. Mine is not obscure at all.

            You understand that cars today aren’t what cars were 30 years ago. I’m only telling you that digital money thirty years from now won’t be what Bitcoin is today, and you think me an old man stuck in my ways for saying so.

            • Seth KingNo Gravatar says:

              Anything can be money. Whiskey shares, Silver Warehouse receipts, anything. If people use it as money it’s money to them. Seashells, Talley sticks. Lots of things are money. Just because you don’t like something doesn’t make it money.

              • Martin BrockNo Gravatar says:

                What I like is irrelevant, and I don’t dislike Bitcoin. I just don’t see it becoming stable enough to become a common unit of account.

                Here’s a business model for your consideration. I’m calling it 500Pay. I create a plain vanilla, S&P 500 index fund with the lowest costs I can manage, which can be very low if the fund becomes large enough, and I sell shares of the fund.

                By design, the price of a share tracks the S&P 500 index, so the price might be $1848 today and $1775 tomorrow, but the price of a share doesn’t discourage buyers, because I’ll share half shares or quarter shares, even a thousandth of a share, maybe a millionth. You can buy and sell your shares online, and if you sell shares to another fund shareholder, the commission is very small.

                So far, that’s nothing special. People buy arbitrarily small bits of an index fund this way every day, through a 401k for example. The accounting is not a problem at all, and hedge markets are very well-established and efficient.

                Once this fund is established, I create this new service called 500Pay. Online retailers may post a “We accept 500Pay” button on their web sites, enabling the fund’s shareholders conveniently to sell shares (including fractional shares) of the fund before buying things at the web site. People may also use their cell phones to pay for goods this way in brick and mortar stores.

                Share buyers and sellers pay the transactions costs, so retailers pay nothing for this service. If a retailer will accept payment directly in shares of the fund, someone exchanging shares for a retailer’s goods this way also pays little or nothing for the transaction.

                So here’s a question. If I create this service, do shares of the S&P become money? Does the answer to this question depend upon retailers’ willingness to accept payment directly in shares of the fund? Does it depend upon retailers’ willingness to price their goods and otherwise to account for their revenue and expenses in shares of the fund?

                • Seth KingNo Gravatar says:

                  If two people use it as money, it’s money.

                  • Martin BrockNo Gravatar says:

                    I’m still not sure what you mean by “use it as money”. If you and exchange one good for another good, then both goods are money?

                    • Seth KingNo Gravatar says:

                      All commodities can be used as money. Iron might not make for a very good money, but if people use it as such, then it is, regardless of how much more superior other monies are.

                    • Martin BrockNo Gravatar says:

                      What distinguishes a commodity that’s used as money from an commodity that’s not used as money? If you and I exchange an ounce of silver for a gram of gold, are both goods money? What if we exchange a gram of silver for a gallon of grade A whole milk? Which good is money?

                    • Seth KingNo Gravatar says:

                      They can both be money, but milk isn’t seen as money because superior monies exist.

                      People have been debating the definition of money for a long time.

                      To me, I hark back to the SVT. Money is what I value as such.

                    • Martin BrockNo Gravatar says:

                      So money is whatever you say it is? But if I say that something is not money, then I have my hands over my ears crying “la la la la”? I’m all for the subjective theory of value, but does common usage mean nothing?

                    • Seth KingNo Gravatar says:

                      Actually, you make a very good point there. My “aha” moment was when I realized that the only thing stopping me from valuing Bitcoin… WAS ME!

                    • Martin BrockNo Gravatar says:

                      We’re discussing common usage of the word “money”, not the value of a bitcoin. You may pay whatever you like for a bitcoin, but words mean what people commonly mean by them.

                    • Seth KingNo Gravatar says:

                      A lot of people see Bitcoin as money. The only thing holding you back is you.
                      I will say, though, you’re the first person who is not old. Well, you’re not 60+. You understand how Bitcoin works, mostly, and you’ve used Bitcoin, and you’re still anti-bitcoin. Congratulations.

                      I still think you’ll come around, eventually.

                  • Martin BrockNo Gravatar says:

                    “A lot of people” is not a coherent, common usage of the word “money” and does not contradict any conclusion I reach from the observation that Bitcoin is not money as economists and people generally use the word “money”. You’re evading points left and right, and I’m not sure you’ll ever come around, but as I say above repeatedly, if the future you imagine emerges, I’ll have no problem calling Bitcoin “money”. I only say that it’s not money and is not becoming money now, i.e. it’s not a common medium of exchange, unit of account and short-term store of value (all three of these things) now.

                    • Seth KingNo Gravatar says:

                      There are several million people that use Bitcoin as money. That’s a lot more than some small nations, and way larger than tribes in the jungle. I’m not really concerned that most people don’t use it. Most people have still never heard of Bitcoin.

                      Again, Bitcoin may not be money to you, but that’s your hang up. Not anybody else’s.

                    • Martin BrockNo Gravatar says:

                      Buying and selling Bitcoin is not using Bitcoin as money any more than buying and selling Google shares is using Google shares as money. Millions of people do not use Bitcoin as their unit of account and medium of exchange, so millions of people do not use Bitcoin as money. Far more people buy, sell and hold gold, and gold is not money either.

                      But if you want to use “money” idiosyncratically, that’s fine with me. Your usage has no bearing on my conclusions, because my conclusions follow from the fact that Bitcoin is not money in the more common sense of the word.

                    • Seth KingNo Gravatar says:

                      People are doing more than just buying and selling Bitcoin for fiat. My job pays me 100% in Bitcoin, and I buy many goods ans services with those Bitcoin. There is a gas station near where I live that accepts Bitcoin. There are many stores online that accept Bitcoin. I don’t give a damn what they do with the bitcoins once they’ve got them. If I can exist without needing fiat, Bitcoin is money, at least to me.

                    • Martin BrockNo Gravatar says:

                      If you receive most of your income in Bitcoin and purchase most of your goods with Bitcoin and keep your accounts in Bitcoin, then Bitcoin is your money. If millions of people use Bitcoin this way, I’d like to see some evidence.

                    • Seth KingNo Gravatar says:

                      Most Bitcoin users get paid in fiat, buy Bitcoin. Probably 10-20% of their monthly earnings at most. Then they pay for things in Bitcoin when they can and they also likely save Bitcoin for the future. I think a lot of people would happily get paid in Bitcoin, but their employers don’t offer that option yet.

                    • Martin BrockNo Gravatar says:

                      I doubt that most Bitcoin users spend anything like 10-20% of their income on Bitcoin. Where are you getting these numbers? If people buy Bitcoins only then to buy things with Bitcoin, I can’t imagine why, because the transactions costs are considerable. I suppose most buyers of Bitcoin at this point are buying to speculate.

                    • Seth KingNo Gravatar says:

                      Bitpay alone has transacted more than 100 million dollars worth of Bitcoin. I’m sorry to break it to you, but yes, people are actually spending their bitcoins. Lots of people are saving, too, but there’s also lots of spending going on.

                    • Martin BrockNo Gravatar says:

                      BitPay is a brokerage service. I believe that people speculating on Bitcoin take profits by selling their Bitcoin and then spend their profits. People speculating on Google shares do the same, and Google’s market cap is about 40 times Bitcoin’s market cap, so if you’re looking for the world’s next reserve currency, maybe you should look at Google shares, though Google’s market cap is smaller than Apple’s.

                    • Martin BrockNo Gravatar says:

                      And I’m not anti-Google or anti-Apple either.

  27. FranzNo Gravatar says:

    I find the circular arguments of the Bitcoin Deniers to be very amusing. Who cares if they don’t want to adopt Bitcoin? They will die cold, broke and alone.

    In the meantime, starting tomorrow, Overstock.com begins accepting Bitcoin as payment for merchandise. The world moves on, far beyond what the Statist Bitcoin Deniers can control with their now-obsolete fiat, central banking systems.

    • Martin BrockNo Gravatar says:

      http://www.forbes.com/sites/amitchowdhry/2013/12/21/overstock-com -is-going-to-accept-bitcoin-in-2014/

      “Overstock.com is likely going to partner with Bitcoin payment processors such as Coinbase or BitPay for the initiative. Byrne acknowledged that Bitcoin prices are volatile, which is why the online retailer will immediately liquidate the digital currency into dollars or find a market to hedge the risk.”

      That’s not accepting Bitcoin as payment. In the BitPay scenario, Overstock.com only links a brokerage service from its web site to encourage shoppers holding Bitcoin to sell their Bitcoin for dollars before spending the dollars at Overstock.com. You can verify BitPay’s terms of use at bitpay.com, and I quote them above.

    • Martin BrockNo Gravatar says:

      People can sell anything for dollars before spending the dollars at overstock.com. Everything is not money for this reason. You get that, right?

  28. FranzNo Gravatar says:

    Quotes from another famous Bitcoin Denier, Statist, and Central Bank Apologist, Paul Krugman: “Bitcoin is Evil,” New York Times, 12/30/2013.

    “The growth of the Internet will slow drastically, as the flaw in “Metcalfe’s law”–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.” — 1998

    • Martin BrockNo Gravatar says:

      A network in which everyone is directly connected to everyone else has n-squared connections, where n is the number of nodes in the network, so “Metcalf’s Law” seems trivial. In a network with n-squared connections, everyone is talking directly to everyone else, which is the furthest thing imaginable from most people saying nothing to each other.

      In other words, Krugman doesn’t grasp the simplest mathematics that he trots out as justification for his generalizations.

      But what does that have to do with Bitcoin?

  29. TomNo Gravatar says:

    ” From my perspective, people treat something as money when they think in terms of that item and are willing to enter into fixed contracts with that item. In the US, dollars are money and we daily enter into all kinds of transactions with dollars, instant transactions and longer term contractual transactions.”

    http://www.economicpolicyjournal.com/2013/12/does-anyone-really-u se-bitcoin-as-money.html

    • Martin BrockNo Gravatar says:

      Needless to say, I agree completely with Robert Wenzel.

      “Both Virgin Airways and Overstock have announced that they are going to accept Bitcoin, BUT both are setting prices in terms of dollars and asking for Bitcoin payments at the time of the transaction based on the fixed dollar price, not a fixed amount of bitcoins. Both VA and O also appear to be converting immediately (or plan to convert immediately in the case of O) their bitcoin receipts to dollars.”

      If Overstock.com uses BitPay (as it reportedly considers above), it need not and presumably will not accept Bitcoin at all. “Accept and convert immediately” misstates BitPay’s terms of service. See the terms quoted above.

      BitPay guarantees a specified price in dollars before a transaction, then charges Overstock’s customer as much Bitcoin as necessary to provide this price to Overstock, including the brokerage/transaction costs involved in selling the Bitcoin for dollars. BitPay charges the Bitcoin holder for the transaction and also hedges any arbitrage risk. Overstock may settle for dollars at the specified price in dollars after the transaction without ever holding Bitcoin. In this scenario, only BitPay holds Bitcoin, and it presumably sells the Bitcoin for dollars a.s.a.p.

      Overstock hardly “accepts Bitcoin” in such a transaction. Overstock only employs BitPay to encourage people with Bitcoin to sell their Bitcoin for dollars before spending the dollars at Overstock.com.

      I have no problem with any of that, but “Overstock.com accepts Bitcoin” is extremely misleading.