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Title: Bitcoin digital currency Post by omar on May 15th, 2011, 4:42pm I was writing a paper titled "Sound Money Without Commodities" and while researching the current state of digital currencies, I came across Bitcoin. A digital currency based on cryptography and a peer-to-peer infrastructure. It's the coolest thing I've seen since Arimaa :-) http://www.bitcoin.org/ |
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Title: Re: Bitcoin digital currency Post by ddyer on May 16th, 2011, 2:49pm As a technical demonstration, this is indeed cool. As a practical matter, it's a terrible idea. The basis for the "currency" is essentially burning a lot of electricity and computer time. This is sort of like defining the "transit of america" as the basis of your currency, and awarding one "transit" if you drive your car from coast to coast. It's hard to fake, but it is a pure waste. If you base your currency on gold, you can at least make things out of the gold you end up with. |
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Title: Re: Bitcoin digital currency Post by 722caasi on May 16th, 2011, 10:06pm I think a currency should just be something that is easy to trade, hard to fake, and universally accepted. Bitcoin only fails on #3. After all, a dollar isn't intrinsically worth anything. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 17th, 2011, 12:49am on 05/16/11 at 22:06:53, 722caasi wrote:
On the contrary, a dollar can be used to pay taxes owed to the government of the United States of America. You can't pay your taxes with bitcoins or gold coins or loaves of bread or World of Warcraft gold or anything else except dollars. This is the intrinsic value of the dollar. The U.S. government is responsible for safeguarding the value of the dollar, in part by controlling the supply of dollars, in part by enforcing accounting laws, but also in part by making sure dollars can be ultimately used for something. You and I can "lose faith" in the dollar, but we will still need dollars on April 14th, a reality that is unaffected by our faith or lack of faith. If, in contrast, everyone loses faith in bitcoins, what are bitcoins good for then? It will not matter that the software controls the supply of bitcoins and enforces accounting laws for bitcoins; the software can't ensure that there is any demand for bitcoins in the way the U.S. government can ensure that there is demand for dollars. The fact that one can quote a current exchange rate between dollars and bitcoins hardly reassures me; there is also a current exchange rate between dollars and World of Warcraft gold pieces. But I'm not going to amass my retirement savings in the form of WoW gold. Yes, millions of people play WoW at the moment and yes, they are willing to give dollars for gold at the moment, but WoW is a social phenomenon that might not exist twenty years from now. At the very least WoW has a lesser chance of existing than the social phenomenon called the United States of America. And I rate bitcoins as likely having an even shorter lifespan that World of Warcraft. It seems that the allure of bitcoins to many people is a lack of faith in governments to be good stewards of their currencies. Certainly there is ample historical record of governments debasing the currencies they issue. It is reasonable to expect that the U.S. will soon debase the dollar. But a new currency that is based on nothing but the hope that other people will honor it sounds like a collective hallucination to me. The question of what money ultimately is fascinates me, which is part of the reason I enjoyed reading the science fiction trilogy The Baroque Cycle (http://en.wikipedia.org/wiki/Baroque_cycle). And it's a fun read even if you don't care what money is. :) |
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Title: Re: Bitcoin digital currency Post by megajester on May 17th, 2011, 1:29am on 05/17/11 at 00:49:03, Fritzlein wrote:
Which is why you can't release a fiat currency (http://en.wikipedia.org/wiki/Fiat_money) without being a government. If you really want to get something started you have to peg it to something, either an existing currency or a precious metal. Gold makes sense because it's internationally accepted, not controlled by any one government, and is always the last man standing when state currencies go to the wall. ("BitGold, it's the gold standard (http://en.wikipedia.org/wiki/Gold_standard) reloaded!"). However everybody's geared to quote prices in currency, so I can see a market in "BitDollars", meaning I hold a reserve of X million dollars, for which I issue bitwhatever with "BitDollars Inc. promises to pay the bearer on demand 1 USD" written on them for everybody to trade P2P. If a P2P system can be shown to work and be impervious to hacking I reckon it would be better than stuff like Facebook credits, where you're basically trusting a monolithic corporation with your money (even more suspect than national governments). It's like going to a casino and buying chips to do business with, except they never give you any chips they just say "Yep OK you've now got 100 dollars worth of chips. Just tell us when you want to use them and who you want to give them to, so we can WOTCH U." Which is why P2P networks would be preferable. But seeing as how governments have spent most of the past 50 years getting people to use banks so they can monitor all their transactions, a P2P currency would undo all their hard work. It does not surprise me that every single online digital currency listed on Wikipedia (http://en.wikipedia.org/wiki/Digital_currency) is either dead or was never alive to start with (please correct me if I'm wrong). PS: If you want to get your head around money check out "The Ascent of Money" by Niall Ferguson (http://en.wikipedia.org/wiki/The_Ascent_of_Money). Though that book Fritz mentioned sounds really interesting! |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 17th, 2011, 1:59am on 05/17/11 at 00:49:03, Fritzlein wrote:
As long as they are US coins - you can, although you probably would not like to. :D |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 17th, 2011, 2:12am on 05/17/11 at 01:59:10, UruramTururam wrote:
Ha ha! You are right. I recently convinced my stepmother to trade in her 1920's silver dollars for about $20 each, that being the melt value of the silver in them. I guess she could have also used them to buy things (or pay taxes) for $1 each, but it never even occurred to me that they were still currency rather than merely precious metal. :) |
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Title: Re: Bitcoin digital currency Post by ddyer on May 17th, 2011, 11:00am on 05/17/11 at 01:29:59, megajester wrote:
On the contrary, anyone who has a reasonable ability to make promises and be believed can issue a fiat currency. It happens all the time. Ever buy a phone card? It's just a promise to deliver phone minutes sometime in the future, backed by nothing. People buy and sell phone cards all the time, just as though they were money. the are money. Do you save frequent flyer miles? It's just a promise to deliver a free flight under some completely ill-defined conditions, some time in the future. You can even get "miles" by using your credit card for other things. You can even BUY "miles" for cash. Ever do a favor for a friend and be told "I owe you one". Your friend just issued currency. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 17th, 2011, 11:18am on 05/17/11 at 11:00:32, ddyer wrote:
Yes, "miles" are a hilarious currency. People seem unfazed by the fact that airlines can honor "miles" at whatever rate they want: a flight can cost 25,000 miles or 100,000 miles or 1,000,000 miles depending on what the airline decides. If you are worried about governments debasing their currencies, why trust airlines not to? But the weirdest part is that when miles are offered for cash, it is usually at five times their value or more, say $50 for 1000 miles. Thus if you buy a flight with miles that you bought for cash, you will end up paying five times more than if you bought the flight for cash directly. So we have a demonstration that people not only have faith in nebulous promises, but also that people are bad at math. And while we're at it, note that Omar has issued his own currency called "Arimaa points", the value of which depends on our faith in Omar to redeem them on demand. I am willing to hold Arimaa points because I trust not only Omar's promise to exchange them for cash, but also because I trust that I can at least use them to enter Arimaa events, which is a thing of value to me. |
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Title: Re: Bitcoin digital currency Post by megajester on May 17th, 2011, 2:51pm on 05/17/11 at 11:00:32, ddyer wrote:
Er, yes it is. By consumer law. Which simply underlines the fact that a fiat currency or indeed any other "promise based" unit of value is impossible without a government to back it up. on 05/17/11 at 11:00:32, ddyer wrote:
Now let's not get pedantic. I thought it should go without saying that I was talking about how to set up a universally recognized unit of value that's capable of supplanting real world currency. A philosophical debate on the meaning of the word "currency" is beside the point. |
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Title: Re: Bitcoin digital currency Post by 722caasi on May 19th, 2011, 10:06pm I think it is possible to set up a new currency without being a government if you have a guaranteed tie in to an established currency/good/service. Specifically, the creators of bitcoin have guaranteed the tie in of computer processing time to bitcoin via the mechanism of coin mining. If the creators were sufficiently wealthy and guaranteed the exchange back again, then the bitcoin currency would have a fixed value, equal to the going rate of computing time, and so it would be just as hard a currency as gold, because it would have actual value.The only problem would be if the creator of the currency couldn't pay for the computing time in the event of a run on the currency. However, if the creator used the processing time instead of wasting it as he currently does, he could make enough money initially in bitcoin production to pay it out again later. In conclusion: an internet based currency is possible, if it is based on guaranteed exchange for a service of real value, such as computer processing. This makes it a hard currency, like gold, not fiat. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 20th, 2011, 12:01pm on 05/16/11 at 22:06:53, 722caasi wrote:
Heh, only you say? The problem is that to be a currency something needs to be widely accepted. For a newly introduced electronic money a kind of wide acceptance is necessary as there is no one to enforce the usage of bitcoins as legal tender. In the USA if you pay in dollars the seller in fact has to accept that. In Poland there is no way not to accept the payment in zloty and so on. For internet-based currencies there is no enforcement - thus an agreement is needed. I can predict that if the large services like youtube or facebook started to accept and promote bitcoins - they may become quite a strong currency. Otherwise they are just a bit more than our Arimaa points introduced by Omar to reduce money transfer fees in our community. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 20th, 2011, 2:17pm on 05/19/11 at 22:06:28, 722caasi wrote:
Even a currency that is backed by gold is not itself gold. It is just a promise to exchange currency for gold on demand. There is a long and inglorious history of issuers of "hard" currency successfully gaining universal acceptance of their currency and then breaking their promises to exchange it for gold on demand. It is beyond me why anyone would distrust the dollar now because it is "backed by nothing" and trust it more if we went back to the gold standard. In either case the government is making a promise to ensure the value of the currency, and in either case breaking the promise provides short-term gain and long term misery, but in neither case is the money any more or less real than the promise is real. And even if gold itself were money, and we settled debts by moving around bits of physical gold rather than making marks in a ledger (or bits in database), our currency would still be reliant on an implicit promise that other people will value gold in the future. Ddyer calls gold real because you can make things out of it, but if gold had no psychological value and was priced purely on its industrial uses in electronics and whatnot, it would sell for less than $200 an ounce, not $1500. (That's right; gold is worth less than it costs to dig it out of the ground. We dig it up because of a pathological conviction that it has an intrinsic non-use value, which isn't even a coherent thought.) If you take dollars out of the equation, and equate gold to other things like hamburgers, you would see that (if gold were our currency) we would be suffering prolonged deflation. And tomorrow people could lose their enthusiasm for gold as quickly as they came by it, causing the relative price to plummet, causing (if gold were our currency) massive inflation. In short, the implicit promise by other people to value a commodity higher than its industrial worth is another promise that can be broken, undermining even a physical currency. In my opinion, just as democracy is the worst form of government except for all the others, the dollar is the worst form of currency except for all the others. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 20th, 2011, 3:42pm Especially THIS dollar: http://tierraincognita.blox.pl/resource/100_trillion_2009.jpg ;D |
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Title: Re: Bitcoin digital currency Post by Eltripas on May 23rd, 2011, 12:23am on 05/20/11 at 14:17:30, Fritzlein wrote:
I thought gold was valuable because of its use in jewelry. |
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Title: Re: Bitcoin digital currency Post by Tuks on May 23rd, 2011, 5:52am people prefer diamonds for jewellery |
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Title: Re: Bitcoin digital currency Post by Eltripas on May 23rd, 2011, 8:40am on 05/23/11 at 05:52:31, Tuks wrote:
Of course but you don't see rings or necklaces made 100% of diamond. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 23rd, 2011, 10:32am on 05/23/11 at 00:23:39, Eltripas wrote:
Yes, use in jewelry is what usually determines the market price of gold. The current situation, where investors (or as I like to call them, speculators) are willing to pay more for gold than Indians who want necklaces are willing to pay, is a bit unusual. When the speculative bubble bursts, investors will all bail out, and the price will be once again set by people who want to wear it. But jewelry is not an industrial use. A necklace can be made out of other metals than gold, and be just as durable and/or shiny. You would think jewelry is all about appearance, but it isn't. If it were just about appearance, folks could wear gold-plated silver for a fraction of the cost. People want their jewelry to be gold because gold is inherently valuable in their minds. People get off on wearing something that is precious. People want to have something that not everyone else can have. Gold makes people feel special and safe. People aren't buying the appearance of gold, they are buying gold's history, intrigue, and mystique. And they have an unshakable (and in my view unwarranted) belief that gold is real money that never loses its value. on 05/23/11 at 05:52:31, Tuks wrote:
Diamonds are gorgeous, in my opinion far surpassing the beauty of polished gold. Their crystal structure and high optical density makes them the prettiest inputs to jewelry that exist. Diamonds are, however, just pure carbon, and carbon is abundant. We are only a few years away from being able to manufacture diamonds indistinguishable from the finest ever unearthed. What what happens when diamonds can be cheaply mass produced, and everyone can afford one? I bet that this gorgeous gemstone suddenly loses its allure, and is considered tawdry like sequins are today. Once again, it will be proven that jewelry is not about appearance, it is about saying, "I have something you don't have; something that will never lose its value." |
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Title: Re: Bitcoin digital currency Post by rbarreira on May 23rd, 2011, 12:10pm on 05/23/11 at 10:32:08, Fritzlein wrote:
81 GHz CPUs to make faster Arimaa bots? :D http://www.geek.com/articles/chips/81ghz-diamond-semiconductor-created-20030827/ I actually didn't know about it, your post got me searching synthetic diamonds and I ended up finding this. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 23rd, 2011, 1:32pm From Wikipedia I see that I'm out of date myself on synthetic diamonds. I didn't realize how desperate traditional diamond sellers are getting. "The three largest distributors of mined diamonds have made public statements about selling their diamonds with full disclosure of the individual diamond history, and have implemented measures to laser-inscribe serial numbers on their gemstones." Since diamonds per se are no longer scarce, what can I have that you can't? Aha, the history of the diamond. Those synthetic diamonds don't have a pedigree even if they have the same appearance and physical properties. We simply can't let people get the idea that diamonds dug out of the ground aren't special any more. Ricardo, thanks for the link to the article about diamonds as semiconductors, although for cellphones (and other applications) it seems more important to use less power in the first place rather than to dissipate it better or be able to run hot. Here's my second Neal Stephenson recommendation of the thread: Diamond Age, about a future in which diamonds are cheaper to manufacture than glass, so that only the rich have glass windows, etc. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 23rd, 2011, 1:51pm Tee hee! Just in time for our discussion, Utah passes a law making gold into money, sort of. Here is the video with Yahoo's Daily Ticker discussion (http://finance.yahoo.com/blogs/daily-ticker/utah-goes-gold-state-puts-metal-coins-par-165924763.html). I'm right with Henry and Aaron in finding the gesture pointless and wondering what Utah thinks it is accomplishing. |
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Title: Re: Bitcoin digital currency Post by 99of9 on May 23rd, 2011, 7:56pm Our currency is rocks. We carry around huge containers full of rocks, especially when we visit China. They like our rocks, and give us all kinds of things in exchange. Some countries think rocks are too heavy to carry back home. So when they bring goods here, we don't give them any rocks. Instead we just let them walk around on our rocks and take photographs. It sounds like some of you like jewellery that you can have that nobody else can have. If you can afford it, consider a big rock. Even in Australia, the land of plenteous rocks, I've only ever seen little rocks hanging around people's necks. Nobody has ever successfully produced a good forgery of a rock. And the government can't print them when it overspends. They're also quite resistant to inflation. I've heard that rocks were valuable in the stone age. But they're even more valuable now. Once upon a time rocks got thrown at animals, but now that rocks are so expensive, we only throw hollow rubber balls. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 24th, 2011, 3:49pm I got a Google alert that informed me that Omar, rather than participating in our little abstract debate about the soundness of BitCoin currency, is voting with his actions. You can buy Arimaa gear for bitcoins (http://arimaa.com/arimaa/store/setAndBookBTC.html). Best of luck, Omar! I hope you don't get stuck holding a currency that you can't use to buy the things you want and need. |
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Title: Re: Bitcoin digital currency Post by ocmiente on May 24th, 2011, 8:11pm Bitcoins on NPR (http://www.npr.org/2011/05/24/136620231/what-are-bitcoins) |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 25th, 2011, 3:24pm on 05/24/11 at 15:49:24, Fritzlein wrote:
Don't worry Fritz! Next year prizes in the Arimaa tournaments will be in bitcoins! ;D |
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Title: Re: Bitcoin digital currency Post by Eltripas on May 25th, 2011, 3:50pm on 05/25/11 at 15:24:51, UruramTururam wrote:
Oh, I would love this to happen for the poetic justice. |
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Title: Re: Bitcoin digital currency Post by omar on May 25th, 2011, 7:41pm on 05/16/11 at 14:49:14, ddyer wrote:
I was looking at the details of how it works and the requirement for making you use a lot of computer time seems to be related to trying to slow down the computers and prevent them from flooding the p2p network whenever a transaction is posted. Also it is to prevent someone from getting bad transactions accepted. To get a bad transaction accepted you have to have more compute power than the rest of the p2p network. |
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Title: Re: Bitcoin digital currency Post by omar on May 25th, 2011, 7:56pm on 05/24/11 at 15:49:24, Fritzlein wrote:
It was mostly so that I could add the Arimaa site to the list of merchants that accept bitcoins. https://en.bitcoin.it/wiki/Trade#Games |
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Title: Re: Bitcoin digital currency Post by omar on May 25th, 2011, 8:03pm on 05/25/11 at 15:24:51, UruramTururam wrote:
Yes, I'm seriously considering that since it avoids the transaction fees, would be available in countries where PapPal isn't and you don't have to count on me maintain your Arimaa points balance. But the registration fees would also be in BitCoins. |
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Title: Re: Bitcoin digital currency Post by Eltripas on May 25th, 2011, 8:37pm on 05/25/11 at 19:56:27, omar wrote:
"Arimaa Game Set, handsomely designed animal theme pieces in gold and silver color." That's a poor description in my opinion, even if you just can use one line I'm pretty sure you can get something more appealing, with some info about how is it hard for computers and that other stuff that makes Arimma interesting. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 25th, 2011, 11:13pm on 05/25/11 at 20:03:54, omar wrote:
Before making an executive decision to have prizes and registration fees in BitCoins, please open it to discussion with the community. Are you sufficiently enamored of BitCoins that you would support the currency at the expense of Arimaa? That is to say, if it appeared that switching currencies would result in fewer participants in Arimaa events, would you still consider it a good idea? I personally would find it a nuisance to have to buy into a new currency for a single use, and would immediately cash out any winnings back to dollars. For me it would be a dead weight without any benefit. The only people whom I can see it benefiting are those who can't pay you with PayPal, but honestly, how many such people are there, and how many of them will find it easier to pay in BitCoins? The "no transaction fee" argument is a red herring. The important issue is not the internal cost of transactions, it is the cost of getting my dollars converted into Bitcoins and then back out again. That certainly isn't free. Mt. Gox charges 0.65% coming and going, and one also loses the 1% spread in exchange rate, for a total of 2.3%, before any fees charged by the financial institution from which the dollars originated and to which they are ultimately deposited. How is someone who is unable to pay Arimaa.com going to be able to pay or be paid by Mt. Gox? But the biggest problem with BitCoins is the exchange rate. On Mt. Gox the exchange rate has fluctuated 25% in the last twenty-four hours! To me this has all the smell of a bubble. The price of a BitCoin is controlled by the number of people who want to buy it for dollars. The more people that "buy in" to the system (both figuratively and literally) the more the value of the BitCoin goes up. People who got in early are minting money. They traded CPU time for BitCoins, which they can now trade out for dollars from the suckers buying in. And for a while, the suckers who buy in will see their investment pay off as further suckers buy in at an even higher value. As long as new money and new enthusiasm flow in, the price of a BitCoin keeps skyrocketing, and everyone can pat themselves on the back for their financial innovation that is resulting in a "sound" currency that isn't subject to inflation. But it is all smoke and mirrors. The self-congratulation sounds plausible, just as plausible as Nasdaq 5000 because the Internet was changing the laws of the universe, and just as plausible as Bernie Madoff having secret investment strategies that would never lose money. At base the talk about BitCoin being a sound currency is a cover for a pyramid that must keep recruiting an ever-larger base in order to avoid collapsing. Money and enthusiasm can flow out as well as in. Today there are fewer old hands taking profits and cashing out than there are new fools rushing in. Maybe one BitCoin will go from $7 today up to $50 or $100 as the fever takes hold, but that bubble won't expand forever. At some point, the balance will swing to people cashing out. Say BitCoins hit $200 and then drop back to $100. Merchants who were accepting BitCoins will suddenly decide they shouldn't accept them any more. People who are holding BitCoins suddenly become afraid they can't buy anything with them any more, so they try to sell them. In a very short time (much shorter than it takes to inflate the bubble) BitCoins will crash right down through $7 back to $0, because they have no fundamental support, no government taxation authority backing them up. Please don't hitch the success of Arimaa to the inflation of a bubble. If you want to gamble your own money with it, OK. You could actually make money by perfectly timing your exit out of BitCoins into a real currency just before the house of cards collapses. Actually that isn't OK either, because you talk like a true believer that BitCoins are going to work, so you would lose your shirt instead of even realizing that you are gambling. You are my friend and I don't want to see you take a financial hit. But if I can't persuade you out of exchanging real money for funny money, at least let your experimental buy-in to a pyramid scheme be a separate experiment from Arimaa. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 26th, 2011, 3:34am on 05/25/11 at 20:37:42, Eltripas wrote:
The bitcoins community seems to have quite a lot of smatr programmers so popularizing Arimaa there may result in more bot developers here. |
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Title: Re: Bitcoin digital currency Post by RonWeasley on May 26th, 2011, 2:48pm I like Arimaa Points. I hope to earn enough to cover all my entry costs so that my arimaa play is independent of my galleons. If I have left-over arimaa points that never get converted to galleons, no to worry. I still got to play all those arimaa games. |
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Title: Re: Bitcoin digital currency Post by Eltripas on May 26th, 2011, 7:02pm on 05/26/11 at 14:48:07, RonWeasley wrote:
That's the spirit!, 5 points for Gryffindor! |
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Title: Re: Bitcoin digital currency Post by omar on May 26th, 2011, 8:05pm on 05/25/11 at 20:37:42, Eltripas wrote:
Some suggestions would be helpful. I tried to think of some, but fitting it in one line is hard. |
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Title: Re: Bitcoin digital currency Post by Eltripas on May 26th, 2011, 8:38pm on 05/26/11 at 20:05:00, omar wrote:
I didn't give a suggestion because English is not my first language so my wording may be poor, but I'll give it a try: "Arimaa Game Set, an animal themed board game designed to be hard for computers but easy to learn and intuitive for humans." |
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Title: Re: Bitcoin digital currency Post by omar on May 26th, 2011, 10:03pm on 05/25/11 at 23:13:04, Fritzlein wrote:
Yes, you're right it might actually be difficult for people to obtain bitcoins now. Also it has started to get quite volatile. The exchange rates are changing too fast, so thats not good for a currency. Maybe in a few years after it settles down. Maybe this will go the way of Napster. But I think the genie is out of the bottle and even if it goes away something else will come along. It's as if the time for a p2p digital currency has come. In case you're wondering I haven't bought any bitcoins. But I am getting more desperate to trade some Arimaa sets for them :-) https://www.biddingpond.com/item.php?id=708 Similar to how I'm intrigued by how the Arimaa challenge is going to play out between the humans and computers, I am also intrigued by Bitcoin. It's going to be interesting to see how this plays out between the cathedral and the bazaar. |
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Title: Re: Bitcoin digital currency Post by omar on May 26th, 2011, 10:15pm on 05/26/11 at 20:38:47, Eltripas wrote:
I like it. Thanks. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 27th, 2011, 7:24am on 05/26/11 at 22:03:31, omar wrote:
I think so. But will it be bitcoins? Thats a big question. Note that many economists foresee a global monetary crisis around the year 2014 and the cease of "empty money" banking system. Seing what's happening to dollar and euro I think it's probable. If they are right there will be a turn towards a currency that amount in circulation can not be changed at will. They usually point at GSPP (gold, silver, palladium, platinum) based money but in fact a currency like bitcoins also fits there. We shall see. And as I like gambling I have bought 7BTC ($7 apiece). I may well lose $49 but it's a part of fun. ;) I plan to sell them if they reach $50 each. ;D If they do I'll contribute about a half of my gain ($150) to AC2012. |
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Title: Re: Bitcoin digital currency Post by megajester on May 27th, 2011, 9:04am on 05/27/11 at 07:24:27, UruramTururam wrote:
Good grief, they're 9 dollars already! http://bitcoinprices.com/ By the way, I would like to retract my rubbish about fiat currency. This is not a fiat currency. This is revolutionary. It's either a bubble, or it's genius. Either way these guys (http://launch.is/blog/l019-bitcoin-p2p-currency-the-most-dangerous-project-weve-ev.html) reckon it's the most dangerous project they've ever seen, and I'm starting to agree with them. I want a piece of the action! 8) |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 27th, 2011, 11:39am on 05/27/11 at 09:04:23, megajester wrote:
on 05/27/11 at 07:24:27, UruramTururam wrote:
I hope you both strike it rich! Getting in on a bubble can be very profitable if you get out again at the right time. :) Quote:
And usually such commentators own the metal they recommend as a alternative currency, and would profit handsomely if suddenly governments needed more of it. Come to think of it, all the advocates of a gold standard that I know of are not economists so much as politicians and investors. Who in academia is a fan of the gold standard? Seeing what is happening with the euro is a lesson for not using the gold standard, at least according to the economists I hear in the news. I have heard economists of several different stripes say that Greece's situation would be tractable if only they controlled their own currency so they could inflate it. Of course inflation causes economic dislocation and pain, but it has virtues as well. Greece can't repay its debt; it must default. However, defaulting within the euro framework will leave the Greek economy in shambles, whereas defaulting while inducing controlled inflation (not hyper-inflation; just more than Euro inflation) would make Greek wages and goods and services competitive in Europe once again. Exports would rise; imports and consumption would fall. Inflation is a way to re-align economic fundamentals that may be less damaging to Greece than what we are going to see happen instead. Greece's present situation is only one example of the perils of having a currency that you can't inflate. The Great Depression, with its persistent deflation, is another example. Somehow supporters of gold as a currency focus only on the evils of inflation. But what about the horrors of deflation? How do you fight deflation if the money supply is constant but the need for money is expanding? Monetary policy in the United States is between a rock and whirlpool; the gold bugs say, "Ooh, look out for the whirlpool! We need to crash straight into the rock!" on 05/26/11 at 22:03:31, omar wrote:
One interesting facet of open source software (the bazaar) is that it relies on the government to force people to play fair. It is important that nobody can take open code, make changes to it, and make the new product proprietary. Companies have tried to do that, but they have lost in court every time. So the competing models of proprietary software versus open source software are competing on motivation of the contributors and on design philosophy, but both seek government assistance to enforce intellectual property rights. BitCoin is not merely competing with other currencies for mindshare of what money is and how transactions should be accounted, it is also impinging on government authority. It isn't just a question of the motivation of the participants (i.e. what makes money valuable?) it is also a question of who has the authority to issue currency. How can governments regulate transactions, levy taxes, and make some flows of money illegal if it doesn't control the accounting system? If BitCoin starts to become a hub of economic activity, it will surely draw the wrath of governments that will try to kill it. My guess is rather that BitCoin collapses under its own weight economically before it becomes that prominent, but if I am wrong, it will be very interesting to see the legal/political battle unfolding as entrenched powers take arms against it. Quote:
It would be another matter indeed if the technology behind BitCoin were adopted by governments as a replacement for fancy bits of paper and the databases stored at banks. It might be a superior technology for accounting and processing payments. And with government backing, it would have neither its current legal issues, nor the problem of being based on nothing, because governments could demand taxes in BitCoins, making them inherently valuable. |
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Title: BitCoin values Post by mistre on May 27th, 2011, 1:10pm For those interested - you can track the value of a Bitcoin on this website - http://bitcoincharts.com/markets/ |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 27th, 2011, 1:47pm on 05/27/11 at 11:39:47, Fritzlein wrote:
Ludwig von Mises, Murray Rothbard, Friedrich Hayek and their followers. In the late 80ies Rothbard predicted to a great detail the credit crisis that happened recently - 20years later. He wrote than "if the reaction to that crisis is adding empty money to the market, the whole monetary system is doomed in 5 more years." He might be wrong. In fact I hope he was wrong, but given his previous good prediction I try to be prepared for the case he was right. Quote:
Deflation is painful but necessary period of healing the economy. The Great Depression with its deflation was only the result of cheap credit politics and making money out of nowhere earlier. And it was so long because the government instead of letting it do its job tried to fight it which made it even worse. I strongly suggest you (and the others too!) to read "Man, Economy and State" by M. Rothbard. Also this book is noteworthy but it needs a theoretical background of its reader: http://mises.org/rothbard/agd.pdf |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 27th, 2011, 2:10pm on 05/27/11 at 13:47:18, UruramTururam wrote:
Thanks for the recommendation. I will try to educate myself. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 27th, 2011, 2:21pm In fact Man Economy and State is a dangerous book. :D A few years ago I could write what you wrote a few posts above that was my way of thinking - based on Keynes economic theories in fact.. Then I've read ME&S and then "Human Action" by von Mises. And after that I yelled: "D...n, those guys are bloody right!" In fact now I agree with about 95% of ME&S and 100% of HA. 95% in the first place because Rothbard is for anarchocapitalism which is unstable (as an organization that specialises in violence - a mafia - may take it over and establish a state installing itself as a government), while von Mises is for minarchocapitalism where state exists but covers only army, a parto of police forces and some (not all!) courts. In fact that was the economic model of early USA. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 27th, 2011, 4:09pm on 05/27/11 at 14:21:01, UruramTururam wrote:
Yes, the trouble with demanding liberty is that it is always in the interest of some to violently deprive others of their liberty. There are plenty of reasons to see the State as the source of oppression and originator of violence, but let the State once disappear, and you would see oppression and violence on an even greater scale. Anarchists have an untenably rosy view of what happens naturally. My view is that the instability caused by a lack of government does not apply only to violence, but also to the economy. Free markets are not naturally free; they are so because the government maintains them. Markets, too, are unstable, and tend to give rise to monopolies (market mafias, if you will). Doesn't every economist agree that monopolies are bad? Monopolies mis-allocate resources, reduce efficiency, retard the creation of wealth, etc. If governments would "just get out of the way" of free markets, the markets that would arise would not be free for long. Similarly, if the point of a gold standard (and/or BitCoins) is to take monetary policy power away from governments, because governments have a history of abusing that power, it is starry-eyed to assume that the power would just disperse into the air and magically belong to everyone. On the contrary, that power would coalesce among people who have even more incentive to abuse it than the government does. There would still be monetary policy all right, but it would be set by a less transparent process than the Federal Open Market Committee, and with the best interests of fewer at heart. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 27th, 2011, 4:43pm on 05/27/11 at 16:09:11, Fritzlein wrote:
And here's the point where we fully disagree. Market can be free only if the government (or anything that can use force to make people do something) has nothing to do with it. Being "free" is the natural and stable state of the market and instabilities disappear naturally. Being maintained by the government is the ending point of being "free". And also: it is impossible to form a monopoly without the help of the power (government). |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 27th, 2011, 5:21pm on 05/27/11 at 16:43:40, UruramTururam wrote:
Yes, I would say "fully" describes our disagreement well. :) Monopolies can be created from the pure power of money. Take any finite resource (say oil or right-of-way for roads), buy all of it at free market prices. If anyone won't sell out to you, undercut them on price until they go broke. Economies of scale naturally work in favor of the big guy forcing the little guy out of business, as does the ability to set standards and control the supply chain. Even if companies start out in competition with no evil intent, many factors join forces to produce a single winner. You don't even have to control all of a resource yourself; if the number of people controlling a resource is reduced to a relatively small number, then they can agree to fix the price. Monopolies can be created by collusion as well as by purchase and marketplace victories. Once you win, use your monopoly power to restrict supply and set the price far higher. The market will try to correct for this imbalance by using less of the resource, finding substitutes, etc., but the upshot will be that the monopoly profits, everyone else suffers, and the total wealth created by the economy is less than it otherwise would have been in the presence of competition. All this requires is property rights, i.e. some entity to enforce that you get to keep all of what you bought and do whatever you want with it, even if you are using your monopoly to the detriment of the common good. If there is any entity (governmental or not) that maintains property rights, then people can be "forced" to do all sorts of things inconsistent with a free market. A starving man will pay anything for a sandwich, if only one person is selling sandwiches. The idea that monopolies will be corrected by market forces (i.e. that higher prices will cause competition to spontaneously reappear) is about as realistic as saying that the mafia couldn't install itself as an ersatz government because individuals would spontaneously take up arms and rebel. Dictatorships are unstable (as we see in Libya) but they can survive a long, long time first (as we see in Libya). Similarly the barriers to entry in some markets can be enormous, such that nobody can simply decide to be a competitor. The idea that monopolies don't arise naturally, well, I don't even know where it is coming from, so I don't know where to attack it. :) The main point on which we agree is that freer markets are better. We also agree that government involvement in markets by definition makes those markets less than perfectly free. But the result can still be a much freer market than an absence of government intervention would produce. Government isn't the only hindrance to free markets, nor the worst. There are certain types of monopoly power (beyond just the police) that should only be held by the government, because it doesn't work to have them held in common. For other resources, it works best to have them privately held, but with the government stepping in (ala Microsoft) to prevent a monopoly from abusing its pricing power. Of course, the government can abuse its regulatory power to create crony capitalism, just like it can abuse its police force to create a police state. That's a bad thing against which the citizenry must rise up. But a decent government intervention in markets will work out much better than a total lack of government intervention in markets. |
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Title: Re: Bitcoin digital currency Post by rbarreira on May 27th, 2011, 6:35pm There isn't a free market without a government to keep it free. An unregulated free market can quickly become a monopoly. |
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Title: Re: Bitcoin digital currency Post by Janzert on May 27th, 2011, 10:32pm on 05/27/11 at 11:39:47, Fritzlein wrote:
I know this was very much a side comment, but since it relates to a subject that is rather more important to me than the main conversation I feel compelled to respond. :P I think you may be confusing rms' (http://en.wikipedia.org/wiki/Richard_Stallman) view and the GPL license (http://en.wikipedia.org/wiki/GNU_General_Public_License) restrictions with the broader open source community. Many open source licenses and the projects* using them have no restriction against using the code in pretty much any way you would like, including making a proprietary product out of it. Rather confusingly rms insists this is less free than his restrictions, but I digress. Janzert * Including OpFor with its MIT license of course, although it does fall under the somewhat awkward position of needing an Arimaa license from Omar to really reuse most of the code. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 28th, 2011, 3:01am on 05/27/11 at 18:35:25, rbarreira wrote:
A common misconception. :( In fact goverments try to make people believe in that for their own sake. But: it is logically impossible to form a persistent monopoly without the help of the government. Governments fighting monopolies fight the threat created by themselves. That causes people think they are useful in sustaining the economy while government can only harm the economy. The government is necessary for the sake of internal and external safety but for the economy it is always the "necessary evil". I'm too bad in explaining and too bad in English to show the proof of the above, but again - please read "Human action" and/or "Man Economy and State" where all those issues are fully addressed. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 28th, 2011, 11:05am on 05/27/11 at 22:32:41, Janzert wrote:
I am aware that open source licenses come in many flavors, and did feel a twinge as I was writing my oversimplified summary, but I barreled on for several reasons: (A) It wasn't my main point. I was trying to point out that competing within a government-supported legal framework, however radical the innovation, is somehow less radical than competing in a way the government would consider an existential threat. Thus BitCoins not only have to win mindshare, like GPL software; BitCoins also will likely be declared illegal. (B) Although I can understand giving away software with no strings (or very few strings) attached, I don't foresee that having the same social force as GPL'ed software. Haven't there been many free projects swallowed up by commercial entities, after which the free version was abandoned? But we shall see. I could be as wrong in my expectation as the businessmen, fifteen years ago, who couldn't believe unpaid programmers would ever participate in GPL projects in enough numbers to challenge paid developers cranking out propriety software. The free software movement is yet young, and may have further surprises in store. Is it mostly academics that prefer fewer restrictions than GPL? I would expect that, given how they (or should I say we?) get satisfaction from adding to the sum of human knowledge without much caring who makes money from the addition to the total. |
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Title: Re: Bitcoin digital currency Post by Janzert on May 28th, 2011, 6:59pm on 05/28/11 at 11:05:02, Fritzlein wrote:
The only ones I can recall offhand is where the primary authors decided that open source wasn't accomplishing their goals and made later versions closed source. Quote:
I'd have to say it's the closed source software movement that is young. ;) Quote:
Heh, my general feel is the opposite. Academics are more likely to be directly invested in their project as the "end product" and don't want to see someone take it and make money off of, or hide improvements to, their work. Whereas non-academic originating projects are often "infrastructure" for the person developing it and they don't care quite so much what others take and do with it. But overall I don't really see that large of a difference between academics and not in regards to license preference. Personal preference (or maybe ideology) seems to cross that line without much problem. Janzert |
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Title: Re: Bitcoin digital currency Post by Eltripas on May 28th, 2011, 7:43pm on 05/28/11 at 18:59:45, Janzert wrote:
I'm not a programmer, but I know some programmers academics and non-academics, and in my experience it is exactly the way Janzert describes it. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 28th, 2011, 10:48pm on 05/27/11 at 14:21:01, UruramTururam wrote:
By the way, I don't identify myself as a Keynesian. In particular I reject the notion that war is good for the economy, whatever else I may have said that reminded you of Keynes. Ideas should be considered and tested individually, and not accepted or rejected wholesale based on who put them forward. Brilliant people can be brilliantly correct about some things and shockingly wrong about others. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 28th, 2011, 10:55pm on 05/28/11 at 18:59:45, Janzert wrote:
May I then say that the GPL is young? And if the GPL wasn't inspired by the hijacking of an earlier generation of free software, what is your theory on why the GPL came into existence and gained a significant measure of popularity? You seem not to have a very high opinion of the GPL; if that is true, would you be willing to explain directly why that is? Quote:
Thanks for the information. I wonder how personal preference (or ideology) with respect to software licensing arises, and what else it is related to. |
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Title: Re: Bitcoin digital currency Post by rbarreira on May 29th, 2011, 9:41am on 05/28/11 at 03:01:34, UruramTururam wrote:
Why does a monopoly need a government to keep its control, when it can kill off any emerging competition by temporarily keeping prices low enough to get them out of business? |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 29th, 2011, 5:31pm on 05/29/11 at 09:41:17, rbarreira wrote:
In (very) short - because this "temporarily" would be in fact "most of the time". As the prices start rising again a new competition will emerge or - most probably - a part of the monopolistic trust will decide to compete against the rest of it. So the prices will eventually remain low. The government should react only if the trust tries to use force against the competition (no matter internal or external) but not for any reason connected with monopolies but because using the force is prohibited as such. By the way, as an empiric digression, there was no stable economic monopoly without a force (government or mafia) background in the history of mankind. The so called "walmartization" is a black legend created by the competition to turn the government against a strong competitor. In fact in the areas where Wallmart expanded prices drop and then rise, but the level after the rise was lower than before the drop. So it was good for the consumers. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 29th, 2011, 7:13pm on 05/29/11 at 17:31:17, UruramTururam wrote:
As a former Yahoo employee, I have to raise the example of Google's dominance of Internet search. Indexing the Internet is not cheap. It costs at least a billion dollars per year. But, having created the index, you get to use it for all your customers at relatively low cost per use. Yahoo tried to keep up, but they couldn't afford to spend as much on it. As a result, new Web pages that would appear within a day on Google would take a whole week to appear on Yahoo, and similar stuff. So Yahoo finally gave up. Now Google's only competitor is Microsoft. Microsoft has deep pockets and is willing to spend just as much as Google is on indexing the Internet. Unfortunately for Microsoft, they are losing money at it. In addition to the expense of creating an index, they have a branding problem. If you put the two sets of results on the same search side by side, but randomly assign the logo, people will prefer the results labeled "Google" over the results labeled "Bing", regardless of which engine generated the results. It is only a matter of time before Microsoft decides Bing is not winning and decides to stop losing money on it. Google already charges more than Microsoft, and if the competition goes away, they can charge still more. Internet search is an industry with a massive barrier to entry. Raised prices aren't enough to spontaneously create competition, because anyone who tries to compete has to deal with the likelihood that they will lose a huge upfront investment. If Google is smart, they only raise prices 50% so that the invitation to compete is still less than the fear of losing. Then everyone (except Google) is worse off. The greater the hurdle to competition, the more the monopoly can abuse its pricing power without any competition spontaneously arising. The government wasn't responsible for reducing the number of search engines to two, and if it drops to one, it won't be the government that picked the winner. Nobody has used force. The economy of scale creates the monopoly, and the barrier to entry enforces it. As for Walmart, I agree that it has been good for consumers on the whole. But Walmart has very similar competition on either side; Target at a slightly higher price point and dollar stores at a slightly lower price point. So even though they have crushed KMart and other direct competition, they are still have enough competition to keep them honest. How do you feel about AT&T and Standard Oil? Or to get more recent, Microsoft Windows? A judge demanded to see the prices Microsoft was charging retailers (Dell, HP, etc.) for Windows. They didn't all get the same wholesale price. The judge ruled that Microsoft was abusing its pricing power to stifle competition and punish retailers who didn't do what Microsoft wanted. The public didn't get to see the prices, but that's what the judge concluded, and I think it is a bit much to insist a priori that Microsoft couldn't have been a monopoly and couldn't have abused its pricing power, because that sort of thing never ever happens in the history of mankind. |
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Title: Re: Bitcoin digital currency Post by 722caasi on May 30th, 2011, 12:25am on 05/28/11 at 03:01:34, UruramTururam wrote:
A common misconception :) Monopolies can happen in a number of ways, including: Natural advantage-ownership of critical resources Economies of scale-Large companies do the job better, so small companies don't start Collusion-Every incoming business is bought by/colludes with an existing one, because of higher profits Government subsidies As you can see, government can prevent monopolies, particularly the collusion type. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on May 30th, 2011, 2:10am @ Fritzliein: As long as other internet search engines are allowed to exist, Google is not a monopolist. And if it is choosen freely by most consumers it may set higher prices... Such a price is not a monopolistic price but a fair market price for the services they offer. @ 722caasi: Nope, it's a proven economic law. Your examples are invalid: * Natural advantage-ownership of critical resources Worldwide? Not likely. And even so if such a company tries to set its price too high a replacement resource would emerge soon. Moreover companies controlling too much are harder to manage effectively thus not so stable. And - creating large companies is often encouraged by the government - if it demands too much bureaucracy to be done for a unit of work large companies are more effective there, but it is the fault of the overcomplicated law (thus the authorities), not the market. * Economies of scale-Large companies do the job better, so small companies don't start If they do the job better - what's the issue? They can ask more for their job. And maybe it's not a productive job but a bureaucratic one? If so - see above. * Collusion-Every incoming business is bought by/colludes with an existing one, because of higher profits See the first two issues. * Government subsidies Oh - but this is straightly a government-created monopoly! It can exist as long as the government continues to support it. All in all - fighting monopolies governments fight the threat created by them own. * Of course I understand it's hard to switch from the false Keynes economic theories that are invalid theoretically and bankrupted several times in practice to the correct ones that brought wealth to nations - as the Keynesian ones are promoted by media (and backed by the governments!)... Nevertheless - end of topic from my part. It takes me too much time to answer each question individually while the answers are written in the books I've given above. I'm not an economy teacher. ;) Beside the authors I've written before (von Mises, Rothbard, Hayek) I'd also recommend Adam Smith and Milton Friedman. In fact we are a lot offtopic now, it should be a talk about bitcoins. :) |
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Title: Re: Bitcoin digital currency Post by 722caasi on May 30th, 2011, 3:13am on 05/30/11 at 02:10:49, UruramTururam wrote:
Examples of worldwide control of natural resources: New inventions-May not be replaceable Situations where a replacement good/secondary source does not exist at the necessary price, so all other sources are too expensive. Quote:
What? They first two issues do not apply when all competitors are voluntarily colluding. In addition, what about cases where a lower cost is possible, but start up costs prevent a second competitor from being practical? I don't think it is at all "proven" that all monopolies come from governments. |
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Title: Re: Bitcoin digital currency Post by Janzert on May 30th, 2011, 12:26pm on 05/28/11 at 22:55:46, Fritzlein wrote:
If you like. :) I'm having a hard time calling something related to computers and technology that is over 20 years old, young though. But yes if you look at software licensing and source code availability, the idea of copyleft licensing is certainly the late comer. Quote:
From what I know, the GPL was a reaction to the general rise of proprietary (closed source) software through the late '70s and '80s. I don't know of any case where it was open source being hijacked that motivated RMS. RMS feels quite strongly that any software that does not provide source code and allow that code to be modified and redistributed is unethical. Quote:
If I contribute code to a project I want to be able to take that project and use it in any way I would like, including possibly as part of a proprietary project of my own. I have yet to release any closed source software, but the restriction that I couldn't if I wanted to is enough to turn me away from GPL licensed projects. It is also what motivates me to release my stuff under a BSD, MIT or other non-copyleft license. I don't want to put a developer that picks it up under any restriction either. GPL advocates will often emphasize that they are for free software (free as in freedom not free as in beer) and that any other licensing is less free. My gut reaction is that this is rather disingenuous. Although I'm sure this is because I prefer the freedom of the developer to do as they wish above the freedom of the code to be open, whereas they value it in the opposite order. Quote:
Hopefully the above gives some glimpse into it. The above are certainly just my own views and opinions in an area that many developers have very strong feelings. In order to try and keep from a full blown flame war I will try and refrain from responding should someone else post their own opinions. Janzert |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 30th, 2011, 1:43pm Thanks for explaining, Janzert. I won't take up a defense of the GPL or express a contrary opinion, as I don't feel very strongly about it, and don't know all that much about it. I don't see anything wrong with there being an ecosystem of lots of different software licenses. I just sensed that your earlier responses correcting me were motivated by some strong opinions that you weren't expressing, so I didn't want to simply keep talking about side issues without talking about the elephant in the room. If my perception was correct, then let me apologize for highlighting copyleft while ignoring other kinds of free software. I can see how that would touch a nerve if there are ongoing holy wars with people shouting "my software is more free than your software". If, on the other hand, my perception was incorrect, then I apologize for missing the point myself. |
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Title: Re: Bitcoin digital currency Post by lightvector on May 30th, 2011, 5:57pm on 05/30/11 at 02:10:49, UruramTururam wrote:
I think different people might be working off of a different definition of what a monopoly or a monopoly price is, or what a fair market price is. If I recall correctly, in the simplest classical view, the fair market price P occurs when the price equals the marginal cost of production (including opportunity costs). In this classical view, any higher price P_2 > P is not optimal because there will be people in society who value the product between P and P_2. The cost to the producer is only P and these people would have been willing to pay more than P, benefiting both themselves and the producer, yet are unwilling to pay P_2. The Microsoft-Google scenario that Fritz presented might be an example. If Microsoft dropped out and Google raised its advertising prices 50%, that is precisely a monopoly situation. The cost of production (providing the internet search) has not increased and remains low, but the price is now much higher. According to the classical view above, the advertisers who no longer want to pay the higher price will switch to imperfect alternatives and experience a loss in utility not completely compensated by anything else. This holds even if there are substitutes, if those substitutes are imperfect. Since users prefer Google over things like Bing, "advertising on Google" is a unique product with no perfect alternatives. (note that it's not the users who are buying this product, it's the advertisers!) |
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Title: Re: Bitcoin digital currency Post by megajester on Jun 1st, 2011, 3:13am OK what do you say to this: I predict that one of the uses for Bitcoins will be as an intermediary currency for banking transactions as a secure replacement for hawala (http://en.wikipedia.org/wiki/Hawala). |
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Title: Re: Bitcoin digital currency Post by Nazgand on Jun 2nd, 2011, 2:33am on 05/29/11 at 19:13:42, Fritzlein wrote:
Not really. Bing is a notorious plagiarist; it will not die. http://arstechnica.com/microsoft/news/2011/02/google-catches-bing-copying-microsoft-says-so-what.ars |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 2nd, 2011, 9:12am on 05/27/11 at 11:39:47, Fritzlein wrote:
The bubble inflates well, it's 1BTC>10USD now. Well if a "critical density" of interest is reached than $50 is not impossible. The amount of BTC entering a the market daily is more or less constant, while the demand while a bubble is inflating grows exponentially. The growth started from $6 and for a world-wide bubble a 3-4 fold growth is expectable. Now $6*2^3.5=$68. I plan to quit at 50. ;) |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 2nd, 2011, 12:11pm on 06/02/11 at 09:12:50, UruramTururam wrote:
If the sovereign debt of Greece is restructured (or "reprofiled", or any other name for default), I will be happy. The only alternative to default is to transfer the debt from the private sector to the public sector and delay the default, but ultimately insure that when default comes, it will be taxpayers and not banks who bear the burden. Yet if the Greek default I am hoping for happens soon, the value of BitCoins will probably soar, as people trust state-issued currencies less and less, and look for alternatives, however improbable. Let the euro show signs of falling apart, and BitCoins could reach your target $50 before year end. :) |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 2nd, 2011, 3:46pm on 06/02/11 at 12:11:11, Fritzlein wrote:
In such a case that a large number of people and a few big companies tried to put a part of their money into BTC the price would skyrocket and end well above $50. Let's say for example that 1 billion USD is to be invested in bitcoins. In the circumstances in consideration it is quite a reasonable amount. With about 7 millions BTC in existence that alone would push the price to at least $150 not counting current owners' interests and speculations. I doubt in such a scenario, but everything may happened there and it could be fun to watch. |
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Title: Re: Bitcoin digital currency Post by megajester on Jun 3rd, 2011, 7:16pm I just bought myself £30 worth on #bitcoin-otc (http://www.bitcoin-otc.com/). Britcoin was trading at £12.50 ($20) at the time, so I didn't get the price I could have done had I been trading in dollars, but hey. I know market traders talk about there being a "rush", well I can see what they mean! Because you're not just walking up to a counter and buying it, you're negotiating the price and the method of payment. And then there's the "moment of truth" when you find out if the person really is as trustworthy as you thought... EDIT: One thing I will say is that if you don't have a dollar account it is extremely difficult to buy Bitcoins. Paypal shut down the only official Paypal vendor, so since then your options are limited: 1. Mt. Gox etc. (Which involves buying some sort of e-currency to buy Liberty Reserves to buy Mt. Gox credits to trade Bitcoins, and signing up to every single website along the way) 2. Jumping through the equally ridiculous hoop of getting an avatar in Second Life so you can buy Linden Dollars so you can buy Bitcoins on VirWoX. 3. The trading-floor-slash-shark-pit which is #bitcoin-otc (http://www.bitcoin-otc.com/). Edit: Bitcoinmarket.com (https://www.bitcoinmarket.com) looks like a safer version of the same thing, although they say they've run up their quota with gmail for signups. How did you do it Ururam? |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 4th, 2011, 12:19am on 06/03/11 at 19:16:20, megajester wrote:
Is PayPal hostile to BitCoins, or was the vendor shut down for other reasons? |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 4th, 2011, 1:32am on 06/04/11 at 00:19:38, Fritzlein wrote:
PayPal counts buying and selling BTC as "currency exchange" which is not allowed according to their regulations. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 4th, 2011, 1:35am on 06/03/11 at 19:16:20, megajester wrote:
I used Bitmarket: https://bitmarket.eu/ |
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Title: Re: Bitcoin digital currency Post by megajester on Jun 4th, 2011, 2:57am on 06/04/11 at 00:19:38, Fritzlein wrote:
Well, here is the explanation of the founder (http://www.arbetsnamn.se/bitcoin-exchange-account-of-coinpal-shut-down-by-paypal/) originally posted on the bitcoin.org forum. You make your own judgement :) |
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Title: Re: Bitcoin digital currency Post by rbarreira on Jun 4th, 2011, 4:25am Paypal has a history of freezing funds in their accounts, sometimes for months. It's a very shady company that I wouldn't trust with any significant amount of my money. |
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Title: Re: Bitcoin digital currency Post by omar on Jun 4th, 2011, 8:34am Looks like this is going to be the fastest growing bubble we've ever seen. The price hit $17 today. First the black money is going to chase it then the investors are going to chase it. http://www.fool.com/investing/general/2011/06/01/this-investment-gained-300000.aspx |
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Title: Re: Bitcoin digital currency Post by megajester on Jun 4th, 2011, 11:06am Below is a comment I wrote in reply to this article (http://www.openmarket.org/2011/06/03/bitcoins-all-buzz-no-substance/). I wonder what our resident economic experts would make of it. "OK let's try this one for size: The fact that Bitcoins are all just empty boxes is actually a good thing. Why? Because everybody knows they are! Market crashes happen because people confuse goods with moneys, to use your expression. "People everywhere like eating coconuts, so coconuts are good as money." Except now the coconuts aren't food, they're money with the illusion of being food! So when some rumour spreads that nobody eats coconuts any more, or all the money-coconuts are rotting, bang goes your coconut economy. But it makes no sense, because those money-coconuts were never going to be consumed as food anyway. If everybody could be persuaded to just carry on regardless the economy would tick over just fine. This problem exists for all commodity-based stores of value, even gold. That's the genius of Bitcoin. There's no illusion of intrinsic value, so there are no illusions waiting to be shattered. It's only worth anything as money because... everybody's using it as money! This is not a new idea; this is also true of fiat currencies. After all, they are also "empty boxes." The reason currency markets go up and down is because of changes in confidence in the economies that use them, not the value of the thing inside the box as it were. The box is empty, everybody knows that. To conclude, in terms of the basis of its value, Bitcoins are no different from fiat currencies. Added to which, they come with the advantage that governments are utterly deprived of the ability to monkey with it. So what's left? Bitcoin can only be killed by hacking or banning; the first is unlikely and the second is unfeasible. Therefore, I submit that Bitcoin is at least as credible as any fiat currency today." |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 4th, 2011, 12:11pm on 06/04/11 at 11:06:31, megajester wrote:
I'm no economic expert, but perhaps my comment will nevertheless not be out of place. Quote:
You left out a third option for what could kill BitCoins, namely that everyone could stop valuing them. The price of a BitCoin relative to other things in the world is set by people's enthusiasm for holding BitCoins. You can see in a moment's consideration that the price isn't set by the supply of BitCoins, because the supply is barely changing while the price is wildly fluctuating. The price must be set by the demand. It is a dangerous half-truth that, because the supply of BitCoins can't be "monkeyed with", the value of BitCoins is secure. This leaves out the demand side of the equation entirely, and the demand for BitCoins could dry up overnight. This would be true even if the demand were driven only by people wanting to use a new currency, rather than demand being driven by speculators, which I think it is. Quote:
No, fiat currencies are not on an equal footing with BitCoins, because fiat currencies have government backing. First, as I argued in an earlier post, the government has taxation authority, which creates a demand for the currency. You can't use coconuts to pay your taxes. You must use the currency of the country in which you reside. I can't decide to wash my hands of the dollar and never use a dollar again, unless I want to end up in federal prison. But also the government can mandate that every vendor must accept payment in the local fiat currency. If I take out a loan to buy a car, my lender can't demand that I repay the loan in coconuts instead. If I show up with a bagful of dollars, I can't be turned away. They can't say my payment is invalid. That is true (in my country) for nothing but dollars. Quote:
And the government has the power of persuasion when it comes to fiat currencies, because they have the power of coercion. Quote:
You ascribe a rationality to market participants that history argues is ill-founded. Time and time again, people value X only because they see other people valuing X. Specious arguments are made that X has an inherent value that justifies its price, and some people believe those arguments, but mostly the enthusiasm is based on a desire to gamble, a desire to get rich quick, and a belief that prices which have moved up in the past continue to move up in the future. The notion that prices are set by well-informed and rational actors is not borne out by history. Quote:
I submit that it is extremely unlikely that the price of BitCoins is being set by people who want to use BitCoins as money. Yes, there will be some demand for a new kind of transaction in alpaca socks and guns and drugs (not to be confused with demand for the items themselves, which hasn't changed). For various reasons people might prefer this new digital currency as a medium for transactions rather than existing currencies. But can you honestly see this sort of demand doubling in two days? Suddenly twice as many people have seen the light and henceforth want to abandon all old currencies? I have a hard time believing it. But if you say instead that BitCoins are only worth anything as a speculation because... everybody's using them to speculate, it suddenly makes sense. Bubbles have happened for no better reason than this in the past. At a minimum, demand for BitCoins as a means to gamble on further price rises must be added to the demand for BitCoins as a currency. My guess is that speculation is already by far the dominant factor. Quote:
It is sad that governments have a history of debasing their currencies, a history that is nearly as illustrious as the history of speculative bubbles. But I submit that an informed citizenry in a democratic system of government can successfully demand that their currency not be debased. I would rather pin my hopes on the mass of voters preferring monetary stability, than pin my hopes on the price of BitCoins not crashing when the speculative madness ends. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 4th, 2011, 1:01pm on 06/04/11 at 08:34:19, omar wrote:
Thanks for the link, Omar. Let me add a footnote to the author's recommendation to buy physical resources. Suppose you believe that the dollar is going to be debased, and therefore expect inflation to run 10% per year for the next ten years. If you stuff $2594 under your mattress for ten years, it will end up buying what $1000 could buy you today. Your purchasing power will evaporate. So to you dollars are a hot potato. You want to get out of dollars into something that will hold its value, say gold. How much should you be willing to pay for gold? It depends on what you think the price of gold will be ten years from now, because gold pays no dividends. All you have is the sale price of gold when you cash in. Let's say your crystal ball tells you that in ten years gold will sell for $1000 per ounce in today's dollars, or $2594 per ounce in future debased dollars. Then you should buy gold for any price less than $2594 today to get out of dollars. If you can buy gold for only $2000 an ounce today, you are coming out ahead of the mattress scenario. Let's play that scenario forward. Your predictions were correct. You buy an ounce of gold today for $2000. Inflation is 10% a year for ten years. After a decade you sell your ounce of gold for $2594. You congratulate yourself for having invested in a "store of value" instead of hanging onto dollars that can be debased by irresponsible government policy. Yay for you! But wait. The purchasing power of the $2594 future dollars you ended up with is only worth $1000 of today's dollars. You gave up $2000 of today's purchasing power to get that. Your "store of value" lost half of its value! Yes, you lost less money than simple inflation would have taken away from you, so it was better for you to hold gold than dollars, but if you hadn't carefully thought through what "store of value" means, you might be very disappointed to have lost half of your store. In face of looming inflation, it is rational to get rid of cash for things that can't be inflated but can be turned back into cash at need. Thus it is rational (no speculative bubble required) to bid up the price of gold so high that the purchasing power of gold is expected to go down almost as much as the purchasing power of the dollar is expected to go down. I'm oversimplifying, because dollars earn interest and gold doesn't, which means that gold is less attractive and shouldn't be bid up as high. It should only be priced to account for the difference between inflation and interest. But right now dollars earn pretty near 0% interest, so it's a good first approximation. Now, let's say other people who study these things have already bid up the price of gold to a certain point of inflation expectations. Are you still eager to buy gold? Only if the gold market is still underestimating inflation, your crystal ball predicts higher inflation than that, and your crystal ball is better than the market's. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 4th, 2011, 2:27pm Well, people who can predict or are lucky to guess what will be a good investment are getting wealthy. My own rule is: "If everyone says I should buy X - I sell it." I've sold several Oz of silver a month ago because my mailbox started to be flooded with "invest in silver" spam. It turned out to be a good idea. When the whole net starts buzzing about BitCoins there will be probably the best moment to sell them. After thet they will either collapse or start to be used as a standard online currency. Even in the second - less probable - case, the price with go down a bit after a big peak. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 4th, 2011, 2:45pm on 06/04/11 at 14:27:26, UruramTururam wrote:
Yes, I made Katie sell her silver in January on the same principle. Along the drive to school I started seeing billboards advertising "We buy Gold!". Selling at $29/oz was in some sense way early compared to the April high of $48/oz, and even after the May selloff it's still $36/oz. Well, if I had some special insight for knowing which day would be the peak of the silver market (or any market), I would be getting so rich it would be more efficient for me to hire someone to brush my teeth than do it myself. Since I don't have that insight, I use rules of thumb like Ururam Tururam suggests. I remain convinced that $29/oz was already overvalued. I'm not kicking myself at all for selling, because I still expect silver to drop to half that price, even if I don't know when. In a related story, I was working in a prison in early 2006. One day (I forget exactly when) I overheard several of the inmates discussing what a great investment real estate was. When the buzz around real estate has permeated society to such an extent that even prisoners are discussing how to get a piece of the investment action, you know it's time to get out. Sure enough, that would have been a brilliant time to sell any property (or property-related securities) that you owned, even though that market didn't crash until later. |
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Title: Re: Bitcoin digital currency Post by megajester on Jun 4th, 2011, 3:03pm Edit: This is in response to reply #78, I hadn't read subsequent posts before making this post. Thank you Fritzlein. I had a feeling my reasoning wasn't necessarily sound even as I wrote it. I'm just "trying it on for size", almost like playing devil's advocate. Your reply is very well reasoned and seems solid, however I would just like to mention a couple of points that (at the moment) still seem persuasive to me. Firstly, about the "empty boxes." The writer of that article had said that over the ages money has progressed from simple commodities, to commodities with "certificates" (eg. an official stamp on a gold coin). He dismissed Bitcoins on the basis that they're like certificates without any commodity to certificate, an empty box if you will. My point was that fiat currencies basically fit that description. You're right that fiat currencies are not based on nothing in that governments demand it as tax and can force their populace to use it. However the value of one dollar is not determined by government decree, it is determined by market forces of supply and demand. If China sells its dollar reserves tomorrow, thus increasing the dollar supply, the value of the dollar will plummet. If the US does well economically, increased demand by foreign investors and speculators will decrease the dollar supply pushing its value upward. And there's not a whole lot that the US government can do about it. They will always charge taxes in dollars, but what those dollars are worth is another question. This is what I mean when I say that "in terms of the basis of its value, Bitcoins are no different from fiat currencies." Of course you are right about the coercion side of things. But if you say that government coercion is simply artificial demand, we can still say that fiat currencies and Bitcoin are more like each other than commodities in that their value is based on sheer market forces. Which brings us full circle to the basis of Bitcoin demand. True, the main driving force right now is speculation. What we're watching right now certainly looks like a bubble. But Wikipedia defines an "economic bubble" as "trade in high volumes at prices that are considerably at variance with intrinsic values." Meaning, we're buying and selling boxes at higher prices than the value of what's in the box. But this is Bitcoin, there's nothing in the box! An "overpriced Bitcoin" is either a truism (because their intrinsic value is nil) or a conradiction in terms. If speculators reckon that people will be willing to pay $50 next month for Bitcoins and trade accordingly, that's not a bubble, that's a self-fulfilling prophecy. A $50 Bitcoin is worth either $50 or nothing. For a bubble to burst, you need some sort of event that causes a loss of confidence. My question is, "confidence in what?" In the dotcom boom and bust, for instance, the "confidence" was that internet startups would take over the world. So everybody rushed to buy their shares. Shares are not empty boxes, because inside the box is a promise that the company will pay out dividends when they make a profit. This is the "confidence" that was lost when the market realised these companies weren't all they were cracked up to be and the hype had run its course. Depending on how you look at it fiat currencies aren't empty boxes either, because they contain the specific promise "You can use this to buy stuff in country X." If less people want to buy stuff in country X than before, the currency's value will decrease. If the US economy suddenly starts doing badly the price of dollars falls, because investors convert their dollars to other stores of value thus flooding the market with dollars. But Bitcoins really are empty boxes. So a "crisis of confidence" would be of confidence in what exactly? What would it take to convince people that Bitcoins priced at X are actually worth Y, when everybody knows Bitcoins have no "actual worth" to start with? |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 4th, 2011, 4:04pm on 06/04/11 at 15:03:13, megajester wrote:
It would be a crisis of confidence that the price of BitCoins will keep going up. This is equivalent to a crisis in confidence that other people will want BitCoins, although I imagine the connection in some folks' minds is hazy enough that it doesn't sound tautological. Quote:
I beg to differ. Value investors do indeed buy a company based on the expectation of future dividends. Value investors don't give a fig if nobody will buy back their shares later on, because they don't have to sell. Other people's confidence (reflected in prices) is a meaningless consideration. They can kick back and collect dividends instead of selling. But it was certainly not value investors that drove the dotcom bubble. Note that value investor Warren Buffett didn't buy any dotcom stocks, not even winners like Amazon.com. The dotcom bubble was driven by momentum traders, not value investors. Momentum traders are only interested in price movements, not dividends. They want to sell at a higher price than they buy. To differentiate between the two ways of thinking, here are two things a momentum trader would say: "I won't sell now, but I will sell if the price goes down to X." "I won't buy now, but I will buy if the price goes up to Y." A value investor could never, ever say that about any stock, commodity, loan, or what have you. Instead a value investor would say only "I won't sell now, but I will sell if the price goes up to X." "I won't buy now, but I will buy if the price goes down to Y." In the dotcom bubble, people were buying Internet stocks because the price had gone up. It would have been insane to buy in expectation of dividends from companies that had never turned a profit and were in fact predictably losing money at a so-called "burn rate". And when the bubble burst, people started selling because the price had gone down, not because of any shift in economic fundamentals. Now let me suggest that the current BitCoin frenzy is being caused partly, mostly, or entirely because the price has gone up. This means it is by very nature a momentum trade. Can you think of any other reason for the price spike? There may be a few "value investors" holding BitCoins who are committed to holding and using them as a currency regardless of the exchange rate, but I doubt there are more than a handful. Even more than a typical market, the BitCoin market will have prices set by momentum traders rather than by value investors. As Mark Dow is fond of saying, "Nothing brings out buyers like higher prices." Quote:
Like you, I have some problems with the reasoning used in the original article. In particular, the author says that he is arguing from intrinsic value alone, leaving out "the role that governments play in the monetary system". Say what?? If you leave out the role of governments, then yes, BitCoins and fiat currencies are indeed on the same footing. Quote:
It is true that the value of a dollar is partially determined by things outside the control of the US government, including the performance of the economy, and including the enthusiasm of the Chinese government to hold dollars. The dollar can suffer a crisis of confidence. And most certainly the value of a dollar is not set by government decree. The government can only indirectly boost the value of the dollar, primarily by raising interest rates. Raised interest rates make the dollar more attractive to hold (because it is earning interest) and also shrink the supply of dollars (because it is more expensive to borrow them), but that's not the whole story. So let's just say the US government has substantial control over the value of the dollar, not that it can decree the dollar's value. In some sense, there is no doubt that the US government could keep the value of the dollar steady. Currency debasement isn't a given. The policy tools exist to prevent it. The problem is just that the primary tool to support the value of the dollar, namely higher interest rates, makes it more expensive for the government to borrow, and governments love to borrow. The problem in this light is not that fiat currencies lack intrinsic value; the problem is government borrowing addiction. Once a government borrows too much, its taxation authority is a weaker force than the crushing weight of its debt. |
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Title: Re: Bitcoin digital currency Post by megajester on Jun 4th, 2011, 4:22pm Thank you again for honouring this layman's comments with a thoughtful and informative reply. That all sounds very reasonable. So what you're saying is that it's not the starry eyed investors but the momentum traders who will be the ones to burst the bubble when the increase stops, simply by trying to get rid of their Bitcoins that aren't appreciating so fast any more. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 4th, 2011, 5:18pm on 06/04/11 at 16:22:37, megajester wrote:
You are welcome, but I'm a layman myself. I'm trying to teach myself by reading and writing about it. I actually think I blundered above by saying that higher interest rates contract the supply of dollars. It's the other way around. When the Federal Reserve wants to raise interest rates, it does so by contracting the supply of dollars. The contraction in supply causes the raised interest rates. Probably I have made many similar blunders sprinkled throughout the thread. Quote:
There may be a role for starry-eyed investors who truly believe that pets.com is going to change the world. Great faith can result in strange economic acts, such as spending your life savings to advertise the end of the world. (http://www.silive.com/news/index.ssf/2011/05/robert_fitzpatrick_is_back_wit.html) That was the action of a true believer. And Ray Kurzweil was such a believer in transformative technology that he went so far as to say the dotcom bubble wasn't a bubble even after it had burst! Surely BitCoins also has some share of true believers. My intuition, however, is that the faith is often an excuse to justify to ourselves some behavior that we would otherwise recognize as irrational. I might buy gold at $1500 and claim that I do so because I am convinced that all the major currencies of the world will shortly turn into toilet paper as every government tries to inflate away its debt. That explanation sounds a lot more rational than explaining that six years ago my cousin Larry bought gold for $450, more than tripling his investment since then, whereas I bought a stock index fund that has returned 3% a year, which is darned near a zero real return when inflation is taken out. Who has the guts to admit that he is buying gold because of an all-consuming jealousy of the people who have already gotten rich by buying gold? In any event, it is indeed the momentum traders who deflate bubbles by selling when the price goes down. True believers would buy even more on a price dip, doubling down like Robert Fitzpatrick in the linked story. If the faith that inflated the price were truly faith in some economic fundamental, not everyone would lose their faith at precisely the same instant. But when the faith that inflated the price was merely faith in a rising price, then it is quite natural that a falling price and lost faith create a feedback between each other that bursts the bubble and crashes the price. |
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Title: Re: Bitcoin digital currency Post by megajester on Jun 4th, 2011, 6:28pm on 06/04/11 at 17:18:27, Fritzlein wrote:
Not meaning to nitpick, but I was actually talking about when the increase stops, not when the decrease starts. You see I'm trying to resolve in my head why the price can't just rise and then stay where it is. As you can tell from my previous posts, I had assumed that bubbles bursting was all about the difference between the price and the value, and that bubbles burst because after everybody's ridden the hype wave to a dizzying height and no further, it's only a matter of time before somebody loses their nerve and dips the asking price. I had tried to reason that since Bitcoins don't have a "real value" that they're being traded above of, investors will invest, traders will use it to trade, until everybody's bought into it who will and then everything just continues along that plateau. However I can see now that momentum traders will bust it all on their own. Regardless of what it is or isn't worth, a momentum trader will sell once it stops increasing. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 5th, 2011, 1:34pm Last night I heard Paul Simon's song So Beautiful or So What (http://www.hulu.com/watch/241603/saturday-night-live-paul-simon-so-beautiful-or-so-what) for the first time. I don't think the song is about economics, but these lines sure seem relevant to the discussion of how bubbles form: Ain't it strange the way we're ignorant How we seek out bad advice How we jigger it and figure it Mistaking value for the price To me it seems that if people didn't have the false intuition that the value of a thing must be equal to the price of that thing, then bubbles couldn't happen in the first place. |
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Title: Re: Bitcoin digital currency Post by 99of9 on Jun 5th, 2011, 7:37pm To those who hold that bitcoins will have long lasting value: What do you think will happen when bytecoins are introduced? And then bitnotes, and then bytenotes, ... Anonymous cryptographic transfer sounds like a good transfer system, but not such a good value system. So here's my question. A bitcoin is essentially the solution to a mathematical problem. But it's a cryptographic problem nobody wants to solve, so it's not really that valuable. Are there mathematical solutions which actually have value that could be traded? It might be hard to standardize this, i.e. get a whole bunch of problems that each corresponded to one coin. But I can imagine a class of similar computationally expensive problems would often have a similar difficulty and might be of equal value. I guess there would have to be a "cashing in" step where if you wanted to know the actual solution, your "coin" would be destroyed/converted.
PS Fritz, if you never want to deal with US dollars again, an alternative to Federal prison is Australia... not bad if prison is your other option! |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 5th, 2011, 9:36pm on 06/05/11 at 19:37:28, 99of9 wrote:
Katie lived in Australia once, and from time to time expresses an interest in moving back. Unfortunately for us, non-citizens can't just move in. You need to be invited to a job, or else buy government bonds. Maybe when Katie completes her Ph.D. she will be invited to teach at an Australian university. ;D |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 6th, 2011, 12:38am on 06/05/11 at 19:37:28, 99of9 wrote:
In fact the problem is: "Are the bitcoins transactions performed so far valid?" I think the problem is chosen to be like this - having no other use - for the purpose of no interference between transaction validation and doing anything else. In fact who wants banknotes for the paper they contain? By the way the bitcoin hashing is - as far as I understand it - a NP-complete problem. Just like the salesman problem is. And all NP-complete problems are equivalent, so if anyone finds a faster solving way for any of them it could be fairly easy adapted for all the others. |
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Title: Re: Bitcoin digital currency Post by megajester on Jun 6th, 2011, 3:38am The point is not what it takes to produce a Bitcoin. The only reason for having the mining system is to have a stable way of releasing the currency. As I understand it, Bitcoin's worth is based purely on the fact that it's being used as money, that everybody else thinks it's worth something. Like a very powerful yet very dangerous way of harnessing the bandwagon effect (http://en.wikipedia.org/wiki/Bandwagon_effect). You could also say that much of the debate in this thread has been over to what extent fiat currencies also amount to this. |
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Title: Re: Bitcoin digital currency Post by 99of9 on Jun 6th, 2011, 6:59am But if you're going to put in a mining step, why not mine something useful. Then it can be at least slightly valuable. Why solve a random useless NP-complete problem when you could solve a useful one? I think the best thing about bitcoin is it's ability to be divided and transferred easily. But without any trace of backing value it's totally vulnerable to imitators. Why would *this* version retain value if there were 100 other equivalent schemes promising bytenotes. |
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Title: Re: Bitcoin digital currency Post by rbarreira on Jun 6th, 2011, 7:15am on 06/06/11 at 06:59:01, 99of9 wrote:
I think it's about the momentum of the currency. As long as people are willing to trade services and goods for Bitcoins, does it matter that nothing of value is behind it? |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 6th, 2011, 12:25pm on 06/06/11 at 06:59:01, 99of9 wrote:
I think that is a very incisive question. Particularly to those who believe that technology keeps making everything better, it is easy to imagine that bytenotes will have additional features that bitcoins do not, and which can't be backported to bitcoins. If everyone therefore stopped using bitcoins and started using bytenotes, then value of bitcoins would drop to zero. This thought experiment alone should scare everyone away from bitcoins. The only counter-argument I can think of is if the transition was somehow orderly, i.e. if everyone received the same number of new bytenotes for their old bitcoins. But given how that is not happening for the transition into bitcoins (supposing that is what is happening now), why would it happen on the transition out? |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 6th, 2011, 12:38pm on 06/06/11 at 07:15:11, rbarreira wrote:
I think it is about momentum, to be sure. But are BitCoins really gaining momentum as a currency? I'm trying to imagine how that would even work with such a wildly fluctuating exchange rate. Let's say Omar checks the exchange rate and sees 1 BTC = $8. He offers to sell an Arimaa set for 5 BTC, the suggested retail price of $40. Three days later, the price of BitCoins has gone through the roof so that now 1 BTC = $20. Suddenly nobody is going to pay 5 BTC ($100) for an Arimaa set. So Omar can't make a sale. He has to go in and reprice his sets at 2 BTC = $40. But wait, this is really risky. What if the next day BitCoins drop in price so that 1 BTC = $15. Then someone snaps up Omar's Arimaa set for 2 BTC = $30, i.e. 25% less than what Omar was intending to sell it for. Tough luck, Omar. Let me make a total guess with no data to back it up: the overwhelming majority of transfers of BitCoins at the moment are not in exchange for goods and services, but rather in exchange for other currencies. If my guess it correct, it would be further evidence that BitCoins are not taking hold as a new currency, but rather are taking hold as the latest speculative fever. |
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Title: Re: Bitcoin digital currency Post by megajester on Jun 6th, 2011, 3:15pm on 06/06/11 at 12:38:29, Fritzlein wrote:
Er no, he quotes his prices in dollars and updates the Bitcoin price continually based on the market feed (http://bitcoincharts.com/markets/). If gold bar vending machines can do it, why not a website? Plus he can give me a discount because I'm not using Paypal. Based on personal experience, I think you have to be living outside the US/western Europe to understand exactly how great it sounds not to have to deal with the international banking system. This is what I meant when I said I think this could replace hawala. An international Bitcoin-powered network of independent money transferers would make a killing from remittances. on 06/06/11 at 12:38:29, Fritzlein wrote:
Now what you say there about the current situation is absolutely true. However, if any new currency is going to get off the ground with no official backing whatsoever, you have a chicken-and-egg situation in that no internet retailer's going to go to the trouble of enabling Bitcoin on their site when nobody's using the things. Ever the optimist, I wonder if we might now start to see more internet sellers implement Bitcoin. But if this does happen it's going to be grass roots. The risks are too great and the benefits too small for the big players. The little guys might just sneak under the radar. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 8th, 2011, 12:45am on 06/02/11 at 09:12:50, UruramTururam wrote:
Wow, that may only be a few days from now. It's already trading over $27! I have never seen anything like this in my life. The price of BitCoins is rising so fast, I have to check it both before I go to bed and as soon as I get up in the morning. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 8th, 2011, 1:02am on 06/06/11 at 15:15:20, megajester wrote:
OK, that could be done, although it still leaves the vendor with potential losses if the price of BitCoins plummets after a sale has been made. As for gold bar vending machines, it is pretty easy to predict those will disappear as soon as the bubble in gold prices is popped. The man on the street will suddenly realize that not only does gold not retain its value through thick and thin, it is also somewhat inconvenient to spend. I saw it happen only too recently with real estate. Friends of mine bought a second house, not to live in, but on the conviction that house prices never go down. Now they "can't sell" their extra house, which is a euphemism for being unwilling to sell at the current market price, which is too much lower than what they paid for it. There may be a coming debacle for the euro, and for the yen, and also for the US dollar. Gold may look good for a while yet. But when the dust settles, gold will not be the new means of settling international payments. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 8th, 2011, 6:20am on 06/08/11 at 00:45:35, Fritzlein wrote:
I'm not that greedy. Sold for $32. It grows too fast. Input $49, output $224, balance 175, I offer 150 to the prize pool of AC'12. :) |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 8th, 2011, 1:16pm on 06/08/11 at 06:20:28, UruramTururam wrote:
I'm glad you won your gamble, and glad of the generous use to which you will put your winnings. :-) In other news, the government crackdown is looming (http://finance.yahoo.com/news/Senators-seek-crackdown-on-rb-4251307580.html;_ylt=Am8asfIIuLfBVSy6MmhwFx27YWsA;_ylu=X3oDMTE1cjRkamtkBHBvcwM2BHNlYwN0b3BTdG9yaWVzBHNsawNzZW5hdG9yc3NlZWs-?x=0&sec=topStories&pos=3&asset=&ccode=). But government moves so slowly, and this bubble is inflating so fast, that it seems something has to give economically before law enforcement can effectively interfere. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 10th, 2011, 2:44pm I surely don't know the future of BTC price, but as for today it seems I had got a good price. ;D http://img215.imageshack.us/img215/6774/unled1re.gif (http://imageshack.us/photo/my-images/215/unled1re.gif/) Uploaded with ImageShack.us (http://imageshack.us) |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 10th, 2011, 2:53pm Wow, if the trend keeps up, it will mean that you sold at the exact peak of $32. That is unbelievable. While you're at it, will you pick my lottery numbers for me? ;D We should take a "double-or-half" poll. From the current price of $22 is it more likely to hit $44 next or $11 next? Since earlier in the thread I spoke of BitCoins reaching $100 or even $200, I will stick with the implicit prediction. The pyramid will not yet collapse. $44 will come before $11. But eventually the price will indeed fall below $11, probably below $1. I say this because it is hard for me to psychologically accept a bubble unraveling so soon. I'm steeled to waiting years for stock market or commodities bubbles to burst. Besides, the news about BitCoins is still just getting out. There are plenty of fools left that haven't rushed in yet. But why should a quick end be so strange? The bubble inflated more quickly than I imagined possible in the first place, so I should adapt my expectations to a new pace of change. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 10th, 2011, 3:08pm I basically agree here. I'm not sure if $44 would be reached but I expect a rise next week. Yet I also bet $44 rather than $11. Now a lot of new people started mining BTC and the network is vastly overpowered generating 450 BTC/hour instead of desired 300. This would cause a big jump of difficulty around next Wednesday. And there are supply shortages of Radeons! So I expect a rise afterwards. I have a few spare BTC (not bought but generated using my comp while I'm working - as fortunately I have a Radeon 5870 known as the best GPU for Bitcoin generating) so I'll play with them. The point that we disagree with each other is the final price of BTC. I don't believe in $1-$10 range. The project will either succeed or collapse totally and the price will be either >$100 or <$0.10. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 10th, 2011, 3:14pm on 06/10/11 at 15:08:47, UruramTururam wrote:
You are probably right that it will either succeed or collapse totally. The problem with the "succeed" scenario is that there is no stable price other than $0. Why $200 and not $2000? Since there is no stable price greater than zero, the price must eventually converge to zero. Mathematical proof. :) |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 10th, 2011, 3:22pm The price needs not to be stable to exist. it may well oscillate as prices of other goods (and currencies relative to each other). In fact it would slowly grow in such a case as Bitcoins are a limited resource (deflating) currency. But - wait! There is another stable situation: a total success of BTC would make all other currencies obsolete making their values expressed in BTC go to zero. :D |
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Title: Re: Bitcoin digital currency Post by Nazgand on Jun 10th, 2011, 4:33pm I think that american buyers will push the price to 25$ by selling when over, buying when under. I believe this will go on until the rest of the world's buying power is to high for americans to ignore(americans have a way of doing that). And yes, I do think this is the result of lower intelligence (https://www.facebook.com/l.php?u=http%3A%2F%2Feducationnext.org%2Fteaching-math-to-the-talented%2F&h=2b994).- After looking at the price in Euros' I suspect it will oscillate between 25USD and 20EUR. Perhaps I should restate the reason for my belief: round numbers. I remember people being quite excited when the year became 2000, simply because we use base 10. UruramTururam: I don't think that is how old currencies will fall. it will eventually come down to a currency that cannot easily inflate vs currencies that the governments purposely inflate. Which has more value? The relatively deflating one. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 10th, 2011, 11:47pm Nazgand, from looking at the fine-grained chart of MtGox trades, the price of a BitCoin fluctuated between $20 and $25 within fifteen minutes. It looks like 19:45-20:00 on June 10 UTC, if I am reading the chart correctly. Given that kind of volatility, I am thoroughly skeptical the price can stay for a significant time in the tight band you suggest. Round numbers do have a psychological impact, but other things (such as a perception of momentum) have a greater psychological impact. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 11th, 2011, 1:10pm I finally thought of a scenario for a stable BitCoin price other than $0. The number of BitCoins is small enough that an institution of moderate size could commit to buying them all, if necessary, to maintain a certain price. Say Organization X really, really likes BitCoins above all other means of settling payments. They agree to peg 1 BTC = $1, effectively buying the currency for $20,000,000 if everyone else loses faith. Of course, they won't have to spend that all; once other people believe in the peg, other people will become willing to hold some of the outstanding BTC. Organization X's backing then provides a stability and a confidence for vendors and customers to use BTC. What does OX get out of it? Well, maybe they trade in illegal drugs, and the value to them of having a convenient, untraceable way for customers to buy outweighs their one-time investment. This seems like a conceivable alternative to BitCoins taking over the world or collapsing to nothing. |
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Title: Re: Bitcoin digital currency Post by Nazgand on Jun 11th, 2011, 5:09pm Bitcoins are pseudonymous, not anonymous. All transactions in the history of bitcoin are visible by everyone; thus, if you do a transaction to someone who knows your name(or your mailing address), they could look at the history of the bitcoin address you are using, and the history of the bitcoins owned by that address. In this way, it is possible to figure out some of your activity by comparing the list of bitcoin addresses you buy from to a list of publicly announced bitcoin addresses. Another thing: if you pay using multiple bitcoin addresses, everyone will realize that they belong to the same person. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 12th, 2011, 12:27am on 06/10/11 at 14:53:04, Fritzlein wrote:
Well, that prediction took about thirty hours to prove false. BitCoins traded hands for $11 this evening on MtGox. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 12th, 2011, 2:26am Yes, we were wrong. Yet I'm glad to be wrong this time with 3.25 BTC produced on my comp (I plan to keep them for a few weeks and see what happens) and be right when to sell 7BTC I've bought. I had a good luck there. By the way I still believe in a raise later this week (around wed/thu). |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Jun 20th, 2011, 1:04am The story continues with the following events: * Last week a wallet file with several thousand BTC has been stolen from a user computer. * Yesterday a rich account at the MtGox trading site has been hacked and robbed. * Later yesterday the whole MtGox user database (including passwords) leaked and has been published. As a result the biggest active BTC market is bitomat with current price of 1BTC equal to 37zł which is about $13. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jun 20th, 2011, 1:00pm Ouch. It rather clouds the issue of the viability of BitCoins if the fault of the incidents lies with MtGox instead of with the underlying P2P software. Perhaps BitCoins per se will be judged on the merits of some other software. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Aug 17th, 2011, 12:31pm The recent market turmoil affected Bitcoin prices in a way that I totally wouldn't have expected. With U.S. debt downgraded and European countries on the brink of default, I would expect the rush away from fiat currencies (especially the dollar and euro) to accelerate, with one side effect (a small one among many large side effects) being a higher price for Bitcoins. But no, amidst the market panic Bitcoins plunged to touch $6 and then as markets calmed they recovered to touch $12. That is the opposite of what would happen if Bitcoins were truly viewed as a haven from unsound currencies. Apparently something else is driving the market, something different from that which supposedly gives Bitcoins value. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Aug 17th, 2011, 4:17pm It's probably viewed as highly risky and speculation-oriented good. Such goods behave that way. Nevertheless I've bought (again) 7 BTC for $7. :D Let's see if I win or lose this time. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Aug 17th, 2011, 9:41pm So you bought 7 BTC @ $7, just like last time? If the price again goes to $32 and you sell out at the peak, I am definitely going to ask to rent your crystal ball... |
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Title: Re: Bitcoin digital currency Post by Janzert on Aug 18th, 2011, 11:23am I would guess the recent bitcoin price fluctuations are more directly related to the series of bitcoin sites being hacked/running off with the coins than they are with external markets. At least that has been my thought as someone only moderately paying attention to the bitcoin community. Janzert |
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Title: Re: Bitcoin digital currency Post by omar on Aug 23rd, 2011, 7:30am I've been taking a bit of a vacation from Arimaa this summer and haven't been following the forum or events much. I'm dropping in to let everyone here know about a recent development in bitcoin. One of the bitcoin developers has started a fork of bitcoin called SolidCoin. There have been a few others that have tried forking bitcoin before, but they didn't really provide anything new and seemed to be attempts at profiting the developer by mining a lot of coins before releasing it. SolidCoin tries to fix some of the problems that have been noticed in bitcoin (for a full list see http://solidcoin.info) and the developer has mined only 30,000 coins before releasing it. And even those 30,000 coins are being used to promote the new currency by giving them away to people who tweet about it or become a merchant. I liked the approach this developer was taking and decided to support this variant of bitcoin by accepting it for Arimaa sets and books. Being one of the first merchants I didn't know what to value the currency at and decided to go with 1 SC = 1 USD. I got slammed with a bunch of orders and found out later that an exchanged had opened up that allowed converting bitcoins to SolidCoins and people were essentially able to buy 100 SC for 1 USD. I readjusted my price to 10 SC = 1 USD now and the orders have slowed down. So basically if you buy the Arimaa set or book using SC you can get it for 1/10th the USD price. I wanted to let everyone here know about this new digital currency because there might be another opportunity here if you think this variant will eventually become as popular as bitcoin. Maybe UT can pull out his crystal ball and give us some insight :-) Obviously you know I do think there is some upside to this since I'm offering the sets and books for a huge discount for payment in SC. I also converted some of the bitcoins I had to SC yesterday. The price was 0.0015 BTC = 1 SC, right now it is 0.0024 BTC = 1 SC. So at least for the time being I made a good move. https://scexchange.bitparking.com If you do decide to invest do so after your own evaluation of risk and not because I'm optimistic about it. There are still lots of things that can go wrong with these new currencies as they evolve and adjust. But if you make a killing from this tip, don't forget to contribute some to the prize fund :-) |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Aug 23rd, 2011, 8:42am on 08/23/11 at 07:30:11, omar wrote:
My crystal ball predicts that the future of all the BTC forks will be "glow and fade". Bitcoins are not perfect but they were there first so they would last longer. But for now it sounds well to convert BTC into SC and be prepared to convert them back soon(TM). |
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Title: Re: Bitcoin digital currency Post by Nazgand on Aug 23rd, 2011, 10:33am BTC could modify its protocol to incorporate the improvements SC made... The probably will need to to keep the currency popular; 10 minute blocks are too long. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Aug 23rd, 2011, 11:26am Without knowing any details, I find it strange to believe that SolidCoin will replace BitCoin because it is better, without also believing that SolidCoin itself will be replaced by something better next year. And if digital currencies become obsolete so fast, how exactly are they protecting us from traditional fiat currencies that might lose their value? Sure, there may be profits for those that get in on the ground floor, just like there are profits for those who get in on the ground floor of any Ponzi scheme that takes off. But any "money" that lacks some of the fundamentals of money (legal status, taxation authority), even if has some other fundamentals (accounting, controlled supply) is at base a Ponzi scheme. |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Aug 30th, 2011, 9:04am Crystal ball report: Last week I bought over 650SC for 2BTC. I've sold them today for about 9.5BTC. Nice gain. But it could have been much better if I had sold three days ago - it was over 20BTC then. I have to fix my clairvoyant device... |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Sep 9th, 2011, 7:55pm on 08/17/11 at 21:41:49, Fritzlein wrote:
Hmmm, BitCoins are now under $5. Will they ever see $7 again? Perhaps I'll stick with my Magic Eight Ball (http://8ball.tridelphia.net/). ;) |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Sep 10th, 2011, 8:05am We shall see, we shall see. :) Now I have about 14.5 BTC (After the SC trick) and I don't want to sell them. They make me interested in the whole business at least... By the way I wonder what happened to the guy who bought my first 7 coins. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Oct 8th, 2011, 9:06am Today Bitcoins are trading under $4 for the first time since May. Drawing a straight line on a log scale from the $32 peak to today suggests reaching $1 by the end of the year. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Oct 21st, 2011, 1:49pm Woah, I missed the recent crash to $2.50. UT, it's looking grim for a profit on your $7 BitCoins. Do you have a price point at which you will throw in the towel, like a good momentum trader, or will you hang on to them and hope? At some point it seems like cashing out isn't worth it any more, and it is better to keep the BitCoins you have as souvenirs. You are a coin collector, right? ;) |
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Title: Re: Bitcoin digital currency Post by UruramTururam on Oct 22nd, 2011, 3:43am All in all I'm ahead as I got more during the peak that I may lose now even if BTC drop to absolute zero. So, no, I don't want to sell the ones I got (there's about 14.5 of them after converting BTC->SC->BTC during the SC peak). What is interesting here - the high 'difficulty' rating shows that quite a lot of people still mine BTC even when their current gain is far below the electricity cost for BTC generating. As for collecting - yeah, right, but bitcoins do not feature platypuses (http://dziobaki.blogspot.com)... |
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Title: Re: Bitcoin digital currency Post by mistre on Nov 1st, 2011, 11:42am Interesting article on bitcoins. It might be worth buying at current levels in case another bubble forms. http://www.fool.com/investing/general/2011/11/01/following-a-1000000-gain-a-slow-motion-crash.aspx |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Nov 1st, 2011, 12:10pm on 11/01/11 at 11:42:51, mistre wrote:
Woah, hold on to your hats for some majorly shocking news: the lead developer of BitCoin is optimistic about the future of BitCoin! :P The article rightly points out that BitCoin only has a long-term future if people want to use it as a currency rather than using it as a way to speculate, hedge, gamble, or what have you. Will people actually start using BitCoins to buy and sell goods and services? It's a little disappointing that, since this dynamic is the key, the article only quotes the daily volume of BitCoins as currency trading. What is the daily volume of things other than money that are bought and sold for BitCoins? One might see buying BitCoins as a bet on whether BitCoins will take off as a currency, but to me it seems much more like a bet that you can induce a greater fool to buy in when you are bailing out. What makes $3 a good price (and/or what makes now a good time) for the latter bet? Is there some reason to expect an upsurge in enthusiasm or an influx of new buyers in the near future? The only reason I can think of is that pump and dump scams (http://www.online-stock-trading-guide.com/pump-and-dump.html) seem to rely on a broad perception that something that costs around $1 must be cheap. Maybe we unconsciously compare it to the price of most stocks that trade in double digits, or maybe we compare it to the price of a hamburger. Of course rationally nothing is cheap based on price alone, only based on price per value, but people are irrational. So the "penny stock" level might be a good price from which to stage an empty rally. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Nov 1st, 2011, 8:29pm It's also kind of amusing that the headline calls it a "slow-motion" crash. The decline is only slow compared to BitCoin's unbelievably meteoric rise. For anything else you would care to trade, a 90% decline in price over five months would qualify as abrupt. If you make it a straight line, it is like losing 1.5% of value per day every day including weekends. Stock, bond, commodity, or currency traders would be in hysterics after a couple of weeks of that, never mind five months! |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jan 4th, 2012, 10:25am on 10/08/11 at 09:06:10, Fritzlein wrote:
Once again, I predict wrong. After touching $2 mid-November, Bitcoins have rallied to end the year at $5. About the only correct call I have made with respect to Bitcoins is not to bet any money on what I expected to happen. :P on 11/01/11 at 11:42:51, mistre wrote:
Right you were. Buying on November 1 and selling on January 1 would have been a profit of more than 50% ($3.25/$5) excluding transaction costs. |
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Title: Re: Bitcoin digital currency Post by omar on Jan 8th, 2012, 3:37am It's hard to make predictions about bitcoin prices. However other aspects of bitcoin are easier to predict. For example the number of bitcoins in circulation at anytime in the future is predictable. There is an interesting relationship between the difficulty of producing bitcoins, the cost of producing bitcoins, and the market price of bitcoin. This relationship I think will cause it to have many bubbles. There is a direct linear relationship between the difficulty set by the bitcoin network and the energy cost to produce bitcoins. As price starts to go up while the difficulty is low, it encourages more miners to participate. As more miners participate the difficulty of producing bitcoins go up and thus the energy cost of producing bitcoins goes up. If the cost of producing bitcoins goes up the miners will not want to sell it below cost and so the market price of bitcoins goes up. This can cause a fairly rapid rise in price. At some point those who are speculating on bitcoin decide they want to take their profits and start selling bitcoins for prices less than what miners can afford to sell at. This causes a panic and miners also start selling off as well as pulling out from mining. This causes a fairly rapid decline in the market price. Even though the prices drop and it's less profitable to mine, the difficulty eventually drops to a point where it is profitable to mine again. Speculators notice that the price has hit bottom and start buying again; and the cycle repeats. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jan 8th, 2012, 11:43am Thanks for the description of the dynamic. on 01/08/12 at 03:37:16, omar wrote:
Except that the last step of the cycle (the repeating) might not happen :) |
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Title: Re: Bitcoin digital currency Post by omar on Jan 9th, 2012, 11:25am on 01/08/12 at 11:43:28, Fritzlein wrote:
True, there is no guarantee that it should happen, but I think the probability of speculators not triggering a rise in the market price is pretty low when the graphs looks like it has hit bottom and is stable. I think it's just human nature to think there is going to be a rise in the price again and want to buy them up now. Given enough time it is almost guaranteed to happen. But if the price did stay stable for a very long time then merchants and consumers would become more comfortable with using bitcoin as a medium of exchange. As more people start using bitcoin for real transactions the market price of bitcoin would have to go up since there is a limited supply. The probability of speculators not jumping in when there is a slow rising price would be even lower. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Jan 9th, 2012, 11:18pm on 01/09/12 at 11:25:53, omar wrote:
Is there any news on how much this is happening? Clearly this the "fundamental" aspect of Bitcoins, as opposed to the mining and the speculative trading. |
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Title: Re: Bitcoin digital currency Post by omar on Jan 11th, 2012, 12:58am on 01/09/12 at 23:18:26, Fritzlein wrote:
Here is a real time monitor of the transactions that are seen by nodes in the bitcoin network. http://www.bitcoinmonitor.com/ I'm not sure how they tell the difference between currency trades and regular transactions. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on May 13th, 2012, 11:14am Bitcoins have hovered around $5 for a couple of months. I expected them to go to $0, or maybe boom and bust again, but keeping a stable price was the last thing I expected. Sometimes I think the only reason reality exists is to prove my predictions wrong. :P |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Aug 8th, 2012, 4:56pm Woah, BitCoins have doubled since my last post, and are trading today at $11! Is it conceivable that they could recover and surpass their previous high? |
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Title: Re: Bitcoin digital currency Post by The_Jeh on Aug 22nd, 2012, 3:29pm FYI http://money.cnn.com/2012/08/22/technology/startups/bitcoin-debit-card/index.html?source=cnn_bin |
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Title: Re: Bitcoin digital currency Post by omar on Mar 2nd, 2013, 8:10am > There is an interesting relationship between the difficulty of producing bitcoins, the cost of producing bitcoins, and the market price of bitcoin. This relationship I think will cause it to have many bubbles. Here we go again. Bitcoin is headed for it's second major bubble. It will definitely be larger than the first. http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25zv |
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Title: Re: Bitcoin digital currency Post by supersamu on Mar 2nd, 2013, 9:04am Can someone shortsell bitcoin and how can I do it? |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Mar 3rd, 2013, 8:51am on 03/02/13 at 09:04:47, supersamu wrote:
Don't even think about it. As the saying goes, "The market can stay irrational longer than you can stay solvent." My grandfather sold short during the .com bubble, and he was right, it was a bubble that eventually popped. Unfortunately, he lost most of his life savings before the crash came. If you see a bubble, do stay away from it, but don't ever sell short. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Mar 23rd, 2013, 1:32pm If you had sold short at $33 on March 2, you would have taken a beating as it ran up to $75 on March 21. As much as I think the current run-up is unjustified, unsustainable, and insane, I'm sure glad I didn't bet any money against it. |
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Title: Re: Bitcoin digital currency Post by mistre on Apr 2nd, 2013, 9:47am Now selling at $108. http://arstechnica.com/business/2013/04/bitcoin-value-triples-in-a-month-to-all-time-high-of-more-than-100/ |
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Title: Re: Bitcoin digital currency Post by Janzert on Apr 12th, 2013, 12:35pm Looks like the latest bubble has burst with prices going from $266 to $75 in the past 3 days. Janzert |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Apr 13th, 2013, 11:15am But the "burst" price is still astronomical. And where is it going from there? |
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Title: Re: Bitcoin digital currency Post by Boo on May 1st, 2013, 2:03am Oh you can already spend bitcoins at the bar to buy a beer :) http://www.guardian.co.uk/technology/2013/apr/26/bitcoins-gain-currency-in-berlin (see video there) |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Nov 19th, 2013, 11:34am Boy have I been wrong about Bitcoins so far. Now trading at $720! on 01/09/12 at 11:25:53, omar wrote:
According to a Bloomberg article, speculation in Bitcoins still completely dominates their commercial use: Quote:
That article also had another bit of news that shocked me: China has taken over as the hottest market for bitcoins: Quote:
http://www.bloomberg.com/news/2013-11-19/bitcoin-gaining-validity-fuels-rally-in-virtual-currency-tech.html |
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Title: Re: Bitcoin digital currency Post by 99of9 on Feb 15th, 2014, 7:00am I guess arimaa points are the safest digital currency today ;) |
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Title: Re: Bitcoin digital currency Post by Arimabuff on Feb 17th, 2014, 1:17am I hear there has been a massive bitcoin robbery. It seems that it isn't a very safe currency after all. |
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Title: Re: Bitcoin digital currency Post by mistre on Feb 18th, 2014, 9:07am This appears to be an issue with Mt.gox and not bitcoin itself. http://www.businessinsider.com/mt-gox-2014-2 http://www.businessinsider.com/bitcoin-crashes-to-220-on-mtgox-2014-2 |
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Title: Re: Bitcoin digital currency Post by Janzert on Feb 18th, 2014, 10:17am My guess is Arimaabuff was refering to the supposed Silk Road 2 (http://www.nbcnews.com/tech/security/silk-road-pledges-pay-back-users-after-2-6-million-n32341) hack/theft. Of course when you're dealing in an anonymous black market of illegal goods I'm not sure what protections you really expect no matter the currency used. Janzert |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Feb 18th, 2014, 10:52am I understand that there was a technical issue with Mtgox, but is it really so bad that Bitcoins should trade at half off there? I see they are selling for $300 on MtGox and $600 on BitStamp. Why wouldn't I buy them for $300 and turn around and sell them for $600? This is the weirdest arbitrage opportunity I have ever seen. I can only assume that people who buy Bitcoins on MtGox are afraid they aren't actually getting what they pay for. |
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Title: Re: Bitcoin digital currency Post by Janzert on Feb 18th, 2014, 11:20am Currently, and for the past couple of weeks, nothing is getting out of mtgox. Not regular currencies, not bitcoin. Regular currencies haven't been getting out reliably since last summer. If you believe mtgox over this whole course this is simply due to a technical glitch that will be solved If you believe the popular rumors this is because mtgox is actually insolvent, has been since the US government seized all their funds in US accounts last summer (http://techcrunch.com/2013/08/23/feds-seize-another-2-1-million-from-mt-gox-adding-up-to-5-million/), and they finally also ran out of bitcoins to cover withdrawals of that as well. In either case any arbitrage opportunity at the moment is across time instead of directly between exchanges. Janzert |
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Title: Re: Bitcoin digital currency Post by mistre on Feb 25th, 2014, 8:43am More news on Mt. Gox today... looks like if you had bitcoins on Mt. Gox, you now have nothing to show for it... http://www.reuters.com/article/2014/02/25/us-mtgox-website-idUSBREA1O07920140225 http://www.usatoday.com/story/tech/2014/02/25/mt-gox-offline/5801093/ http://www.telegraph.co.uk/finance/currency/10659768/mtgox-down.html Also found this.... http://mattvukas.com/2014/02/24/breaking-mt-gox-dead-long-live-mt-gox/ very interesting. |
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Title: Re: Bitcoin digital currency Post by Janzert on Feb 28th, 2014, 10:43am And... Mt. Gox Files for Bankruptcy Protection (http://online.wsj.com/news/article_email/SB10001424052702303801304579410010379087576-lMyQjAxMTA0MDIwNzEyNDcyWj) Janzert |
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Title: Re: Bitcoin digital currency Post by omar on Mar 7th, 2014, 7:14am There was a Newsweek article yesterday claiming to have found Sathoshi Nakamoto, the mysterious creator of Bitcoin. http://mag.newsweek.com/2014/03/14/bitcoin-satoshi-nakamoto.html |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Mar 7th, 2014, 11:50am Clearly the Dorian Garay account was a pseudonym for Dorian S. Nakamoto. |
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Title: Re: Bitcoin digital currency Post by omar on Mar 7th, 2014, 1:07pm However, the real Sathoshi Nakamoto has spoken again after all these years and claims this guys is not him. But should you believe that :-) http://p2pfoundation.ning.com/forum/topic/listForContributor?user=0ye0gncqg772o |
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Title: Re: Bitcoin digital currency Post by Arimabuff on Mar 8th, 2014, 5:58am on 03/07/14 at 11:50:54, Fritzlein wrote:
Actually, that's an old account of mine. |
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Title: Re: Bitcoin digital currency Post by Fritzlein on Oct 4th, 2014, 2:38pm on 06/04/11 at 14:45:40, Fritzlein wrote:
Update on the price of silver: now $16.85 per ounce. If the price dropping in half is proof of a bubble, then I have almost been proven right for calling it a bubble at $29, even though it went to $48 in the interim. on 06/04/11 at 17:18:27, Fritzlein wrote:
I thought gold was a bubble at $1500 per ounce. It went over $1900 but today is back down to $1191. Since today's price is only 20% below where I called it a bubble, I haven't yet been proven correct, but I have hope. :-) on 08/23/11 at 07:30:11, omar wrote:
Update on SolidCoin: it was a bust that turned into a scam. If you bought and held for use value (as opposed to buying and selling for speculation) you now have nothing. And finally, an update on Bitcoins: today they are trading for $350 after trading for as much at $1150. By the rule of double/half, there have been multiple bubbles, but by any standard of prediction I have been completely wrong about Bitcoin. Yet despite my huge predctive failures, being correct about silver and becoming more correct about gold make me optimistic once again. I repeat my prediction that Bitcoin will go back below $1, and now I'll put a time frame on it: below $1 by 2020. |
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Title: Re: Bitcoin digital currency Post by aaaa on Oct 5th, 2014, 11:29pm If you're going to champion a cryptocurrency, why not one whose mining at least has (supposedly) useful side effects, like Primecoin? |
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Title: Re: Bitcoin digital currency Post by MarkStorke84 on Aug 26th, 2017, 7:55am Wow this is a one great topic ;) |
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Title: Re: Bitcoin digital currency Post by omar on Dec 10th, 2017, 1:21pm Only 6 and a half years after this thread began, bitcoin seems to be growing faster than ever. 99of9's prediction of bytecoin came true. There is now a coin called bytecoin. It will be interesting to see if Fritz prediction will come true: "I repeat my prediction that Bitcoin will go back below $1, and now I'll put a time frame on it: below $1 by 2020." I actually think there is a possibility for this to happen if another coin over takes bitcoin, pulling away the hashing power and causing bitcoin to go into a death spiral. I wouldn't rule out bitcoin going to zero, but there is also a chance that bitcoin would be trading at $1,000,000 by 2020. Bitcoin is so unpredictable and volatile. Which is probably why Wall Street is now launching futures contracts on bitcoin. Crazy thing is the contracts are cash settled, so neither the buyer or seller has to touch bitcoin and more bitcoin can be traded than there are bitcoin. Pretty soon the futures contract daily volume is going to be many times more than the 16 million bitcoins already mined. So much for not double spending bitcoin :-) http://bitcoinandtheblockchain.blogspot.ca/2017/08/chain-death-spiral-fatal-bitcoin.html https://www.theguardian.com/technology/2017/dec/10/traders-brace-for-bitcoin-futures-launch-after-wild-week-for-currency-chicago-board-options-exchange Bitcoin is not without its conspiracy theories either. In 1988 The Economist magazine published an article titled "Get Ready for a World Currency". The cover of the magazine shows a Pheonix wearing a gold medallion around its neck and all the fiat currencies of the world burning up below its feet. The gold medallion has a date of 2018. The article basically says that national currencies are a hindrance to globalization and it would be better to have a single currency used all over the world. The article goes on to say that nation states will not want to give up the power to issue their own currencies and so there should be a period during which the global currency is used along side the national currencies and the people are allowed to vote with their wallets ;-) It gets more interesting when you look at who owns The Economist magazine. http://www.zerohedge.com/news/2017-07-09/economist-get-ready-world-currency-2018 https://en.wikipedia.org/wiki/The_Economist Bitcoin has also had a time traveler from 2025 return to the year 2013 to warn people to stay away from bitcoin. His prediction that bitcoin would hit $10,000 in 2017 has come true. It will be interesting to see if his predictions for 2019 and 2021 will also come true. https://www.reddit.com/r/Bitcoin/comments/1lfobc/i_am_a_timetraveler_from_the_future_here_to_beg/ |
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