Posted on 01/15/2014 8:01:05 AM PST by SeekAndFind
The big online retailer Overstock.com now accepts payment in Bitcoin. That's good news for lovers of liberty because Bitcoins give us an alternative to government-controlled money. Bitcoins are a currency created by anonymous, private tech nerds, not by government.
Governments don't like competition, and our government sometimes bans competing currencies. But as more of us use Bitcoins, and more businesses accept payment in Bitcoin, it becomes harder for government to dismiss the currency as illegitimate, or ban it.
There are two advantages to Bitcoin.
First, it's harder to trace transactions back to people who make trades. I don't particularly care about that, because at the moment, I don't hide anything from my government.
But I do fear government destroying the value of my dollars by printing more of them, the way governments in Germany before World War II and in Zimbabwe in recent decades did, forcing people to make trades using wheelbarrows of nearly worthless bills. Given how my government spends money, and the way the Fed enables this by buying trillions in government bonds, I fear my dollars may someday be worth pennies. So I bought Bitcoins.
Bitcoins are digitally created -- or "mined" -- at a slow, fairly predictable rate. An incomprehensible (incomprehensible to me, anyway) computer algorithm limits their number.
"Bitcoins are not controlled by anybody," explained Mercatus Center senior research fellow Jerry Brito on my TV show. "It's a new Internet protocol, like email or the Web ... a digital, decentralized currency that allows you to exchange money with anybody in the world fast and cheaply without the use of a third party like PayPal or Visa or MasterCard."
I bought Bitcoins even though I don't understand how Bitcoin mining works. I also worry that someone will hack into my Bitcoin account and steal my money, or maybe hack into the whole system and devalue Bitcoins by creating millions of new ones.
But risky as this new currency may be, I still trust it more than I trust politicians. When my fellow baby boomers demand our promised Medicare payments and discover that government promised trillions more in benefits than it can ever pay for, I assume politicians will print dollars until they are nearly worthless.
So, I put my savings into Bitcoins when they sold for $140 each. I was late to buy -- smarter people bought for much less. But today each Bitcoin is worth more than $800. So, yippee for me! I'm so glad I put all my savings into Bitcoins.
OK, I didn't really. It's just (SET ITAL) part (END ITAL) of my savings -- but it's good to hedge against political venality!
The biggest risk to private currencies may be that governments will become jealous of how well these upstart forms of money work. If people all over the world decide to trade in digital currencies, it will become more obvious than ever that government isn't what makes economic activity happen.
It will also be harder to trace -- and tax -- people's economic activity. Government doesn't like to get sidelined. To its credit, the German government announced that it recognizes Bitcoin as a legal alternate currency.
The U.S. government flexed its muscles by warning that it has the right to regulate Bitcoin transactions. The FBI already shut down a website called Silk Road that accepted Bitcoins as pay for services both legal and illegal (like drugs). Sen. Chuck Schumer, D-N.Y., called Bitcoin "money laundering" and demanded a crackdown. That's not surprising, since Schumer wants to ban lots of useful things, like energy drinks, high-frequency stock trading, free-market wages and 3-D printers that can make guns.
So I'm glad Overstock.com and other businesses are out there, reminding people that law-abiding citizens use Bitcoins to buy legal things. Last month, I used them to buy Christmas gifts.
But Bitcoin's legitimacy shouldn't depend on whether people do things with it that politicians consider wholesome. When government restricts drugs, online gambling and other popular activities, it just makes anonymous, hard-to-trace currencies more popular.
I am likely doing a poor job of describing the problem with bitcoin that is so similar to all the other "barter" systems. Barter, in general, is loosely understood as any mechanism for which value given and value received is conducted without the use of US currency. Thus, bitcoin is going to turn into a barter system whether the purists wish to designate it otherwise, or not.
Further, you say that there is essentially no way that any individual/group may create a bitcoin out of thin air, thereby "filling their account" (or issuing chits to themselves). Famous last words, my FRiend. Kids can hack NASA, and they can hack bitcoin. Watch for the next few months and ask, "any counterfeits in the system?" That is what barter does...it amplifies the opportunity for counterfeit because the foxes own the henhouse.
But, go ahead and buy into it. When the crash from volatility sets this thing to $ 50 per bitcoin, down from $ 970 (okay, I was admittedly wrong about $ 1700), then notice how many squeal because it won't translate into the US$ they gave up.
Thanks for the clarification. The Bitcoin economy is by your definition a barter economy as users are already exchanging value using it outside the USD. No going to be about it.
We’ll see about the script kiddies being able to break the Bitcoin system. While I don’t know every jot and tittle I have a good understanding of the system and it looks solid so far (I’m a programmer).
You indicated upthread that you don’t see the point of Bitcoin. Personally, my interest is in a secure payment system where I don’t have to expose my banking and id information to theft. Having the transaction be cheaper is a plus, though it may not be any cheaper once most of the bitcoin are produced. I would much rather see a stable price so I can transact without the downside risk. So if it falls to $50 and stays stable at that, I’m good.
FRegards,
Database
No argument there. Enjoy your work and your depreciating dollars.
Got it. So it’s like a stock, there was an “IPO” of sorts, and now people are just trading on faith that there will be value when they want to sell.
But someone had to get the real money for the first set of bitcoins sold. Unless they just gave them away.
I guess it could work. For a while. Until there is a scare like a security breach or something that causes everyone to want to sell at the same time and the faith is diminished.
I am not trying to be a downer here, but it all seems sketchy to me. Honestly, I don’t see the point.
Try this explanation: http://www.coindesk.com/bitcoin-explained-five-year-old/
Let me help with that... "So if it falls to one pair of mediocre shoes or a half hour of plumbing and stays stable at that, I'm good..." Weren't we supposed to rid ourselves of that pesky US$???
Yes, if I can go out and do an hour of plumbing for 2 BTC and then by a pair of work boots shipped to my door for that 2 BTC without exposing my banking and personal id info, I’m fine.
Excerpted from an article just now appearing on Yahoo Finance. Sounds promising if you immediately convert to US$. Wait...hmmmm.
That merchants have a way to accept bitcoin that mitigates downside risk is great news for someone like me as it means adoption is on the way, not as a replacement for the dollar, but as a useful mechanism and medium of exchange. I’ll be able to use a convenient and secure method to make my payments. Widespread adoption should flatten out the price fluctuations eventually, though it will likely mean increases in the USD/BTC exchange rate in the short term.
This is exactly what I have been saying. If it is not a replacement, if you stay in the US$ economy, then you are just adding an layer of activity, but accomplishing nothing substantive. And, all of the risks of piracy, counterfeits, padding of accounts by hackers (or miners) is still right there alongside your disdain for the US$. I wish you well, but this is just not for me.
You don’t see anything “substantive,” but others seem to value what the technology accomplishes. I value improved security relative to other electronic transaction mechanisms, merchants value reduced costs relative to the same. We’ll see where is goes.
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