"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Henry Ford

I think this quote is pertinent, some realities are too uncomfortable to face. The nature of money and currency is such a subject.

Though I admit I tend to view all of his quotes in that context.

I always took it as the one quote of Henry Ford that WASN'T concerned with Jews.

But maybe that's just because I agree with the content if the quote. I've seen this reaction in many people that looked into the roots of monetary systems.

I work for a small bank, in the IT department, and recently we started getting into the derivative market, credit default swaps, and the like. They had someone come in and explain to all of us what these different things are and how they work, and you could see in everyone's eyes what they were thinking: "wow, this is all a huge scam!"

I had the same thoughts. But I will have to ponder on your comment. Maybe the quote is really about Jews. Henry never struck me as a deep thinker. Then again, he did get a close personal look into the heart of darkness that is monetary policy.

Now you have me pondering the statement, from the other side

our monetary system works. Which may induce a "wow, this is all a huge scam!" moment for a growing number of people.

For the privileged few who have been bestowed the right to create money out of thin air, this growing awareness represents a threat to their scampire.

"it is a serious question how [the people] would regard the [financial] system under which they live, if they once knew what the initiated can do with it.”

I would personally not quote Ford on banking because a great deal of his material was dog whistling.

Henry isn't really pertinent to the point I was trying to make, namely that we're collectively ignorant of the nature of our financial system.

Thanks for the info though. I'll check it out.

"The process by which banks create money is so simple that the mind is repelled."

Many genuine liberals are obviously reasonably skeptical of bitcoin for a variety of reasons and have expressed those here. However, what's most interesting to me is that any *positive* mention of it whatsoever is immediately and vehemently countered by the full-time defenders of corporate policy in our midst. They seem dedicated to smearing any discussion of the topic that does not consist of mere mocking and dismissal of it, or smearing of it as solely a criminal enterprise.

I don't know enough about how bitcoin actually works to have an opinion about it, but I find the corporate defensiveness against it very interesting. What I do know is that people who use or recommend it often cite disgust with the corruption of our own banking system as the reason they decided to try it.

People more and more are aware that our monetary and banking system is rigged against them from the start. In a sovereign nation that *could* print its own currency and put it into circulation directly, we instead rely on the weird Federal Reserve system of hybrid public-private banks to lend the government money at interest. As a result, every single dollar that enters the system ends up profiting the billionaires and trillionaires at the top. There is no reason other than corruption for these banks to play the role of interest-sucking middleman that they do. The way the system is rigged, there is no possible outcome other than their enrichment and the impoverishment of others.

They create money out of thin air with the press of a button. They charge interest for every bit of it that enters the system. The people can never pay back more than was created in the first place. When we cannot pay it back, the banks then come for our very real assets....our houses and cars and everything we own.

Whatever the flaws of bitcoin, its rise right now IMO is significant because it reflects and underscores the rising anger, distrust, and frustration in this country over the fundamental corruption in our banking system. As long as we tolerate an economic and monetary system that is inherently corrupt and funnels money from the poor to the rich as part of its very structure, people will keep trying to develop alternatives.


Henry Ford had it right about a system he profited from:

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
Henry Ford

has never seemed like a threat to anything I care about.

My speculative theory is that people don't understand it.

The whole "ponzi scheme" stuff doesn't make any sense at all to me. Bitcoin is worth what the market says it is worth, no more and no less. You have to guard your own wallet from thieves. There are day traders, gamblers, buyers and sellers, and yeah there were some dope peddlers (but they get shut down quickly). There are also a ton of ways to spend them on goods and services, and converting them to USD is exceedingly simple at good exchanges.

It just really puzzles me...

but of speculation. "Bitcoin is worth what the market says it is worth" - yes, well, did you expect DU to think that a free market-utopian idea like that is good? A real medium of exchange is somewhat stable compare with the goods and services it purchases.

OK, in theory there are algorithms that limit how quickly the supply expands, and a maximum all-time amount. But as we have seen, the insiders don't play by the rules. It is the ever-expanding supply that causes the reference to Mr. Ponzi.

I'm not taking a position on whether Bitcoins are good or bad, but there are no "insiders" able to manipulate anything. It's all decentralized p2p stuff. There's no central server or processing house. Just because someone doesn't want to play by the rules doesn't mean that it's possible for them to not play by the rules.

Any changes to the the algorithms would require a majority of the participants to agree. This isn't just a gentlemen's agreement, it's enforced by the model. Sure someone could modify their personal copy of the Bitcoin software to play by different rules, but if they did so then none of the other participants would recognize any of their transactions so the attempt would be futile. All transactions must be approved by X other users (actually the users' mining software, using cryptographic algorithms) before they're considered valid. It's essentially mathematically impossible to generate more than 4 or 5 fake approvals without controlling more than 50% of all mining capacity. Since there are thousands of miners all over the world, it's not feasible to garner that level of cooperation.

Theoretically, there might be some flaw in the software that could be exploited, but the party doing that wouldn't have to have any special "insider" status, just a high level understanding of the open source-code and the mathematics involved.

What happened at MTGox was not a breach of the bitcoin algorithm, it was a breach of MtGox's weak security measures combined with the carelessness of people who thought it was a good idea to store their wallet info with a third party. Anyone who has access to your wallet keys has access to your Bitcoins. That's a necessary feature of the model. If you share your keys with anyone, than that person can access your Bitcoins themselves, or someone can hack them and gain access to your keys.

I realize this has been the claim all along, but it is truly astounding that anybody would make such a claim today. Have you not been paying attention to the news?

There will be people who figure out how to counterfeit these coins. Go ahead and tell me that is mathematically impossible. There have been how many viruses successfully released? And in every case a developer said "Gee, I didn't think such a thing was possible."

And I don't know where you are getting your information regarding the pathology of the MtGox problem. The news reports I have seen say this is very much an open question. It sound to me as if you are just making up a scenario that happens to fit the argument you want to make. Can you cite a definitive report that goes through those forensics in detail or are you just guessing?

n/t

2) They really don't know what happened yet.

3) They know exactly what happened because they did it themselves and spent a year covering their tracks before it eventually crumbled. In this case, it might be essentially garden variety account theft, like any other bank theft except that these guys are completely unregulated and unaudited.

4) There was a successful hack into the heart of the Bitcoin algorithm. That would be the end of Bitcoin because if there is a single crack that exposes coins to theft or counterfeiting, you can't ever put Humpty Dumpty back together again. No matter. There are 5 other virtual currencies willing to step in.

On possibility #4, I have no evidence that this has happened in the case of MtGox, but I think it is entirely plausible that it will happen at some stage despite the protestations of the evangelists that it can't possibly happen. And that is where the distributed nature of the system is its downfall rather than a strength. In the case of Target (or any other hacking target), you take your lumps. erect stronger defenses, and move on. In the case of Bitcoin, it is out there and cannot practically be changed because the essence of the system is distributed onto thousands of computers. It is insane for any IT person to believe that any code is perfect. Therefore the only logical conclusion is that the game has always been to ride this long enough for the original insiders to reap a billion dollars or so before the system melts down.

Nobody can just fart up some fake coins. The blockchain forbids it. If they do, nobody on the network will agree and they will be orphaned. Each permutation of blocks becomes exponentially more difficult to crack and the solutions that are found have to be agreed upon by the entire network.

There's something called a 51% attack, but that's not really a concern now that Bitcoin is so widely used. It would be logistically impossible to coordinate that type of operation, even for state actors.

I an not disputing that what you say is what the Bitcoin inverters REPRESENTED the technology to be. But the same can be said of the Microsoft software engineers, who have been pwned thousands of times. IMHO, only a fool believes code cannot be exploited.

So please, spare me a lecture about how open source code is infallible. As a person who has worked professional in software systems since 1973, I really don't need any technology lectures.

I told you how it works, and your rebuttal is "I've been in software since 1973!" Pulling the "get off my lawn" routine already?

You're confusing code exploitation with maths. In the case of cryptography, math win every time. Unless you're the NSA pushing a shit RNG into a NIST standard, you're not going to break 2+2=4. Nor are you going to craft a mystery wallet that fools everyone into thinking you have a billion coins, because that's not even how it works.

that didn't prevent a complete calamity with the Gox system. You can argue that the Gox problems had nothing to do with the resiliency of the Bitcion code -- but if you do so, you are talking out your ass because the full story has not been unraveled regarding Mt Gox.

But ignore Mt Gox. When there is money to be made, hackers find ways to exploit vulnerabilities. And whenever that happens (usually under his breath rather than admitting the vulnerability of his work) "that wasn't supposed to happen". You are giving me your personal guarantee that there are no vulnerabilities in the Bitcoin architecture. Excuse me if I don't take your personal guarantee for it. I've employed hundreds of software engineers over the years and I am always especially wary of the ones who thought they were invulnerable. Those people are the weakest links in the chain.

Given your "get off my lawn" reference, I assume you are not very experienced in IT. Come back in 20 years and see if you have the same opinions.

"You are giving me your personal guarantee that there are no vulnerabilities in the Bitcoin architecture."

No, I said that it's mathematically impossible to conjure up coins. The only way to create coins is through rewards paid by solving cryptographic challenges. You cannot announce to the blockchain that you suddenly have an arbitrary number of coins in your wallet because you have no proof-of-work.

In order to forge coins, you'd need to conduct a 51% attack which is logistically impossible, even for state actors. You would need to control 51% of all peers on the network and coordinate a chain fork that would somehow remain backwards compatible with the mainline chain. It won't happen and cannot happen because a forked chain would result is completely different hashes. You simply cannot do it. No amount of "you whipper snappers in IT today don't know a thing about this" is going to change this.

Exploiting the wallet will only get you access to someone's balance. A far better attack vector (which is currently being done) is to simply look for wallet.dat and send a copy of it and hope the end user has not encrypted it. But making up coins? No.

to impersonate a real coin or subvert the value of the coinage in any similar way?

On what basis should I believe you, given that we are now heading into our third decade of highly successful hacker attacks that "weren't supposed to be possible."

I don't know of many (any?) examples where hackers have actually broken any cryptographic protocols like bitcoin. Successful hacker attacks rely upon human failure, things like phishing or "social engineering". In less technical terms, they don't break the codes, they just steal the passwords.

Mt Gox was not a failure of the bitcoin protocol. Yes, there can still be fraud with bitcoins. If people entrust their bitcoins to someone else (like Mt Gox), then it is possible that the other party will steal them. That can also happen with other currencies (e.g. Bernie Madoff).

Most hacks are from calling someone up somewhere and saying "I'm from your company's help desk and we need your password for computer stuff."

Lots of hacks exploited that architectural weakness.

SQL injectors as another example.

There are loads of examples.

The distinction is important. Spoofing bitcoins requires breaking a mathematically sound cryptographic protocol, and there are, to my knowledge, no examples of this ever occurring in any significant way.

Obviously, if you are storing bitcoins on your home computer, and that computer gets hacked somehow, then your bitcoins can get stolen. This is a real concern. But it is not a problem with the bitcoin protocol.

There have been thousands of cases where what was believed to be a perfectly impenetrable technology has been penetrated.

This page identifies a large number of vulnerabilities that mail be exploitable. And they aren't all simple "I give the anonymous phone caller all my passwords - he said he was the official Bitcoin auditor" cases. Some are quite fundamental to the bitcoin architecture. And surprisingly this page doesn't even mention the well-documented "transaction malleability" problem that results for a small timing window where a hacker can take over a transaction.

https://en.bitcoin.it/wiki/Weaknesses

If you have any examples of cases where "what was believed to be a perfectly impenetrable technology has been penetrated," I would love to hear them. Buffer overruns are not an example.

The only kinds of technology which are or were considered impenetrable are strong encryption protocols, and I don't know of a single example where one has been breached. Nobody has ever believed that operating systems or web pages were impenetrable. And certainly nobody has believed that unregulated bitcoin exchanges were an impenetrably safe place to hold money. The closest thing to an "impenetrable technology" being breached, that I know of, is the possibility that NSA put in a back door in that pseudorandom number generator.

That list you linked to includes things like "Wallet Vulnerable to Theft" (i.e. your password could get stolen) and "Tracing a coin's history" (a privacy issue not a cryptography issue). And so on. Transaction malleability is also not a breach of the cryptography. It doesn't allow a hacker to "take over" a transaction. It doesn't actually change the transaction, just the metadata. But the bitcoins still go to the right place. The problem is just that it might confuse the sender, allowing a hacker to trick the sender into thinking the transaction never took place. But this certainly doesn't represent some catastrophic failure. It is actually a good example of the kind of bugs that might actually exist in the protocol. It is not a fatal problem, and it can be fixed, and it most definitely doesn't allow a hacker just to go around stealing bitcoins.

Look, I'm not saying that using bitcoins is a good idea right now. It's not. There are plenty of problems. For example, if you keep your bitcoins on a your own computer, then your computer can be hacked, or it can crash, in which case you lose all your money. This doesn't require a breach of bitcoin cryptography. On the other hand, if you trust your bitcoins to an online wallet, they can get easily just disappear (e.g. Mt Gox).

But taking a nihilist "all technology is insecure" approach isn't useful, or accurate. Because, by that argument, you also shouldn't trust banks with your money, because banks can get hacked too. The difference is that banks are highly regulated and insured, while bitcoin wallets are not.

And there are most certainly many examples of cryptography systems having vulnerabilities -- some with intentionally designed trap doors. Ever wonder why the NSA doesn't seem to object to Bitcoin?

Banks are required to undergo audits. Banks are required to carry insurance. And Banks are backed by the government as the last resort.

You keep hiding behind cryptographyy, but cryptography is mostly irrelevant. Buffer overruns resulted in thousands of successful attacks against systems that were thought to be completely secure. I mentioned the SQL injection attacks because these were very ingenious, attacking a place nobody ever considered a vulnerability. Hubris is the enemy.

One example, of a cryptographic protocol (other than the NSA and Dual_EC_DRBG), which has been cracked. It may have happened, but I don't know of any examples. Just one example of a protocol that was thought to be "completely secure" but was successfully breached. You keep insisting, so I'm curious.

The first deals with quantum cryptography, which doesn't even exist yet in any practical way. The second seems to be a version of a trojan horse. The third is a man-in-the-middle attack. But none of those are instances of mathematically based strong encryption protocols being broken.

Yes, there are ways to hack systems without breaking the encryption. In fact, the *only* ways that systems are hacked are by doing other things besides breaking the encryption. That's the whole point. The bitcoin protocol itself is secure. But an unregulated online bitcoin exchange is not secure. Mt Gox is not the only example of this.

Which is why, I'll repeat again, I am not recommending that people use bitcoins. But I am recommending that people understand what the actual risks are, rather than random and misinformed fearmongering.

You might as well argue that because there is no mechanism for a hacker to cause a bit to change from 0 to 1 on its own, that all computer systems are therefore safe.

Your argument makes no sense at all. Cryptography is only as strong as the system it serves.

Someone cracking the bitcoin protocol and being able to manufacture bitcoins out of thin air? Not a risk.

Someone hacking into an online bitcoin exchange by other means, and stealing all the bitcoins? That's a big risk.

Last edited Wed Mar 5, 2014, 12:41 PM - Edit history (1)

you must, because you believe bitcoins have value

Did you know it's literally, honestly, simply, just a reverse hash? Of SHA-256, because breaking an NSA invention is trivial. Like their DES backdoor? It would take half the computing power of the whole BTC network to have something like a 10% chance of cracking one coin.

It's elegant in every sense of the word.

So can I use it at JiffyLube when I get an oil change, and how do I explain it to them?

Can I use them at Kroger for my groceries, or at the package store to buy a six pack of Sam Adams Boston Lager??

n/t

But if you want to buy those tulips, go for it.

Although with tulips, they at least had the bulbs to show for it and they are very pretty flowers.

faith.

Federal Reserve Notes are backed by faith in the United States. It's been around a long time and everyone knows what it is.

Bitcoin is backed by faith in...what? Bitcoin itself? No one even knows who "Satoshi Nakamoto" really is, except that he seems to be a true believer in Austrian economics and way too many people have fallen into THAT snakepit.

But go for it. Buy your bitcoins. Air is precious, after all.

In your experience, has it been better than using money?

I've never had to go through any additional hoops to use it or receive it. I protect my digital wallet to keep it from being stolen, just like my regular wallet.

The only difference is, I "mined" the coins back three years ago or so when "just anyone" could with a decent PC. The coins were worth pennies then and it was more of an academic exercise, but the value has gone up and the ones I have not spent are worth something worthwhile now.

I enjoy using it. It's fun!

But it seems like too much work now

See the chart below.

I am saving for high school, college and retirement. I invest in index funds. How do I invest my bitcoins?

I believe the value will rise. Or, you can exchange them for precious metals. Several places sell gold/silver/platinum bricks and bars (physical stuff, not that bullshit "buy gold today" speculative nonsense).

Or you can exchange them for USD and buy any investment vehicle you are interested in.

There are many options.

A currency is more than just a means to buy stuff. There are many different things a currency needs to do, including investing. I fail to see how bitcoin can succeed as an alternative currency until it address that.

You can invest in them. But investment always involves risk. If you don't like the risk, that's a whole other matter entirely and is unrelated to Bitcoin.

I take my dollars and use them to invest in Vanguard funds. I can't do that with bitcoin. Bitcoin, as a "currency" NEEDS some other currency as a medium.

Of course you can invest IN bitcoins. Just like you could invest in tulips centuries ago in Holland.

of people. So just as it is with any other non-Establishment sector, competing interests will destroy any and all competitors and upstarts if they can. Also, see the first response to your OP.

It was not blown up because it was a threat to Chase Bank. Maybe Chase would have gotten around to that, but that isn't what happened. What happened is that it is an untrustworthy system run by crooks. The creators of Bitcoin did themselves in.

Let's not rewrite history so quickly. There will be plenty of time for that.

You can mine your own? What?

It's gone from $100 to $600 in eight months?

Damn!

The game is for heavy hitters with $10,000+ to drop into custom mining hardware now. I have the few I mined when it was new and mining was much easier.

The reason for this is because the mining "difficulty" doubles about every month. Meaning it keeps getting harder and harder to mine coins. A normal PC cannot mine anything anymore. It just is not doable/practical in any way.

Put it in a shed with an internet connection and an array of solar panels on top.

Let's say a drug gang run a money laundering business that happened to sell, say, Valentines candies. One very well might say, "I don't see what the problem is. I've bought candy at this store every year and my girlfriend always liked it. Therefore it must be a good thing."

My opinion, and that of many others is that bitcoin was either conceived as a criminal enterprise from the ground up or else it was well-intentioned but easily taken over as a criminal enterprise. The fact that you have been able to complete transactions is no different than a few years ago when I got an exceptionally good rate on some bonds, and 6 months after a cashed in my bonds, the guy selling those bonds was arrested for a Ponzi scheme. I got lucky and they didn't try to claw back that money. You got lucky and one hopes a lesson might have been learned in the process.

Did you personally audit Mt. Gox? (No, of course not. Nobody did.) My point is that you have no basis for concluding that the other players are not also scamming the system. It is not audit-able, obviously, because Mt Gox got away with their scam for 2 years before the house of cards collapsed.

It isn't hate. It is wonderment that anybody could still trust this system.

The other thing to note is that Mt.Gox did not scam people. They were incompetent boobs that did not know how the technology works. They collapsed because they ignored their system hemorrhaging money. I read it best when they said that it's like writing a check to someone and then they photocopy the check, change the check number, then deposit both checks.

The only people that lost their coins were the ones that were using Mt.Gox as their wallet. There was no scam involved.

I keep my Bitcoins in my digital wallet only. I transfer them to whomever I am buying stuff from directly from my desktop PC, not through some website. In that respect, you're perfectly safe.

Because the police in Japan are still at the point of unraveling the 2-year chain of events, including some DELIBERATE ACTS OF SUBTERFUGE by the Mt Gox operators to cover their tracks over a year ago. But if you say they weren't crooks, and the the guys who operated the LARGEST BITCOIN SERVER BY FAR didn't know what they were doing, and that it is all perfectly safe, then OK.

If I sound snarky, I am sorry. It is beyond my imagination how anybody could make the claims that you are making at this stage.

Bitcoins are the new tulips.
You could buy things with bulbs for a while but the floor dropped and the market crashed.
Michael Hiltzik, a Pulitzer Prize winning business writer for the LA Times, has been tracking the flaws in the Bitcoin chain for quite a while now.
There are a lot of articles pointing to the questionable nature of the currency.
https://www.google.com/search?q=hiltzik+bitcoin+la+timjes&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US fficial&client=firefox-a&channel=sb

Two words; Virtual Currency

VIRTUAL currency.

It's not based off anything tangible anymore.

full faith and credit of somebody somewhere on the internet.

Big difference

The value of which is determined by forces not fully known to the general public.

I don't know why anyone would be skeptical of that.

Notice that the value has been all over the map, but in the last 3 months, it has been going down. And the huge volume days have all been down days. Since December, this currency has performed about as well as the Brazilian Cruzerio in the hyper-inflation days. Before they indexed their currency (the Real) to the dollar, you couldn't afford to place a want ad to sell a car because by the time the ad was printed, the currency lost a third of its value.

On a regular basis. Keep up the great work.

You nailed it.

desentralized, not controlled by any corporation or rich people finance group

what's not for a liberal to like

Not only no taxes, but even less enforcement and regulation than exist with corporations now.
[hr][font color="blue"][center]There is nothing you can't do if you put your mind to it.
Nothing.[/center][/font][hr]

If you receive income in bitcoins, that income is taxable. If you invest in bitcoins and they increase in value, the capital gain is taxable. If you buy goods, sales and use taxes still apply.

Granted, there is much less built in accountability, but the nature of the currency does not impact whether it is taxable or not. (Any more than - for example - barter currency (whether in local "bucks" or services) is not subject to tax - even though many people treat it as untaxable.)

In other words, you're saying that paying taxes on bitcoins is voluntary. That's exactly what Libertarians and ultra-Conservatives prefer.

http://www.nationaljournal.com/economy/how-is-bitcoin-taxed-the-irs-doesn-t-know-20140126

But the government remains mum: "The IRS is aware of the potential tax-compliance risks posed by virtual currencies," the agency said in an emailed statement. "The IRS continues to study virtual currencies and intends to provide some guidance on the tax consequences of virtual-currency transactions."

than taxes on any other form of income.

The details of how it is treated (commodity v. currency) may be unclear - and there are no third party reporting mechanisms in place. But there are no reporting mechanisms in place for bartered exchanges either. That doesn't mean they aren't taxable - just that there isn't a third party reporter.

The enforcement mechanism (prior to any third party reporting requirements) will be the same as it is for any other income which is not reported by a third party. If you are audited, and unreported income is discovered, you will owe back taxes and penalties.

if the income comes from the Bitcoin investment they don't know you have?

They don't.

Everyone is obligated to report their taxable income (and income is presumed taxable unless it is expressly excluded). Because not everyone would, absent a very big stick, the IRS has developed third party reporting requirements (your employer reports your income, financial institutions report income and securities transactions and withdrawals over $10,000, expenditures of over $500 by a business are reported on 1099-MISC forms, etc.) But all of those are only ways to incentivize people who would not otherwise report their income to do so.

Third party reporting serves to catch most of the big cheats - but it isn't supposed to be a substitute for direct reporting. Bitcoins are new enough that no third party reporting has yet been developed.

It's supposed to be another form of currency, not random bartering.

who also intend (or at least hope) it to replace government currency. Over time, as some of those local currencies have gotten larger, guidance, letter opinions, and regulations have developed.

Just because there aren't currently mechanisms in place to require third party reporting doesn't mean that it will stay that way. I've known about bitcoins for 2-3 years because a co-worker was an early miner. But as anything beyond a novelty for nerds, bitcoins are fairly young. Give them time to catch up.

And libertarians.

is a bit of a nerd, but not a libertarian.

And bitcoin currency isn't a Ponzi scheme by any definition I've ever heard of a Ponzi scheme. You could certainly create a Ponzi scheme using bitcoin currency - in the same way you could create a Ponzi scheme using government issued currency, or gold, etc. It is the investment structure, not the currency, which makes something a Ponzi scheme.

drug selling and other taxable but illegal purposes.

I wasn't addressing what people might do illegally - I was responding to the statement that it was not taxed.

of laundering money and paying for illegal contraband or illegal services.

The dollars you transfer via paypal are just bits, and the dollars in your bank account are just as digital. (Not like the 'dollars' in your pocket are any more 'tangible' in the sense of having a fixed value than those paypal bits.)

I don't have any bitcoins myself, but I have no idea where this hate comes from.

Most of their transactions go through credit cards, and that limits the customer liability. Basically, customers don't lose money when there is fraud on their credit cards.

The money in your bank account, digital as it may be, is protected by FDIC.

There are no protections whatsoever with Bitcoin, as the MtCox customers sadly just figured out.

I play a couple of games that have an in-game trading system. You can watch as certain common items become currency, traded for other items in quantity.

These same items can be bought (outside the game or in) with "real" money. One game company recently hired an economist to help understand and protect the market in these digital goods.





Stout shako for 2 refined!

I think integrity of currency is actually pretty important.

Maybe as a chit in a game that isn't so important, but the Bitcoin people wanted to be taken seriously as a real currency.

Be that dollars, rubles, or yen.

It doesn't matter if the 'thing' is a piece of paper, a bead or shell, a bag of salt (salary), or digital bits stored on a pc somewhere.



I think people just don't really understand how made up our system of currency is.

But they also understand that this is heavily scrutinized, and that the government stands behind the currency.

It isn't just some guys.

Currency is currency, fiat or digital.

One has intensive scrutiny against fraud. The other doesn't.

One has governmental protections so that the average person is not harmed in case of calamity. The other doesn't.

One is a managed money supply designed for stability. The other is completely unmanaged and designed to hyper-inflate.

Last edited Sun Mar 2, 2014, 01:27 AM - Edit history (1)

Fiat simply means there is an arbitrary authority declaring "it shall be so" -- literally the translation of the Latin. Most documents talk about "governments" because it has usually been governments that have created fiat currency. (But not always. A few years back while traveling in England, somebody slipped me a 10 pound note issued by the Technology Bank of Scotland -- or some such name. It took me a bit of time to get that honored at an English bank, but it was honored. In that case, it was the bank that created the fiat currency.) In this case the "government" is the founders of Bitcoin, but it is fiat nonetheless.

And if you want to get technical, the US dollar is not created by "government fiat". It is a fiat of the Federal reserve system, which is not a governmental agency, but our government approves of it and guarantees it.

But you are just tossing out red herrings. I identified the main reasons why Bitcoin is more of a Ponzi scheme than a reliable currency. Rather than address those points you want to have a semantic debate. No, thank you. I won't have any more comments about the meaning of the word "fiat" or any other red herring you want to put out there. If you want to discuss the substantive concerns, I would happy to do so.

Monetary theory says different, but okay. And what agency sets monetary policy for the creation of bitcoins? As far as I can tell there isn't one, unless you call an algorithm an agency.

You accuse me of playing with semantics, but get semantic about US dollars being a fiat currency once removed?

*snort*

Mr Pot, I'd like you to meet Mrs. Kettle.

Fiat currency is money that is issued and declared to be legal tender by some government. Bitcoin is not. The founders of bitcoin do not qualify as a "government" in any sense of the word.

Bitcoin is much closer to gold than it is to the dollar. It derives it's value from the facts that (a) it is in limited supply and (b) people believe that it is valuable.

I agree that whether or not it is "fiat" currency is besides the point. The real question is whether it will ever become a legitimate currency in wide use as a medium of exchange. Currently it is not, and it is unlikely that it ever will be. Which means that, for the forseeable future, it is just a speculative investment that resembles a Ponzi scheme.