There is a bitcoin craze at the moment, with prices of bitcoin skyrocketing. Bitcoin is still far from ready for prime time, but as it matures, it will change society’s fundamental operations much more than the Internet did. The net, after all, only allowed people to talk and shop more efficiently. By comparison, bitcoin eradicates the government’s ability to operate.
Let’s begin by looking at what a bitcoin is. It is money. It is a new form of money that isn’t issued by a government. Governments don’t have a monopoly on coming up with things you can trade and barter with, and bitcoin is one such non-governmental barter instrument. The difference between bitcoin and all other such tokens of value that have been invented over the years is that nobody is in control of the money supply, and nobody is in control of the money flow. This means that nobody can start the printing presses to eradicate your savings, and nobody can seize or see your wealth or income. You can think of it as an open-source currency compared to proprietary, state-issued currencies.
There is no central bank. This is a revolutionary concept. People can trade cash at a distance without going through an intermediary. The first time you send the value of a cup of coffee to a friend in India on a Sunday, without any transaction fees, and they have the money instantly, without anybody but you knowing of the transaction, your jaw drops.
This would have been but a curiosity, if it weren’t for the ridiculously strong business case to cut banks and credit card processors out of the sales loop for corporations, which could roughly double the profits in retail sales. This means that there’s a very strong force for universal uptake of this new currency.
As nobody is in control of the money supply (it is set to grow predictably at a slowing rate until 2140), and demand increases with a limited supply, the price for each bitcoin increases. This is what we’re seeing now, as more and more people realize bitcoin’s business potential. Also, there is value in the concept that you don’t have to trust any single person to store or to transfer bitcoin – not your government, not your bank, not Western Union – is something completely new.
Erik Voorhees writes, “Bitcoin is thus the only currency and money system in the world which has no counter-party risk to hold and to transfer. This is absolutely revolutionary and you should read the preceding sentence again. […] Never in the history of the world has an individual had this ability. It is unprecedented.”
So why does bitcoin have value? How is it, strictly speaking, money? People who ask this tend to be stuck in the idea that only states and governments can issue money, but that’s not the case. What we see as money has changed many times, and when Marco Polo came back to Europe from China in the 13th century, people were mocking him for bringing home banknotes. “This is not money”, they would say, and burn the Chinese banknotes. Money was coins. If you dismiss bitcoin just because you’re not used to seeing sequences of rare prime numbers as money, make sure you’re not scoffing at banknotes as people were in the 13th century. If people use it as money to trade, it’s money.
Jon Matonis has an excellent piece over at Forbes where he challenges the notion that money must be state-issued, and explains that a transactional currency can compete on its own merits and its own market.
It is important to realize that while the Internet has changed life in the IT industry tremendously, from a government standpoint, the net hasn’t changed much at all. If anything, it has reinforced existing structures: consumers spend their state-issued money more efficiently, credit is borrowed more and better from state-regulated banks which expands the money supply and keeps people happy, and it has created new industries that can fuel the economy. Oh, and it also lets citizens submit governmental forms more efficiently.
The only flip side to the net, from a government angle, would be that some people use the Internet to violate state-issued monopolies on entertainment distribution, which has been seen as a problem that needs to be dealt with swiftly and harshly, but other than that, the internet really isn’t much new from a government standpoint. Think about that the next time you see a politician who doesn’t appear to get the net: for them, if they’ve been in government too long, there is nothing much to get.
So we essentially have four different types of players that keep the economy going, and by extension, the government funded and operational. One, there is the government itself, which issues money and regulates banks. (For this exercise, I include the central bank in “government”.) Two, there are commercial banks which are in complete control of the money flow, in exchange for sharing that insight with the government and letting it siphon off as much as it likes to operate itself. Also, commercial banks expand the money supply when people ask for credit, so credit is good as the economy is measured today (“growth”). At the bottom of the food chain are, three, corporations which are tasked with using this system, running all its operations through these banks, and four, the ordinary citizen, who is supposed to be doing actual work and actually produce something that fuels the entire ecosystem.
What bitcoin does is cut the banks out of the loop, and by extension, the government’s ability to operate.
Those wars you have seen on TV? They are all fueled by this mechanism – the ability for banks to keep people happy in letting them spend imaginary money, while simultaneously giving the nation-state the ability to control as much of the money flow as it likes (and siphon as much as it likes off for itself).
Now, bitcoin isn’t going to drive its adoption just because it is impervious to state control and insight. Rather, its adoption is going to be driven by the strong business case for corporations to cut banks out of the loop – more specifically, cut bank profits out of their own profits.
The normal reaction for a government would be to use its entire arsenal of force against any phenomenon that threatens the government’s ability to function to this degree. But bitcoin is resilient to that. There is no central point to shut down. You can’t point a gun at a prime number and expect things to change. And we all know how effective governmental attempts to shut down peer-to-peer networks have been (even if it has been a low-priority issue so far that they haven’t really cared about).
A while back, I wrote that bitcoin is “The Napster of banking”. Perhaps there is a better analogy – perhaps it is the Skynet of banking. There is no central mainframe to shut down, and the intelligence in bitcoin is completely distributed with the single goal of obsoleting central banking.
In this regard, people at Business Insider who compare the bitcoin trade and its current price spike with the bubble around Beanie Babies in the early century come across as dangerously shortsighted and ignorant. Bitcoin is not a plush toy, it is not a commodity. It is an economic agreement, and as such, has value like any other contract that improves your business. This particular contract improves every business except banks.
So is bitcoin ready to take over the world? Far from it.
There are many problems with bitcoin today, but they are becoming less severe than the problems that plagued it one, two, and three years ago. In short, we’re seeing kinks being worked out, scratches being polished, and dents being straightened. But there are many reasons why bitcoin couldn’t take the place of state-issued money today, even if it is on a strong trajectory to do so in the next decade or decades.
The liquidity to state-issued money is one thing that strikes me immediately. In any economy, you need bridges between payment systems that are in use. Today, the vast majority of such bridging is handled by a Japanese bitcoin exchange known as MtGox. This is an unacceptable single point of failure in an ecosystem (proven by two hours of outage today). Further, lags of 10 minutes are common with MtGox’s trading engine (I’m seeing 400 seconds of lag right as I type this), which is just ridiculous when the financial world at large is dealing with micro- and nanosecond trading.
Bitcoin is getting there. But it’s not there yet. When it gets there, expect governments to panic and society to be reshaped into something where governments cannot rely on taxing income nor wealth for running their operations.
That is a bigger change to society’s fundamental structure than the ability to seek and share culture and knowledge we got with the net.
Very insightful paper, as always. I long to see where this goes …
BITCOIN IS NOT BARTER. To barter, you exchange production for production or labor for production. There are only two possible economic systems; barter and slavery. God commanded a barter system: “Thou shalt not steal.” The Constitutiion mandates a barter system of gold and silver coins, Art.1, Sec.10. Bitcoin is not production. God promised long life if we refrained from cheating others with false weights or measures. De. 25:3-15. Everybody is cheating others with weightless credit. The Fed twice said their system ‘works 9us) only with credit.’
best parody ever! You win the award, 1 tulip. Enough to buy a house, right now, I hear.
Well, you could always lock your money away in a bank and wait for the bank guys to gamble it away and to have you pay it with your tax money when the bank guys get bailed out by the govt. Does that feel like a more secure investment? hmm..
Tulips are obviously not limited. Bitcoins are limited to 21 million. To print more or to counterfeit bitcoins, you would have to fool over 51% of the computers in charge of verifying the blockchain at the same time. Good luck with that. By the way, I was like you in 2011. I read a slashdot article and dismissed bitcoin. I scoffed “A DIGITAL currency? That’s just what we need” and ignored it until last month. I finally gave it the research it deserved.
Who do you think butterfly labs sold stuff to before they got into the bitcoin asic market?
51% of the block chain in BFL asics would be about half of what it cost to the NSA to buy a new cray machine
And yet the hardware companies could probably hoard hardware and choose only to sell a fraction of all devices they produce to the NSA..?
BFL still doesn’t have a confirmed working ASIC device, one should be careful naming them as players in the asic field.
Research it deserved ? Have you been involved with business equal to say “bit coin is going to be driven by the strong business case for corporations to cut banks out of the loop” ? WTF? I was in the beginning with bit coin and have quit not become a follower. It’s not a tulip like idiots would say, but it’s surely not the future like even bigger idiots wold say. Hang up the lazy alternatives to current messes with others that have no future so the same reasons the ones we use today are broken and go add value to change the world. I’ve built price aggregators and seen greed in high places and with newbies that promise in the beginning to be “good boys”. Are you kindling me when you think a pot smoking hippie server admin and his 51% will be better in the end than the FED? Really? Our problem today are people just like that yesterday. What a joke I even spend this much time telling you how stupid this is. Think about it and turn your brains on!
You only need 2 countries/big instances trying to get the 51% and they already are doomed to fail…
You can’t print more or counterfeit bitcoins EVEN if you control over 51% of the network’s processing power. You would create a hard fork of the blockchain and your fake bitcoins would never be accepted by any honest node – they wouldn’t ever make it to the honest chain and would be practically worthless.
You can’t print more or counterfeit bitcoins EVEN if you control over 51% of the network’s processing power. You would create a hard fork of the blockchain and your fake bitcoins would never be accepted by any honest node – they wouldn’t ever make it to the honest chain and would be practically worthless.
Poorly trolled. If you don’t like Bitcoin, don’t participate. No-one is forcing you to use Bitcoins, which is more than can be said about national fiat currencies.
I am happy at the fact that people refer to previous speculative bubbles in current events~~
Great article, thanks! I was just thinking it would be cool to hear a story of the first person that lives their life off of bitcoin.
What is interesting about it, is that everyone invested in it only wants it to do better, so they talk highly of it. Even the mainstream media is all over Bitcoin. This is undoubtably helping with it’s viral growth.
I’m in the midst of writing an econometrics research paper on Bitcoin, I think you’d be interested in it. If you’d like I could send it your way when I’m done.
It sounds like your research is barely begun.
“I was just thinking it would be cool to hear a story of the first person that lives their life off of bitcoin.”
Look up the User ID of a guy called ‘Plato’, on bitcointalk.org. He published an on-going diary about exactly that. Maybe 2 – 2 1/2 years ago?
People write surreal fiction all the time.
It’s very early in the Bitcoin economy. There will likely be some who will live, and live well over these early days, but they must also spend at least some, not just hoarding their BTC!! Remember that Bitcoin is a CHOICE which contains inherent value as part of having made such! Sacrifice will be required now. This economy must function enough to further encourage expansion, and there must be more exchanges to come to offer real competition to the smiley-faced “we will do you better!” sloggishness of MtGox who still don’t “get” that Americans and most others are very snarky and among the most impatient on the globe, having been bombarded with advertising since conception, possessing the attention span duration of a goldfish in MOST opportunities.
Hi there, I have been thinking of doing my MA thesis on bitcoin for quite some time now with an econometric approach. Are there any tips you could give me regarding starting points for background research? I would love to read your paper once you’ve finished.
I’ve been behind on this “bitcoin” issue. Thank you for the thorough analysis. It sounds like it’s just a bit too early to be hopeful that somehow we can cut out the megabanks and a runaway government that largely spends its money however it wants (such as bailing out said banks and dropping an estimated $6 trillion on Iraq after it’s all said and done), but the idea of putting the currency back in the hands of the people without taking on the risks and debts of our largest financial institutions sounds promising.
I will admit to an immense curiosity about how the future of BitCoins will play out, primarily because ~10% of the total number of bitcoins (1-1.5 million) are (likely) in the hands of the creator(s) of bitcoins at the moment. That makes for a pretty big question mark about what would happen if the market was suddenly flooded with those coins. Assuming that he’s smart about it, they could live indefinitely off that money – but if it became widespread, then holding 10% of the total currency would be quite an interesting proposition…
Bitcoins being essentially a more efficient communal fiat currency, I would argue that banks, states, governments, and the like have a solid investment in the maintenance of the status quo for it’s people, be it good or bad. With bitcoins, there is no overall regulation, ergo, the responsibility falls on a lot of individuals to act responsibly. If the holder of the first 1 million or so bitcoins unleashed 500,000 bitcoins into circulation immediately, the market price would plummet, they could use another currency buy up a much higher number of bitcoins, and control progressively larger shares of the market, shrinking the availability of coins for others, and build their own wealth through exploiting the lack of overall regulation. Eventually, you do a giant pump and dump and make a fortune and walk away rich, crashing the market for all others. Eventually it might rebuild, eventually it might not, but it would have an incredible ripple effect across the world as a whole as a huge amount of money is extracted from other countries around the world. As the overall value of bitcoins is only at $100, it’s not at the point where 1 million of them could have a huge effect, but what happens when bitcoins hit $1000? What happens when someone puts a run on a country through economic pressure on their currency from Bitcoin market fixing?
It’s a very, very interesting world…
(PS: Still looking forward to seeing your BH EU keynote – waiting on the videos)
The bitcoin supply is not in the control of the creators. The currency is created/ generated by bitcoin ‘miners’ which are computers that calculate the transactions in units called ‘blocks’.
There is zero central control in this!
Reverbe, a bit naive, eh! Of course the people behind Bitcoin are in posseion of a large quantity of BC.
I rather have those people possessing a large quantity of capital than HSBC sponsoring illegal drug cartels in Mexico. Seriously, can it get any worse than the current financial system? Yes, it can, as the current financial system will completely collapse in the forthcoming year.
OK Datavetaren you don¨t like HSBC because they according to you support the Mexican Drug Cartels, but you do support BitCoin which helps the same cartlels and which probably can make them richer.
1.1 milion bitcoins, approximately 10% of all bitcoins mined to date, were mined in the first nine months of bitcoins existence.
2.1 million bitcoins, 10% of all bitcoins that will ever exist, were mined in the first 13 months.
Actually I’d like to ask for Rick’s response to that, which is a major “negative” that anti-bitcoiners highlight.
How is it acceptable that “the first ones” hold millions of BTC if/when price goes >$1000 or 10,000 ?
How is it acceptable that government and banks at all levels get to create money and will and charge everyone else for it?
With any kind of desirable natural resource or gizmo, the producers have the advantage.
“How is it acceptable that people who bought AAPL stock when it was $9 a share now have $430 a share??”
Because they took a risk, and they were rewarded for it.
The answer is that it is none of your business, and at any rate, bitcoin is priced by people, so essentially you’re arguing that people are valuing bitcoin at immorally high levels.
So, keep your stupid moral precepts off my currency (your religion, whatever it is, is stupid) and STFU. Thanks.
Jim you win the Greedy Bstrd of the month award, Congrats! I think..
The first adopters risked time, money on mining and money on buying BTC. Why should the people that risked capital on microsoft in the 70s have done so well? well its because they risked time or money on something that could have failed.
The government can turn off the Internet at will. That will stop bitcoin.
Actually bitcoins would revive the second the internet opens again. The only problem closing the internet would cause would be inability to check for double-spending. So if push comes to shove – just don’t expect a payment to have come through before the internet is up again and all nodes can report received payments.
How long is that possible without wrecking too much?
Sure, but it will also stop all systems that the government uses for its purposes, which will cost more than having bitcoin running.
well presumably ONE government COULD shut down the internet.
but there are many governments and not ALL governments would do it which means … it will survive. My first BTC came from Norway and argentina according to the blockchain…. in little tiny parts. IF the USA shut down the internet.
They would also shut down nearly ALL US dollar business transactions which use this network as well and nearly ALL CREDIT TRANSACTIONS in dollars would crash to a halt as well. What do you think would happen in Los Angeles on such a day?
It would be like a nuclear war. Even the toilets would stop working.
That train has left the station. Turning off the net will also kill the economy.
The question regarding shutting down the entire Internet: Will people calmly stay indoors when this happens? 🙂
You know the answer to this one.
I’s not exactly like quietly removing every citizen’s right to privacy in their communication. Shutting down the internet actually threatens the “Bread and Games”.
Facebook, Twitter, Youtube and Icanhascheezeburger. Gone?
That will indeed make the common citizen go out and vote with their fist.
To underscore that, SOPA and PIPA managed to get themselves buried mainly because their perceived threat to the social networks…
And when the twinkie was set to vanish, millions of americans picketed Wal-mart and psychologists actually coined the term “Twinkie Withdrawal Syndrome” for a new traumatic stress disorder.
The problem is mainly that in our body politic the average western leader assumes by now he can get away with anything, forgetting that the vast herd of voters will react – instantly and violently – as soon as they perceive a threat as having moved into their own living rooms. Up until that point they don’t really think about the fact that someone just quietly abolished their right to a private life.
The clever dictator assumes as much which is why such a one rules through heavy-handed fear or by ensuring the cage in which the citizens are kept is gilded enough for the majority.
In 2011 Mubarak shut down the internet during the Egyptian Revolution. This backfired on him as people left their homes in droves to see what was happening in the streets. Before they were content following events on Facebook. Don’t underestimate the power of the internet!
Are you sure? It might cause trouble on a never before seen scale, web-based companies going out of business, banks having to revert to older technology and everything, but is it worse than close-to-100% Bitcoin adoption, from the governments’ point of view? Remember the big banks’ influence over governments.
Also, they could respond by total surveillence no matter the cost and complaints, prohibiting or circumventing anonymizers and making Bitcoin usage punishable by at least a decade in prison.
When it comes to the big banks and the USA i don’t think those options are beyond their capabilities. They could even threaten countries that doesn’t follow their orders with war, as the USA is the most heavily armed nation on the planet.
An animal is most dangerous when it is cornered. That goes for people too, including very, VERY powerful people.
I would ALMOST not be suprised if either the web went down permanently, or sending the wrong bits over the web means a SWAT team arrives at your location within half an hour, sometime in the not extremely far future.
I am pretty certain that they will try to stop Bitcoin, and try much harder than they do with piracy. Piracy is a nuisance when the copyright industry nags at them to stop it, Bitcoin is a threat to their existence, or at least to their way of working.
Unfortunately… I believe in this scenario as well. Bitcoin will be banned, sooner or later.
Klas Katt:
it can’t be banned
it could be outlawed, but prohibition doesn’t work if people really want it
I agree with a ban scenario, many governments and factions will have a common interest in banning it.
First shot will be in the propaganda wars of various regimes. Bitcoin users will get branded terrorists, money launderors, tax evading rich, etc… by many government and ruling factions.
A Terrorist/criminal lable will bring in the right wing nuts to support the ban. A evil tax evading rich bastard lable will bring in the lefties. Boom a coalition of common interests is formed. Bans, enforcement mechinisms and informant networks go into place.
By far the most useful mechanism will be the informant network. The IRS gets more $$ out of disgruntled employess, jealous or disgruntled neighbors and ex spouses than all their data mining efforts.
“Are you sure? It might cause trouble on a never before seen scale, web-based companies going out of business, banks having to revert to older technology and everything, but is it worse than close-to-100% Bitcoin adoption, from the governments’ point of view? “
Irrelevant.
No western government will actively close down the internet and ruin online banking and international business. That means bitcoin becomes a fait accompli to which existing society will have to adapt.
And here’s the clincher. Some banks indeed stand to lose but others stand to gain. Government is actually the only party unable to gain much from bitcoin.
What is “the government” going to shut down? Backbone routers? Every bloody device capable of transmitting and receiving TCP? Even wireless ones?
Bitcoin can function even with only a tiny fraction of today’s bandwidth available. It is not very bandwidth hungry, compared to all the other stuff people are used to consume via their TCP devices. AND, by the time BTC is a big enough threat for someone to want to “shut down the internet” over it, it will be plenty economically significant enough to warrant a rather pure P to P wireless “internet.”
Heck, wouldn’t that be an even worse outcome for government? At least with a common backbone, they have a few common points to insert their probes if they want to spy on people. If they encourage people to route around those, they’ll lose even more of their power.
1. Which government? Bitcoin will survive awesomely without the USA for a few months.
2. Never heard of Mesh Networking?
We’ll be our own ISPs via mesh networks by the time the governments of the world feel that Bitcoin is a threat… In fact I hope they do try it… I want us to get rid of this Orwellian internet model and get to a truly free internet asap.
Bit Coin is very much like a Cell Phone…extremely GRID DEPENDENT; it seems therefore, that Bit Coin should be used like a Cell Phone (i.e., portability, mobility, availability, etc.). Otherwise, why not just stick with Precious Metals?
Let’s leave the governments potential technological attempts to destroy BitCoin aside for a minute.
Aren’t we all forgetting that by its ability to demand taxes from us, any government can still force us to use their currency? Indeed, income tax might be very difficult, but what about a simple flat tax? Plus sales tax and property tax on your house…
Wouldn’t we all still be forced to sell our work/products still in the government’s currency just to be able to pay our taxes?
Governments tax you on things like sales, income, etc. If you are doing all of that in bitcoin, they don’t *know* that you are doing it. So, yes, they demand taxes in USD… but if there is no economic activity that they can trace, they don’t know how much tax to charge you.
This would not be true of something like property tax, so you’d probably have to change some bitcoins into USD to pay that, but by that time you’re paying way, way less in taxes than they want.
Your view might be too optimistic?
> you’d probably have to change some bitcoins into USD
You’re conveniently overlooking the question WHERE this exchange takes place. A bank? This might end up in sth like this: “We’re sorry to inform you we don’t accept BitCoins. But we’ll gladly offer you a loan with your house as mortgage, so that you can pay your taxes. Oh and interest payments are only accepted in USD of course.”
Seems to me that there really is some legislative power needed to solve this problem.
Uhh, you can already buy and sell bitcoins online from multiple exchanges in multiple countries with multiple currencies.
If governments can define laws of VAT for selling business in dollars, then it can define laws of VAT in Bitcoins. What is the difference?
The merchant can decide not to declare transactions from goods traded for bitcoins, but then they will may get prosecuted.
It is easier to trace transactions in bitcoins than in dollars.
not true. you can make BTC impossible to trace.
Think further about the property tax…
US real estate taxes are state and local taxes with municipal-level collections. People will continue to use USD for real estate transactions for as long as they care about whether cops will treat them like homeowners instead of squatters.
Taxpayers are extinct! It is not possible to pay taxes with credit. The feral (sic) Reserve said their system of plunder “works (us) only with credit” Federal Reserve Bank, NY Taxation is an illusion that regulates our use of credit. In 1920, economist, John Maynard Keynes wrote: “If governments should refrain from regulation (many ways) the worthlessness of the money becomes apparent and the fraud upon the public can be concealed no longer.”–The Economic Consequences Of The Peace. There are just 2 possible economic systems; barter and slavery. God commanded a barter system: “Thou shalt not steal” and the Constitution mandates a barter system of gold and silver coins, Art.1, Sec.10
When all of the world’s problems are made possible with paper tokens that the first users get without limit for nothing, a solution to the world’s problems cannot include paper tokens that the first users get with unlimited amounts for nothing. Those who tout such tokens are fictional reserve fanatics who think they are against fractional reserve banking. They are mentioned in James 1:8 : “a double minded man is unstable in all of his ways.” Get acqainted with the author of “Money”, The Greatest Hoax On Earth; Merrill Jenkins, Monetary Realist (1919-1979) to see what others think of him today, google: “merrill jenkins” money You will find his book on Amazon.com
The government can impose taxes, but its ability to enforce them is limited.
If the cost to enforce taxes is greater than the tax revenue, the government have no other choice than downsize and reduce its demand.
If people refuse to be paid in fiat but prefer Bitcoin, the value of fiat plummet and with it the ability of the government to enforce its will.
Even if the government was able to enforce its will on the people, the individuals able to escape its control and use Bitcoin would be the most successful, wealthy, rich.
Ekliptor: The most suitable way for government to tax the people in the post-bitcoin society, is using Georgism and land-value-tax. Preferably using a land/natural-resource-based currency, used just for this purpose and as a compliment to the bit-coins.
This school of economics (Georgism) is experiencing a renaissance right now, and for good reasons! Check it out! There are lots of information about this to be found.
> If you dismiss bitcoin just because you’re not used to seeing sequences of rare prime numbers as money
Bitcoin has very little to do with prime numbers.
Rare prime numbers would incidentally make very bad money, because they can easily be copied.
Indeed – it was my way of simplifying the cryptography behind it when writing for a general audience.
But Rick, you don’t simplify by making it *wrong*! Bad strategy.
The general audience IS used to seeing account numbers (for traditional banks). I know you were looking for the right words in that spot to say that it doesn’t look like the money that they are used to.
Maybe you could have said it doesn’t look like money because you can’t usually touch and feel it like coins and paper, and your account number contains letters and is super long, and you are trusting anyone, yet no one (P2P) to track the account balances.
OK, you’re right – simplifying for the general public is a tough problem.
As always, great article though!
Well, people don’t bother too much with trying to understand ordinary electronic bank and credit card transactions over the internet which also involve a lot of advanced cryptography. Maybe explaining the details to everyone would not be necessary.
Where is the value if anyone can do this?
What’s to stop Betcoins, Botcoins, Butcoins, Johncoins Jillcoins….?
If I use the same, or some other math algorithm, to create a currency in my network of vaults, will I need 150 of my new Putincoins to exchange for 1 Bitcoin?
Sure, you can create your own version of Jillcoins or whatever. Go ahead.
The value in Bitcoins is that a) it’s the first, largest, and most widely accepted as a currency, and b) it is the strongest.
Don’t underestimate the value of having $25 M of distributed hardware aimed at validating transactions, 24 hours a day, in a fault-tolerant network. That’s where the value is. That’s where Jillcoin would fail.
How are you going to convince merchants to accept Jillcoin, if they have Bitcoin as an alternative, and you only have $1 K of hardware protecting the Jillcoin network and processing transactions, while Bitcoin has $25 M of hardware protecting it?
There are already others, Litecoin being the next biggest. Litecoin actually has spiked also as people hope it will followthe path of Bitcoin. I’m sure there will be others and eventually one will supplant Bitcoin. To dismiss it because of this is foolish.
Bitcoin was meant to prove a concept, not to overthrow the financial system. Although it looks to be moving in that direction it would take a much more refined system to do so. I really think a lot of people need to read Satoshi’s work and understand more about Bitcoin before they consider themselves knowledgeable about it. I guess that’s just one of the costs of being deemed “the next big thing.”
If you think you can do better system than Bitcoin go for it and do better system. If its truly better than bitcoin people will start to use it.
This is called free market economy and competition.
Govermental operated Central banking system = Communism.
In free market economy everybody should have right to do their own systems and people use the one that is best for them and systems can compete freely.
The actual mining of Bitcoins is by a purely mathematical process. A useful analogy is with the search for prime numbers: it used to be fairly easy to find the small ones (Eratothenes in Ancient Greece produced the first algorithm for finding them). But as they were found it got harder to find the larger ones. Nowadays researchers use advanced high-performance computers to find them and their achievements are noted by the mathematical community (for example, the University of Tennessee maintains a list of ).
For Bitcoins the search is not actually for prime numbers but to find a sequence of data (called a ‘block’) that produces a particular pattern when the Bitcoin ‘hash’ algorithm is applied to the data. When a match occurs the miner obtains a bounty of Bitcoins (and also a fee if that block was used to certify a transaction). The size of the bounty reduces as Bitcoins around the world are mined.
Read more: http://www.businessinsider.com/how-bitcoins-are-mined-and-used-2013-4#ixzz2PfKZ8ZHB
Meanwhile, be prepared to be out-of-sync for a duration!
[…] From Falkvinge: […]
The deflatory feature of Bitcoins is what worries me in a currency. In order to build an economy, the money must be invested and moved around. Yet the algorithm guarantees, that holding will be always beneficial if the owner can afford it. Whatever enterprise shall form over the currency will end up working upon ever reducing set of the currency, while accumulated wealths of money shall be rewarded for becoming stagnant.
I do not know very well, does inflation in fact create growth (and wealth distribution) in economy and whether the effect is noticably big. Right now I believe there is a connection and that worries me with Bitcoin. I would be more comfortable if some kind of inflation would be built in. Money should die if stagnant. Not appreciate in value.
No, inflation does not in fact create growth, though many mainstreamers/Keyensians will tell you this ridiculous child’s story. Deflation is not a bogeyman. Did you buy a BluRay when it first came out? You probably waited until the price came down… and yet BluRay has hardly gone out of business.
You say that holding currency in a deflationary environment rewards you. True. But it’s irrelevant. What matters is whether holding it rewards you *more* than investing it. If you can loan that out for anything over zero interest, then you are better off loaning it out than “hording” it.
This is a false, though common, boogeyman.
That is true, in the start hoarding is basically the only thing you can do because you can’t buy very many things for the bit coins anyway. Not very many accept them from the beginning, but as more and more services and products start being available for bit coins, the “early bird hoarders” will probably see more and more value in trading away their bit coins for those other things.
I would like to know your background in economics that allows you to post such a statement. It must be either very, very high, or so low that it’s non-existent.
Deflation is one of the many things in economics that are best not touched with the so-called “common sense.” Your laughable example with Blue Ray has no merit, as the thing itself existed on a growing, inflation-fuelled market. Not only has it’s price gone down, it’s value compared to the new stuff has as well. But a deflationary market does not bring new stuff, it hoards the old stuff watching its price rise; this brings the incentive – even economic necessity – to minimize production and further increase the prices of the existing inventory. Nobody wants to sell, betting he may sell for more tomorrow. He fires the staff, closes the factory, and watches his stock gain value while the his former employees have to live on grass and roots.
THAT is deflation, my friend.
I have a hard time understanding how Bitcoins would go up in value while the economy would crash and burn due to deflation. People eat, drink and use stuff everyday. That will never vanish. True, the prospect of lower prices can influence a decision to purchase something today, but people have only one truly precious element to deal with: “time”.
On average, a human in the Western world gets about 80 years if he is lucky. Will he stop spending forever because prices fall? Of course not, because he’s running out of time as from day 1. This is only increased if we cut off childhood where one does not think about live ending yet. Some deflation will never lead to him hoarding all he’s got. He simply does not have the time to wait it out.
With extreme price increases of Bitcoin, hoarding of course is an understandable thing happening. But as soon as BTC adoption has evolved much further, and growth rates start to diminish, price increases become very little, and will battle it out with the desire to have things now.
With deflation at around 1-2% annually, I don’t think many people will throw away 1/8th of their expected life time just to be able to buy that car for 10% less. Walking all these years instead of driving isn’t helping either to postpone that purchase.
On a side note, you would think that the horrible track record of mainstream economists as clearly show by the current financial crisis should encourage you to drop text book knowledge and start to do so thinking of your own. Bitcoin is already proving so many mainstream thoughts wrong. Imagine if all the clever people would actually start to think……
“THAT” is also what is currently occurring in the Global Economy. Moreover, because of said ‘occurrence’, it is very likely that the increase in bitcoin pricing could be a direct reaction to Capital controls.
It seems logical that if “The New Template” is confiscation and Capital controls; that procession of a medium suchas bitcoin has an obvious advantage for bartering (if done in a timely enough fashion…like right now). However, I think the tried and true are better alternatives (i.e, Precious Metals).
There may not be (familiar) Counter-Party Risk when transacting with bitcoin, however, there is a middle-man.
The only 2 things we ever had that were ‘current as money” were gold and silver coins.
Our misleaders want us tyo believe that strips paper beating the likeness of dead presidents are currency. When did Congress make anything besides gold and silver a
‘tender current as money.”
the properties of human behavior you describe seem logical and accurate from my point of view. people are “greedy”, if they can earn more by keeping the money, they will keep the money, but if they can earn even more by investing it, they will invest it. there is no guarantee or even evidence that if money is inclined to increase in value rather than decrease all investing will stop and the economy will cease to function. i for one hail money that increase in value rather than decrease because it will makes life much easier for the productive.
> if they can earn more by keeping the money, they will keep the money, but if they can earn even more by investing it, they will invest it.
I wouldn’t trust on it. A lot of people with money today cease working and live off comfortably. With deflationary currency, holding will not only become a possible investment strategy, it becomes a SAFE investing strategy if economic growth continues. And even inflatory currencies see deflation if we’re in economic shrinkages today…
Even still, if indeed investing will be so much more profitable than holding, what we’ll see is even more drastic “money attracts money” wealth cumulation when the total supply is fixed. And I think increasing wealth disparity is a bigger bogey than inflation…
I hope I’m wrong, because I really like bitcoin as a platform. I just hope it wouldn’t have that damn deflatory thing going on :/
There is built in inflation to the year 2140 when all bitcoins will have been created (assuming it still exists then of course) making the total amount 21000000, that is 21 million bitcoins.
Now, every bitcoin in turn are made out of 100000000, that is 100 million satoshis, which is the smallest unit. That’s 210000 satoshis for each person on the planet, if we use 10 billion as the total population. Would we need more than that?
There’s no problem. You can modify the protocol to include more digits beyond the decimal point while keeping everything else backward compatible with the blockchain. If Bitcoin takes over as _the_ currency of the entire planet, it will be fixed by a small protocol change.
History shows that high levels of inflation correlate very closely with high levels of unemployment, and low levels of inflation correlate very closely with low levels of unemployment. It may not appear to be the case in the short term, but in the long run that’s how the facts pan out.
Eeko – a man’s gotta eat. You can postpone paying for bread, clothes and a roof over your head while your BTC appreciates. It will only make you hungry, naked and homeless.
Deflation makes you spend on necessities, not frivolities – i.e. an economy that values efficiency over waste.
Of course, adopting a deflationary currency like bitcoin will cause depression – but one where we will finally rid ourselves of unnecessary demand.
Bitcoin has its merits, but points raised here worry me:
https://medium.com/money-banking/2b5ef79482cb
How is Bitcoin to avoid a savage deflation of it is algorithmicaly capped at 21 million, while daily currency trade in the world is currently around $200 TRILLION? If Bitcoin was to replace tiny fraction of that it would need to increase in value 5-6 orders of magnitude. And continue to rise indefinitely, along with the world economy. That’s probably fine for someone holding a hoard of them today, but not fine for anyone further along the line.
Is there any real world examples of long term deflation which show that deflation really is bad thing for currency and economy? Because I think people are little too afraid of it.
And anyway, deflation shouldn’t be a problem in a world where you can use multiple currencies. When some currency is so valuable that you are better of using it, you just can use other currency. As many people does the same, the deflation slows down.
Don’t be limited by your experience with the dollar, which can be easily divided only in units of 1/100. It could be argued that with current electronic transfer means, minimum transaction fees make the transfer of anything less than ~$1 impractical.
In contrast, Bitcoins can be divided into 1/100000000 units easily, accurately, and without incurring correspondingly unreasonable transaction fees.
Each bitcoin is divisible to 8 decimal places.
As Chris said: Each Bitcoin is divisible out to eight decimal places. (Eg: 1.00000001 is a valid number of Bitcoins to have.)
Also, Bitcoins have no value other than what people give them. That’s how a barter system works. The U.S. Dollar is backed by a certain amount of Gold, true, but that only matters to other countries who’s FIAT is also backed by Gold.
Right now 1 Bitcoin is worth $133 USD because there is someone out in the world willing to pay $133 to buy one (and someone willing to sell for $133). Just because these two people say a Bitcoin is worth $133 doesn’t mean that I, personally, think it’s worth $133. I can think it’s work more (and ask for more money) or I can think it’s worth less (and charge them less for whatever we’re trading).
People just tend to use exchanges for their simplicity. (This many people can’t be wrong eh?)
“How is Bitcoin to avoid a savage deflation”
Who cares.
(You’ve been lied to. “Deflation” is not bad. That’s just a load of crap that governments and central banks feed people.)
Deflation isn¨t necessarily bad for everybody, but it would probably be really bad for billions of people hit by it.
Then go ahead and detail all these mythical, mystical (read: bullshit) problems with “deflation”. Go right ahead.
You can’t, and won’t, though, because these supposed problems of “deflation” are just government and central bank lies with no substance whatsoever, a fake scare ginned up to justify endless inflation.
Mike there is nothing mythical about the great depression. ME I don’t want to bring that back but you and other BTC defenders seem to don’t care about the people in the world who’ll suffer and starve to death because of capitalism worst sides.
I’m trying very hard to understand this. I get the idea that it gets rid of the middle-man and that the government has nothing to do with this form of currency. I don’t get though, how this works. How do you acquire bitcoins? Who even accepts bitcoins in a transaction? Can someone please explain this to me..how it all specifically works?..How one would get involved in this?
Bitcoins are awarded for solving hard math problems (cryptography) by computers. Also when doing transactions, a math puzzle has to be solved. Bitcoins are “mined” with computers and other hardware ( electronics ). There is a max cap of how many bit coins there could be, so the more people start using it, the more each coin will be worth.
For a transaction to be accepted the bitcoin network ( which is like a big p2p network ) has to “validate” it, which means that people use their computers to verify that a certain number solves a math puzzle. You can give a small reward to the one solving the puzzle in order to get your transaction to be accepted faster. So there is an incentive for people to help out with the security of transactions.
Today the easiest way to start is to download a gpu-miner (assuming you have a decent graphics card on your computer), and join a “mining pool” to start mining. If bit coin goes “mainstream” you could expect the value to be many many times bigger than it is today.
Okay, thanks for answering, harveyed. Very interesting!
http://www.businessweek.com/articles/2013-03-28/bitcoin-may-be-the-global-economys-last-safe-haven
Another note – If you don’t already have a high-end graphics card, don’t go out and buy one to mine with – it’s unlikely to be profitable at this point in the game.
The easiest way to get started with bitcoins in the US is probably to get a Capital One 360 checking account and use it to transfer USD to bitfloor.com, where you can buy bitcoins at market value. You also need to install a bitcoin client on a computer or cellphone, a.k.a. a “wallet”. The coins can then be transferred from the exchange to your wallet via the bitcoin network. Soon, people accepting bitcoins as payment will have a QR code you can scan with your smartphone to set up a payment, and you would just hit the send button. With a phone or computer, you can copy and paste a bitcoin address (string of characters) into your client to send bitcoins. Others can send bitcoins to your address as well, which you could send back to the exchange if you needed to sell them for USD and transfer back to your checking account.
“it’s unlikely to be profitable at this point in the game.”
I disagree. There is a long way from here to bitcoin becoming main stream and anyone having more BTC than average Joe when BTC becomes “main stream” will be pretty rich.
Rick – How do you think the good aspects of our system of tax-dependent government can be preserved if BitCoin largely replaces fiat currencies? Surely public infrastructure, schools, libraries, police and firefighters are worth having. But without a way of legally forcing citizens to pay for it in taxes, it seems unclear how to fund these institutions. How could it be done if we all used BitCoin?
I agree that schools, libraries, and firefighters are Good Things that I want to see funded the next year and the year after that. But the way that this happens will probably need to change.
How? I have no idea. I just observe that there’s change around the corner.
Cheers,
Rick
Rick have you read about Georgism or the Land Value Tax? It seems like one of the least bad taxes and could preserve a high-functioning civilization in the presence of pseudonymous cryptocurrencies. I’d personally want it joined with some pigovian taxes as well but it seems like a clear path forward.
Yes, land value tax, natural resources tax and/or maybe time taxation could work (?)
I think figuring out the answer to this question needs to be the Pirate Party’s top priority in the next few years.
Hell, that answer could still be relevant to countries still running on fiat. People are desperate for a way to fund Good Things that isn’t taxation.
I’d happily donate all the money the Gov steals/taxes me today to “Good Things” I support.
We DO support wikipedia, after all.
But being heavily taxed to support the politicians and their bankster friends? I’d happily opt-out!
I agree, that’s a good starting point, Thracian. The problem is the psychology of it. I have a much easier time paying $50 a month for Internet service than I would paying $2 for Facebook, $2 for Twitter, $8 for Netflix, etc. etc., even if my Internet were now free.
The nice thing about taxes is that you pay for everything in one lump sum, rather than being nickel-and-dimed for every single government service.
There’s definitely a big cultural shift towards voluntarily funding things, but we still don’t know how much that’s going to change the way people think, and how much of our behavior with money is hard-wired.
Schools, libraries, firefighters will be fund as Wikipedia does by donations. If people like them, they will stay. if People do not like them, they will go off business.
Luyun
Luyun,
Wikipedia would have gone out of business if it wasn’t run mostly by people working for free so donations for libraries, firefighters, schools etc. is not a very good funding idea.
Look up your school’s bitcoin address…
I don’t quite see a problem here. How are you really forced to pay taxes right now? You just pay them because you feel obliged to it and probably because you’re afraid of legal consequences. If bitcoin becomes so widespread that it will threaten the existence of traditional currencies then we will smoothly shift to it. We will get paid in BTC and pay our taxes in BTC. The only difference for the government will be that it won’t be able to affect the economy by inflating money, but that’s not a taxing issue. Then again I might of course be missing some subtle point here.
The fear of legal consequences is only there because the government can track your spending. Hiding your fiat money is pretty difficult, and usually requires an offshore bank account. Bitcoin, on the other hand, makes tax evasion trivial.
In a world where bitcoin use is pervasive, all taxation will effectively be voluntary. Which, you’re right, won’t be a problem if the government successfully makes people feel obligated to pay taxes. But that’s a very big if.
I am not sure I agree. Taxes today are about trust.
if you want to start trading, you need to register with the government. That is not going to change with Bitcoins.
One problem with cheating, is that you may do transaction with someone that is not cheating. That means that other merchant will have proper accounting, showing that you are doing business, which you can not account for.
In a civilized developed democracy, it is by general consensus agreed to follow laws and taxes. Not doing so is either morally wrong (which stops many) or it imposes a risks that are bigger than the possible advantage (which also stops many).
Notice also that Bitcoins are traceable. Even if you create new net addresses, I think the IP is also saved?
While forcing you to pay taxes is practically impossible with bitcoin, making you feel sorry you didn’t do it is relatively easy. It’s true that with bitcoin it borders on the impossible to simply take the money by force, but tracking your income isn’t that big of a problem. One doesn’t even need a special permit to do that. The only problem is linking a person to a wallet, but that’s no different from the current situation.
I don’t see any problem for (completely) new taxation models. For private, it’s not difficult to estimate the income or affordability for a person based on how and where they live. Someone has to own that castle. For retailing including fruit stores probably don’t need a different taxation model at all. And the largest corporations have to declare their profits to their (Bitcoin) share holders.
I think it doesn’t that much creativity, actually, to handle a new cash system. It has been done before and irbid still being done.
I’d really love to agree with you guys, but in my experience as an activist, shaming corporations and rich people for not paying their fair share isn’t very effective. In the top income brackets, there is almost no cultural obligation to care for the rest of society. (In fact, it’s all there in a lot of the lower brackets either)
The culture is what we need to change. And with Bitcoin, now that we don’t have the option to change the laws, that reality’s even starker.
Scott,
Land value can always be taxed. Natural resources can be taxed. Electricity to run your computers can be taxed. Internet connections can be taxed. Roads can be converted into toll roads. There are many possibilities.
Retailers will for sure be interested in cutting out creditors or at least giving people the option too, but eventually this will just be better for the consumer, not really the businesses profits, because they will be able to lower their prices for people buying directly with bitcoin.
[…] Someone said: “There is a bitcoin craze at the moment, with prices of bitcoin skyrocketing. Bitcoin is still far from ready for prime time, but as it matures, it will change society’s fundamental operations much more than the Internet did.” …http://falkvinge.net/2013/04/03/why-bitcoin-is-poised-to-change-society-much-more-than-the-internet-… […]
I think it’s worth noting that many people don’t want Bitcoin to develop into the revolutionary, intermediary-free system that you describe. They want Bitcoin to be remain crippled and unable to process more than a tiny transaction rate so that most people will need to use third party, centralized services to transact instead of being allowed to access the blockchain itself.
I wouldn’t worry much about these kinds of attitudes, but some of the people I am talking about are on the core development team.
I think it’s worth noting that many people don’t want Bitcoin to develop into the revolutionary, intermediary-free system that you describe. They want Bitcoin to be remain crippled and unable to process more than a tiny transaction rate so that most people will need to use third party, centralized services to transact instead of being allowed to access the blockchain itself.
Another great article! As customary for articles about financial positions – it should be said that Mr Falkvinge is long in bitcoins having put most of his savings into it at prices varying from $6 to $12 – around $80,000 if I recall correctly (now worth approx $1.3M). Maybe Mr. Falkvinge can confirm whether this is still the case?
I always write a disclaimer as to my position in bitcoin when I speculate about its value, like I do in this article, which I think is appropriate. However, this article was about policymaking and disruption (you’ll find many similar articles on falkvinge.net).
I did not put most of my savings into bitcoin, as you write: I put all of my savings and all my credit into bitcoin at the lower part of the price range you specify (which I wrote at the time). I respectfully decline disclosing its current value, but it is significant.
Cheers,
Rick
OK so you have made a virtual million or two, three etc. on Bitcoins? and now you are trying to lure in naive buyers so you can convert your Bitcoins into real money?
Thanks for responding to my comment. I wish you all the best for your savings!
Not writing a disclaimer for this article is quite dishonest.
Certainly interesting.
Like you point ou , MtGox is probably the weakest point at the moment. If MtGox is shut down (or shot down), a lot of BitCoins will disappear, creating fear and distrust – which is what the BitCoin enemies of course love to see.
Therefore, DON’T STORE YOUR BITCOINS at MtGox. I store mine on a cloud drive, but I wonder what others think would be a good solution. Any suggestions?
The best place to store your bitcoins is in an offline Armory wallet.
Mt.Gox has been under attack for nearly a week. Dwolla, one of it’s biggest payment processors was DDos’d last Thursday into Friday and Mt.Gox was hit next. Although I don’t use Mt.Gox I do keep constant check of it as many use it to determine the current value of BTC. Point being it hasn’t been running right since which makes me think something is still going on. But to your point I agree. I would only store my coins in a wallet I control access to. Not one you have to depend on their server for.
[…] Source: http://falkvinge.net/2013/04/03/why-bitcoin-is-poised-to-change-society-much-more-than-the-internet-… […]
When will we truly grasp the fact that resources are what really matters.Technology is the most valuable asset that we posses as human beings!There is no need need to dig up nickles and dimes!In the coming decade or so most human tasks will be faced out by advance robotics and capitalism as we know it will be faced out as there will be little or no jobs seeing as companies lay off employees as oppossed to reducing work time.Moreover with the easily accessible 3D printing and soon to be nano fabrication,we will be able to make anything we please from food to clothes in the closed doors of our houses without buying anything.I really think its high time we as a species came together to tackle real world problems instead of falling prey to the false materialistic world we have been brought up to believe in!
Yes, I ve always felt that bitcoin wil be the first step in transitioning to a moneyless society by resetting and correcting the concentration of wealth – bitcoin will redistribute wealth from the top down as the 1% become ever more reliant on the 99% to verify transactions in the blockchain – once the 99% become financially free from debt slavery – economic activity can be more optimally distributed – people will have more freedom to do what best suits them. By that time perhaps any form of money will be tied to the finite resources of the planet and systems theory will determine the true cost of any activity by including its positive and negative effects on sustainability.
[…] read this first and if you understand it and are still sane, go to this one […]
But the government doesn’t need to be able to prove that you’ve had income in Bitcoin to demand their regular taxes, they only need to claim that you had. We call it “sköntaxera” in Sweden (I think it’s called “make an arbitrary assessment” in English).
Because of that they don’t need to decrypt Bitcoin, they only need to prove that the digital flow is there. Ask those small car sales businesses in the 70s that had to pay taxes on what the government thought they had earned because they knew roughly how many cares had passed the business even though they had no way of knowing how much anonymous hard cash they’d actually recieved. Or ask those pizza parlors where they checked how much flour they had gotten from their suppliers and then just estimated that they must have sold seven times as many pizzas IRL compared to what their accountancy told the IRS.
Or take electricity. That’s anonymous, right? Your Landlord doesn’t need to know how you use electricity in your appartment, he can make a rough measurement of what goes in through the wires and make you pay for that. Whether you use it for your computer, stereo, dishwasher, illegal personal brewery in the closet and/or homemade electrical S/M sexual machine makes no difference, you gotta pay or move out.
So it’s down to: Hi, we’re the government, we know you’ve recieved Bitcoin packages, we don’t care why, PAY UP!
My understanding of the system is that the problem for the government is the “you” part. They see that a transaction has been made but not who has the destination address. However, I’m new to this, so I could be wrong. I have also heard of some services that randomize bitcoins for a percentage, and that is somehow supposed to make it harder to track who is who.
I really should take the time to read more about this, maybe even try it, depending on how good it seems to be.
Another fascinating article Rick. Many thanks.
However, regarding the present ‘mainstream’ monetary system in the world, governments only control the issue of CASH – notes and coins. Commercial banks create the vast majority of money when they give out loans. That sounds crazy I know, but think about it.
In the UK, the Bank of England controls about GBP55 billion in notes and coins, but the commercial banks control about GBP2 TRILLION in credit, or 97% of the money in circulation. Where does this money come from? When a bank grants you a loan, their computer system puts, say $5000 into your account. Before they lent you the money, it did not exist. As you repay the loan, that money will again cease to exist. Why would banks do that? Simple, they charge you real interest on something they have created out of thin air. Nice work if you can get it.
This probably sounds pretty topsy turvy, so don’t take my word for it. instead go to
http://www.positivemoney.org.uk
Watch their videos and read their articles. They have a British ‘feel’ to them, but the message is equally applicable in most countries.
Exactly. This is what modern society desperately needs: instant on-demand cash, anywhere. Bitcoin in its rigidity is utterly useless as a global currency, and its “total quantity” is and always will be a complete joke compared to the daily cash flows of contemporary financial world. The fact that our institutions can make money materialize anywhere keeps the world spinning.
We cry for limits on printing money, creating money, and creating debt without realizing it is the cornerstone of our current economic model. The measure of restructuring and reorganizing the world economy would need to be able to function with only something like bitcoin is unimaginable. Bitcoin is not the natural outcome of the internet – the natural outcome of the internet is the boundlessly inflational shape of our current financial system.
Perhaps you’ve got it backwards: do we need or want this ‘modern economy’ we have now?
Modern economy will do just fine without fiat governed by government but by free market instead. Bitcoin does not have to take over everything (it can’t) to be successful. I am amazed how many people hang on to their chains (current fiat out of thin air) instead of embracing freedom (like Bitcoin).
Matrix quotes come into mind: the mass is not ready yet to be unplugged.
Hi Rick,
As usual I agree with almost everything you write, but I think this is the first time I disagree with you. So let me elaborate. You say that Bitcoin will end the state’s control over taxing. But this is wrong for two reasons. The first reason is the one that Peter Anderson higher up in this stack of comments explained, but the second reason is much more important.
In an economy, regardless of currency, you are required by law to keep records of all your transactions. In order to “fool” the government you need two parties to agree. This is precisely what happens in the black economy, where no receipts are exchanged in a financial transaction, but there’s always a risk in doing so. The risk is that “the other” person will tell the government and you’ll be “sköntaxerad”. If all records are kept white (which I think most people will comply with), the government will know the cash flows between businesses and between business and employees. Therefore, government will be able to collect tax from these cash flows. The only thing the government won’t be able to is to tax capital as such but in Sweden we don’t have “förmögenhetsskatt” anymore.
Therefore, I don’t see Bitcoin being incompatible with taxation as such.
Hi Datavetaren,
you’re assuming that I say that people can’t be effectively taxed because the governments can’t see wealth or income, but that’s only one part of it.
More importantly, governments have lost the ability to enforce taxation. It’s not so much that it can’t be measured, as the fact that it can’t be collected. I think that’s a much tougher nut to crack for governments that will have to solve this problem.
Cheers,
Rick
Hi Rick,
This is not true. Taxation of salaries to employees is done through the company they are working for. If the company doesn’t pay taxes (happens every month), then the government will shut down that company (essentially outlaw it). I don’t think you want to get into that situation as a company.
Hi Rick,
This is not true. Salaries that are paid to employees at a company are taxed every month. If a company does not pay taxes, the government will shut down that company (essentially outlaw it). Therefore, taxation is enforced by the state and will continue doing so even if Bitcoin becomes the sole currency.
Well, how will that be done in practice if the state can’t know who pays who for what?
The state will get less money in per default and also have to spend more money on bringing new tax in.
@harveyed
The tax is withdrawn at the point when the company pays the salary to the employee. This is done in the U.S. as well (as far as I can remember when I lived there.) Companies are forced to keep the books clean and have a log of all incoming / outgoing transactions. I simply fail to see this as a problem.
Todays wages are (usually) paid out by the banking system as a bank transaction. That makes them somewhat manageable to keep track of by banking institutions and tax authorities which have an eye on said transactions between bank accounts.
If I got paid for my work in cash in a dark alley and no one saw me getting paid and no bank had the ability or responsibility to keep book over it, then it would be more troublesome for the govt. to demand tax for that transaction.
So your point is, that even though the government is just as capable of saying ‘you owe us X’ as it ever was, it cannot just take it out of your bank account or stop it out of your paycheque like it can now?
I hadn’t thought about that aspect but I have to say I think the government can and will tax bitcoin earnings.
Unless EVERYONE just stops paying tax at the same time. Whether that would be a good or bad thing is another matter. 🙂
Not only can’t the state take money from you without physical confrontation, but they can’t either know who has paid who. Both decentralized and anonymous.
and because of what Bitcoin can do atm and will be able to do in the future, what and how it can be used, is exactly why the USA government are going to introduce new laws governing, not just Bitcoin, but all similar ‘currencies’. to me this shows how serious a threat it is to governments, banks and economy monopolies. banks in particular are going to be fighting this and as they are hand-in-glove with governments, any threat to the recognised ‘system’ of monetary exchange is going to receive massive opposition. i mean, let’s face it, the banks have caused so much grief and so many problems, not just over the ‘world financial crisis’ of 2008 and have received almost no punishment at all, no one has been jailed, no banks have shut, none have been made ‘bankrupt’ (any that were close were bailed out by governments using public money which has resulted in ordinary people suffering tremendous hardships as governments want to recoup that money but cant and wont get it from the banks they lent it to!) costing an absolute fortune, but get accused (not specifically caught!) downloading a movie and get $1000s in fines and jailed for years. this alone shows the power behind the monetary system in place today and why there will be any length taken that is needed to protect it!
The main problem with bitcoin, to me, is that I have read there is a limit to how many can ever be mined – like 30 million or so.
How widespread can a currency ever become if there are only ever 30 million in circulation?
We will need a bitcoin 2.0…
This is not a problem, as each “coin” is divisible up to 8 decimals, and is prepared to be divided into 16. In other words, people are already using microcents of the coin.
Cheers,
Rick
That’s easy, you simply split the Bitcoins into smaller units just as today we have Euros and cents. In the case of Bitcoin, the split should probably be into 1/10000ths to give 210,000,000,000 units. Maybe further subdividing further if necessary.
Completely wrong. Each Bitcoin is essentially infinitely divisble (today it is a 100th of a million, but that can be fixed by a small protocol change). Bitcoin turn things upside down. Ordinary fiat currency deals with this problem by increasing the money supply, whereas Bitcoin will imply that prices for goods and services will adapt relatively to each other until a new equilibrium is reached (if new wealth is created).
The number of bitcoins is not a problem. Even if there would only be one single bitcoin ever made, it would still not be a problem. The reason is that bitcoins can be divided into smaller units.
At least 8 decimals, as far as I know.
The hard limit is 21 million, the last of which will be mined in 2140. Scalability is not an issue as one bitcoin is divisible into 100 million satoshis, and a small protocol change could increase this divisibility even more if it became necessary. In a world that has seen widespread adoption of bitcoin as a medium of exchange, daily purchases may very well be made in satoshis.
Stuff will start costing less and less bitcoins the more people start using it.
But you could actually trade such small amounts like 0.0000000001 BTC (don’t know exactly how many decimal places, but quite some), so it would require that BTC grows very large before that becomes a problem.
I think the biggest problem for most of us, is that we tend to see the monetary value when seeing numbers like 21 million BTC.
It’s the actual number of coins that will be in circulation. Not the value of the coins in other currencies.
And on top of that, there is nothing forcing you to use whole BTCs. We use fractions of our currencies as it is, same with BitCoins. (Is there a name for the sub-whole BTCs, like pennies, cents and ören?)
mBTC is looking to be the standard
No. Bitcoin can be divided into the 8th decimal point. One Bitcoin in the far future won’t be equal to the buying power of one USD. But 1/10th of a Bitcoin might be equal to one USD. Having a cap of 21 or so million is not an issue when the coin can be nearly infinitely divided into tiny smaller coins.
I find Paul Bohm’s take on what makes Bitcoins decentralization unique very interesting: http://paulbohm.com/articles/bitcoins-value-is-decentralization/
Also some critique on the lack of demurrage:
http://realcurrencies.wordpress.com/2013/03/29/bitcoin-blessing-or-a-trap/
Over the last months I have found that all of the people who are ‘anti-bitcoin’ simply lack a full understanding of Bitcoin and/or economics. But hey ho, you can only beat someone with reality so much until you have to give up and let them live in their fantasy world.
It’s always a refreshing change to read an article about Bitcoin by someone who not only understands it, but who also has experience of it, unlike all these other “financial experts” who write in their wall/fleet street journals & who’s jobs rely on banksters. Congratulations Rick.
I have been mining and using Bitcoins for nearly two years now, and remember thinking when I first came across the idea: “this is the future of money”. Two years down the line and I’m more convinced now than I ever have been, not to mention better off and more understanding of how we are all slaves to the corrupt financial institutions/corporations/governments. Bitcoin will end this and a whole lot more besides – it is the future.
I still use fiat money when I have to, simply because I HAVE to, but my preferred currency is Bitcoin, and I look forward to the day when everyone thinks the same. The sooner the better – starve the banks.
Peace.
The problem with bitcoin and almost all other currencies in use today is all based on trust. and not backed by something of physical “value”. While governments back all the national concurrency with a few exceptions people at large do trust there government more then some machines out there telling them they have some bit coins available.
The transactions are mined in blocks and Blockchain.info is a record of all transactions and is open for anyone to verify at any time. Total transparency and nearly impossible to scam. You would have to simultaneously fool over half of the miners in order to fool the system. You have a better chance of getting struck by lightning 3 night in a row.
The problem is not about lack of trust, it is about faith in a currency.
If all vendors stop believing in Bitcoins (allowing purchases may take too much administration so as not to make it worth it), then you can’t use Bitcoins for anything. If that would happen, there is nothing from stopping the value to fall unlimited close to 0.
To some extent, fiat currencies have a similar problem. But most states have some kind of reserve, even if it is not a gold standard. The also use more or less autonomous institutions that control the currency. And gold itself can’t fall infinitesimally close to 0, as it has use for in the industry (even though only 10% is actually consumed).
[…] READ THE FULL STORY […]
[…] New article: Why #bitcoin is poised to change society much more than the Internet did. (Yes, really, definitely.) http://falkvinge.net/2013/04/03/why-bitcoin-is-poised-to-change-society-much-more-than-the-internet-… […]
Bitcoin is certainly revolutionary but it has no chance of ‘Eradicating the government’s ability to operate’. That’s just nonsense.. Because of its structure, bitcoin is by nature deflationary. That alone will keep it from being a significant international transaction currency. If the value of your bitcoins is likely to go up, you’re way less likely to spend them. As a secure storehouse of value they have great potential, but you’re very unlikely to use them on a daily basis for transactions.
Of course it will be deflationary at least for as long as it is not main stream. But that is true for just about anything… Everything would raise in value if demand goes up faster than supply does.
What will happen for BitCoin valuation after a “better” virtual currency appears to supercede it on the markets?
The same thing that happens when a superior paper currency supersedes an inferior one – an exchange rate develops between the two, which not surprisingly is what happens between just about all currencies.
[…] Rick Falkvinge mentioned on his blog, “There is a bitcoin craze at the moment, with prices of Bitcoin skyrocketing. Bitcoin is still far from ready for prime time, but as it matures, it will change society’s fundamental operations much more than the Internet did. The net, after all, only allowed people to talk and shop more efficiently. By comparison, bitcoin eradicates the government’s ability to operate.” […]
Alright, dumbasses.
There is NO SUCH THING as a deflationary currency.. it is a logical absurdity. If the collective market knew that a currenct worth 100 per unit today was appreciating to, say, 120 next year, then the marketprice would snap to 120 today. It is called arbitrage. Taking advantage of information lag or liquidity lag. The bitcoin exchanges are still chained to the 3-day ACH game, so the market price may take days to reach. This recent climb from 40 to 130 is just that.
dumbass alright,
by the same argument, there is NO SUCH THING as an inflationary currency. It’s a logical absurdity. If the collective market knew that a currenct worth 100 per unit today was depreciating to, say, 80 next year, then the market price would snap to 80 today.
Can you tell what’s wrong with the argument? If not, please cease and desist from making dumb comments. Of course, I’m posting this on the blog of a smart guy who’s just made profoundly dumb comments on bitcoin. I just wouldn’t like the pirate party to get caught in the maelstrom when everyone realizes how collectively dumb they were for buying bit-tulips.
Nice try.
You can’t toggle my argument from deflation to inflation because the two are not symmetrical. An inflationary pattern could exist due to the borrow rate on the currency. The borrow rate may cause me to lose the arbitrage opportunity since the only way to short a currency is by borrowing it to sell it. Once I’ve sold all of the currency that I hold long and others have done the same, the only remaining actors are using the currency for its utility as a currency, and accept a small inflation tax. The expectation for inflation is not absurd like it is for deflation.
[…] un aveu. Je n’ai entendu parler de Bitcoin que mardi matin, à la lecture d’un tweet rédigé par un obscur follower: «Bitcoin est en passe de révolutionner la société beaucoup plus qu’Internet l’a fait (Oui, […]
I’m really, really disappointed in you, Falkvinge. Are you really this ignorant, or are you just selfishly trying to talk the bubbly price further up? Maybe it’s just pandering to the various species of gold bug? There are so many errors here I hardly know where to begin.
* Bitcoin does not “eradicate the government’s ability to operate”. In fact, it’s probably a lot less problematic than cash, which is a far more anonymous payment option.
* EVERYONE can see your wealth and income. The system has a complete record of all transactions. Sure, addresses are pseudonymous, but once they’ve been linked to a known identity, every trade you’ve ever made is on record. This is less information than payment with credit cards (as those records come with some hint of WHAT was bought), but a lot more than cash. Bitcoin users who are aware of this and want to conceal their payments, try to obfuscate cash flows with multiple accounts, but researchers data mining the block chain see right through that. It’s plain old security through obscurity.
* The system is pseudonymous, not anonymous. It has to be, if it was anonymous trust would be impossible, and thus trade (you just paid me 1 BTC for a bag of herbs? No you didn’t *smirk*. Nothing coming in the mail for you). Every time you interface with the real/legal economy, you inevitably link your real/legal identity to your pseudonymous BC address. If there was any truth to the idiotic allegation that BC “eradicates the government’s ability to operate”, government could just outlaw such interfacing – criminalize taking or paying in BTC. Then BTC would only be of use in the illegal economy, and would have to be laundered to be used in the legal, just like illegally earned cash.
* Banks and issued currency are not going anywhere. Because BTC is deflationary, it encourages hoarding and discourages spending and investment. This causes bubbles, and would have caused real harm to real-world production capacity (if bitcoin had any of that, LOL!). Bubbles appeal to gamblers, but unless that’s your business, currency risk is something you want to minimize your exposure to. BTCs built-in bubble dynamics is a FAR greater threat to stability than government printing presses.
You are mostly correct, except for your last point. You claim that BTC cause bubbles but so does our current fiat system. So how are we any worse off from that with BTC?
BTC will have deflation, that’s built in to the system. But I’m not certain that that’s entirerly negative, either. Time will tell.
If there ever comes a point where the deflationary nature of Bitcoin will effectively impede trading, Bitcoin’s price will rise quickly, creating a bubble. When it bursts (as it inevitably will, because people will stop using over-priced Bitcoin and demand will fall), its value will plummet and so will the trust in it as an effective instrument.
This is not different from any bubble that we curently have “with” our currencies, only our currency is not at the root of the bubble (tho monetary policy may help create it). Bitcoin itself will be the reason for it’s bubble. That is very different form how normal currency usually works in a bubble situation – currency is not the commodity, merely the mechanism that makes bubbles possible. Bitcoin is both the commodity and the mechanism, which pretty much ensures that it may not survive such a crisis.
Right on. We have asset bubbles, and those are bad enough, but a deflationary bubble in a national currency would be a disaster.
Deflation, sure.. well we already have deflation in many quite thriving markets.
I could buy a HD TV right away or I could wait a few months to get more for my money.
I could spend bit coins right now (for anything), or I could wait and get more for my money.
Some will have a more long term perspective and value the coins more than the time and some will have a more short term perspective and value having stuff for longer periods of time over getting maximum value for the coinage over time. It’s just about priorities really.
Sadly, no. Deflation has measurable, proven negative impact on economy and deflationary situations tend to worsen if left alone (vicious circle).
Ask the Japanese government about their twenty years with effective deflation, its effect on economic growth and society in general.
Deflation kills innovation, investment, risk-taking, generally everything that makes economic progress possible.
If you want to make an honest approach to Japan’s deflation, you have to account for the massive inflationary boom that preceded it and, subsequently, the market not clearing because of excessive money printing afterwards. No such thing would happen with Bitcoin; no inflationary boom and thus no deflationary bust. Also no deflationary bust taking ages to clear (depression) because of government printing money.
You all need to put the deflation argument to bed. You really do.
“Deflation kills innovation, investment, risk-taking, generally everything that makes economic progress possible.”
Hmm no. I think you are mistaken. If there was no deflation in bit coin then who would want to take the risk starting to invest in it..?
Quite on the contrary you have massive deflation on all tech markets. I can buy a flat screen today or wait a year and get bigger/better for my money. I can buy a mobile phone today or wait a year and get more for my money, the inflation of fiat currencies really does not change that too much.
Well presented ideas with the exception of the impact if the internet. While governments may not have been changed by the internet, society and individuals certainly have. In 1996 I was sent to prison and was released in 2010. During the time I was incarcerated I began to notice a change in the attitudes and behaviour of newly incarcerated prisoners. At the time, I didn’t have a clue as to the cause and attributed it to me just getting older. However, other long time prisoners I spoke with were noticing the same changes also. It wasn’t until after I was released and had an opportunity to see the world and society that the cause of the changes I observed while in prison became clear: the internet. It would be a mistake to underestimate it’s impact on people and society or to assume that the effects have been positive. While the internet has in many ways had a positive influence on the world, in my opinion it has destroyed people’s ability to think and has warped moral values in terrible ways. I will conclude by simply stating that the world in which I now find myself has been a huge disappointment.
Very cool comment and a very interesting perspective. It doesn’t mean I agree, but what you’re saying sounds very intriguing.
Do you have a blog by any chance?
Funny you should ask as I have given quite a bit of thought to the idea in recent weeks. Unfortunately between work and trading bitcoins and litecoins I have little extra time to devote to writing. The fact that you have asked has certainly reinforced my interest though. Do you have any suggestions for pursuing this?
“While the internet has in many ways had a positive influence on the world, in my opinion it has destroyed people’s ability to think and has warped moral values in terrible ways.”
In 2001 the US was raped by high-level organized crime. Most Americans still blame the Muslims. The moral character of America has been deteriorating ever since. Please don’t blame the internet.
Do you mean to suggest that the internet did not exist in 2001 and therefor could not be a cause of the crime wave you mentioned? And who are these “most Americans” for which you speak? I ask because I have yet to meet an American who blames Muslims for “the US being raped by high-level organized crime. ” The question I really want to ask you though is exactly what YOU believe is the cause of the erosion of the American moral character? Having spent 14 years imprisoned, I realize that there are certainly things of which I am unaware. It is quite possible that your perspective could allow me a better insight into the current state of the world today. Do you ideas of your own on this matter? Or did you think I was going to be an mark to pick on? The truth is, judging by the attitude you adopted, I’m guessing that you are one of those people who have so thoroughly disgusted me with the world as I now find it. Did you think the because I am a convicted felon that I am stupid? Or maybe you feel as though you have some sort of moral superiority over me? I believe that is what your true motive for responding was…I am certainly familiar THAT attitude: it’s the same attitude those young punks just coming to prison possessed. Do I really blame the internet? No. The internet has no capacity for doing anything. I blame people such you. If you feel as strongly you would have me believe, then quit with sideways attacks on me and put your time and effort into a cause that will actually effect some type of meaningful change.
“Do you mean to suggest that the internet did not exist in 2001 and therefor could not be a cause of the crime wave you mentioned?”
Crime is caused by the choices of individuals. Internet technology can make no choices.
“I ask because I have yet to meet an American who blames Muslims for “the US being raped by high-level organized crime. ””
Most Americans still blame Muslims for 9/11, though that proportion is diminishing. Look up public opinion polls on the matter.
“The question I really want to ask you though is exactly what YOU believe is the cause of the erosion of the American moral character.”
The corrupt morality of the elite trickles down the socio-economic ladder. The morality of the leaders is adopted by the followers.
“Or did you think I was going to be an mark to pick on?”
Pick on, really? Easy there, I made no person remarks. You, however, have gotten personal. Way to undermine yourself.
“I’m guessing that you are one of those people who have so thoroughly disgusted me with the world as I now find it.”
Lol. I know I’m a horrible person for making my short, impersonal remark about American morality.
“Did you think the because I am a convicted felon that I am stupid? ”
Defensive much?
“Or maybe you feel as though you have some sort of moral superiority over me? I believe that is what your true motive for responding was…I am certainly familiar THAT attitude: it’s the same attitude those young punks just coming to prison possessed.”
Ya take it all out me, It’s all my fault.
“Do I really blame the internet? No.”
Now you have directly contradicted yourself. Way to go.
“I blame people such you. If you feel as strongly you would have me believe, then quit with sideways attacks on me..”
Ya it’s all my fault. I totally attacked you viciously. I’m so so sorry about what I said. I hope you can find it in your heart to forgive me. I’ll never do it again, I promise.
———————–
Way to overreact and contradict yourself there buddy. Might want to change that username. You have undermined your credibility.
i find the concept very interesting and comparative to the Technocracy ideals. Finally my parents would be very proud.
If you bet on the wrong horse now, it’s may controproductive. Butcoins has flaws, but i seen no useful soulutions yet.
So there should be done more research to the topic. The Long Term development is interesting.
So here are my thoughts which bother me.
The amount of Coins is fixed. Even if you split the floating points to NaN. And this can’t be changed in the future never ever. As questions would appear to how to distribute it.
You can lose your money, if your harddisc crashes, if your forget your private key, or some evil rootkit steels you everithing? And mostly, people are dying and do they tell the password to realtives or so on? I guess not, so the amount of BCoins is still fixed at 21M but the availiable sum which peaple in the network can deal with is less… how does this develop over years as no new coins can get into the network? Sure u can keep trie to keep creating new ones per transaction for the miner, but there has math to be done how much coins are to be regarded lost. Who does this? some centralised entitiy who shall decide.
If i got it right mining will be less efficent when all coins are finally spend, who is mining today? and who is then ? if you depent on the transaction fee and it gets irrentable, you may close down your mining station.
Now there could be a problem less capacity for transaction nework but in the future there are also more and more and more people using it. Sure the transaction fee amount would increase as all have to make it rentable for the miner again.
So who are these miners, in theroy as wikpedia states it could be your homecomputer… but i don’t think thats true, when you take a look at some youtube videos(referenced at the and)
Why is this having private people spending 500 kw/H a day in running BC mining. Because it’s worth it.
The amount of computations is increased with every transaction as far as i know. so how could that transaction list look like in 50 years? Who provides the infrastructure for this, sure google and amazon can, mining them to world leadership…
Also you see BC are backed by spent energy and computations, the ecological impact on engery consumptions would not be that high, but maybe you can afford some green energy supply and provide a mining farm, the gold mine of the small man.
This works as long as energy costs let’t you do it and get an return on invest. So what happens in 50 years if energy price may increase the capacity of BC P2P network would go down, while the need for it makes the mines richer by the way i think it’s a waste of energy and computer power… btw computer power may not develope exponential in the near feuture as it used to do, but the transaction chain does?
That bitcoin isn’t anonym at all was mentioned above see the ccc talk for more about that. may you could say it’s as anonym as TOR(when you take care of you cookies and postes)
Also above was mentioned when more people start using it, you would just split to more decimals, but how would you distribute it that every one could have a billionst of a coin?
The early users have whole coins, later you cold mine a billionst of a coin? And how could poorer people mine then anyway, or do they have to sell everything to the realy bitcoin gatheres to get started?
Anyway most youtube videos which i watched stated that bitcoin has a self destruction mechanism because in some decades there are too many coins lost for what reason ever, at some threashold all thrust in it will vanish who is then sill onboard?
ccc talk : /watch?v=-FaQNPCqG58
a miner : /watch?v=G5f_e4P6gMA
” diversionhobbies vor 1 Jahr 2 videos 217058 views and 126 subscribers
I use 500kWh/day at $0.075/kWh so at the current difficulty I can mine until Bitcoins are only worth $1.60 and still turn a profit. If I lived on the coasts or in Europe this would have stopped being profitable when Bitcoins fell below $6-$7.
“
[…] Falkvinge, the founder of the first Pirate Party, makes some good points about bitcoin, but takes it a step too far when proclaiming bitcoin will stop government as we know […]
[…] Falkvinge, the founder of the first Pirate Party, makes some good points about bitcoin, but takes it a step too far when proclaiming bitcoin will stop government as we know […]
Rick Falkvinge : “A while back, I wrote that bitcoin is “The Napster of banking”. Perhaps there is a better analogy – perhaps it is the Skynet of banking. There is no central mainframe to shut down, and the intelligence in bitcoin is completely distributed with the single goal of obsoleting central banking.”
OK so you advocate that a currency that you feel is closer to Skynet than it is to Napster is what will bring down governments?
Seriously there is NO way I Repeat NO way that Bitcoin will have a greater importance to society than Internet.
And I believe that most people who isn’t a heavy investor in Bitcoins agrees with me on that.
People who promote Bitcoin neither understand what makes something money nor the technology of Bitcoin and public key cryptography and internet security. Anyone who understands these things knows that Bitcoin is a confidence game that will crash sooner than later and leave a lot of people holding the bag.
Everything you write is rather a description of the current monetary system with govt. monopoly on money printing and banking monopoly of transactions of the money.
Harveyed Banks actually doesn’t have monopoly on money transactions.
Well most transactions are made by a few big banks and/or credit card companies, so it is maybe more like an oligopoly. However you have a centralized power structure – which very often encourages kissing up & kicking down behaviour.
Basic freedoms are quite threatened by the big players’ ability to stop you from doing electronic transactions within todays banking system.
This has already happened in Sweden, where a smut store was denied opening a credit card to the bank account for their business.
For freedom as citizens (and consumers) and freedom of business, it is extremely important to not let the big players decide what is a “legitimate business” and what is not.
[…] Why Bitcoin Is Poised To Change Society Much More Than The Internet Did – Falkvinge on Infopol…. […]
[…] Här är Falvinges senaste inlägg om Bitcoin på falkvinge.net: Why bitcoin is poised to change society much more than the internet did […]
[…] me start with Rick Falkvince’s “Why Bitcoin is Poised to Change Society Much More than the Internet Did”. He claims that as Bitcoin “matures, it will change society’s fundamental operations much more […]
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Taxing of some form of wealth will always be a potential source of revenue for governments; as there will always be hard, physical things that are valuable. If you want the government to help protect you against some guys simply moving in and taking our house calling it their own, you’ll have to pay them. Ditto for your car.
Activity Based Taxation (ABT) will go away; whether income or consumption. As will taxation of wealth tucked away where noone can get to it, like BTC. But if you want to own a home, or a factory, or a bicycle, governments can still tax those.
Confessions of a Bitcoin scammer.
http://www.youtube.com/watch?v=7fvSYT7vhQY
Sanningen bakom Bitcoin-“miraklet”
Mah. Banks will operate just as well with Bitcoins. True, there will be no central bank to regulate the money supply -which means probably deflation, and much more risk of defaults. But as long as people deposit and are happy to see their money as numbers on an account (while they phisically are elsewhere), nothing really changed in what banks do.
[…] Here are some excerpts from Why Bitcoin Is Poised To Change Society Much More than the Internet Did: […]
[…] Falkvinge: Why Bitcoin is bigger than the Net […]
[…] Why Bitcoin Is Poised To Change Society Much More Than The Internet Did […]
[…] 4 Apr 2013 Rick Falvinge – Bitcoin Poised To Change Society […]
[…] Rick Falvinge – Bitcoin Poised To Change Society: […]
[…] Rick Falvinge – Bitcoin Poised To Change Society: […]
As long as the state requires to pay taxes in the states monopoly currency, bitcoin will be of no danger for the state. If you earn bitcoins, but have to pay your taxes in the state cirrency so you are forced to use the currency of the state if you want or not.
Oh, really? And how will they control the incomes in BTC, please?
Simply because there will be a law requiring you to do so.
You could simply work in CASH, private, changing hands…
You don`t need Bitcoins to undermine laws…
[…] pas pour rien qu’elle fait rêver le libertarien suédois Rick Falkvinge, un des fondateurs du parti pirate, qui y voyait naguère le napster de la banque, le trublion qui […]
As a monetary economist, bitcoin will not be revolutionary, because for 2 decades there has been a revolutionary consensus among economists that monetary policy is an evil best left alone, limiting its use to control “inflation”.
My own take is that the term “inflation” should be broadened to include property value and savings, because being able to buy a house and have stable savings are NECESSITIES.
Bitcoin is no revolution. The revolution has happened already. Governments do not control the money supply and hence we don’t have inflation. Argentina does have its money supply controlled by the government and the “official” figure is 25% annually.
[…] choosing to use their skills to build arguably one of the most radical technologies out there. They are disrupting money and the very role of governments. “We’re giving tools […]
[…] choosing to use their skills to build arguably one of the most radical technologies out there. They are disrupting money and the very role of governments. “We’re giving tools […]
[…] http://falkvinge.net/2013/04/03/why-bitcoin-is-poised-to-change-society-much-more-than-the-internet-… […]
[…] me start with Rick Falkvince’s “Why Bitcoin is Poised to Change Society Much More than the Internet Did”. He claims that as Bitcoin “matures, it will change society’s fundamental operations much more […]
Hello Rick Falvinge and readers here,
This was a very insightful article. I hope you’ll have a read here to see what you as an individual can do about some of the statists’ current assaults on bitcoin:
https://twitter.com/Liberationtech/status/402212131770478592
Thank you in advance.
If Bitcoin most benefits those who command most resources to mine new bitcoins and who can best afford to hoard them, then will not Bitcoin , to the extent it is so speculated in and adopted, increase disparity of wealth ?
And does not Bitcoin decrease transparency of wealth ? who and what, to the extent that it (or anything like it) is adopted, will that most benefit?
As for the not-entirely-unrelated issue of taxation, I’ve suggested in a blog-post top-down taxation of wealth as the only fair method of taxation, placing its burden squarely on those most able to support it, instead of on those least (as do income-taxes, sales-taxes and license-fees), and having a salutary rather than retarding effect on the economy:
http://jdkabc.blogspot.com/2013/01/tax-grazing.html
And that blog-post in turn touches on, at the end, another not-entirely-unrelated issue, truth in ownership, with any asset the ownership of which has been falsified or is hidden to be confiscated by the State in which that asset is so identified, and all assets whose ownership-trails lead to countries allowing the falsification or concealment of ownership being confiscated likewise.
Bitcoin going to save the global economy, Bitcoins are digital coins transferred from person to person, without using a bank or centralized service. Bitcoin is honest and reliable. The mathematics of it are very clear and can be verified by anyone who bothers to walk through the cryptography techniques.
CryptoCafe is going to be big in the world of Bitcoin, be sure to sign up for the big release announcement. The website is owned by a public company called Myriad Interactive, the stock symbol is MYRY and its predicted to be very big!
Myriad Interactive Media Begins Development of Bitcoin Platform CryptoCafe.com
For more information and to read disclaimers and disclosures: http://finance.yahoo.com/q?s=myry
Thanks !
[…] het fenomeen bestempelen als een hype, heeft de innovatieve technologie volgens verschillende experts de potentie om nationale en internationale handel velen malen efficiënter te laten […]
“It gives to you high service to your demand like it”
‘Ziddu is paying more’ than any crypto currency mining for more information, please visit http://goo.gl/8INZsI
[…] O trecho acima retirado do artigo “Bitcoin: A Peer-to-Peer Electronic Cash System”, publicado em 2008 por Satoshi Nakamoto foi o pontapé inicial para a criação da primeira moeda eletrônica descentralizada: o Bitcoin! O artigo descreve a parte gerencial de um sistema financeiro apoiado nas ideias de privacidade, descentralização, desenvolvimento em comunidade, e distribuição das atividades necessárias para manter o sistema funcional entre os participantes dele. Muitos pesquisadores consideram uma das maiores revoluções desde a criação da internet, se não maior que ela[2]! […]
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[…] »Bitcoini bodo spremenili družbo in denar, kot ga je iznajdba interneta.« – Rickard Falkvinge […]