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> I think it is, but there are significant ramifications that will result from the decoupling of currencies from governments. The decoupling of currencies fro

> I think it is, but there are significant ramifications that will result from the decoupling of currencies from governments. The decoupling of currencies from governments sounds like a radical shift, but it's actually only fairly recent in history that we use fiat money. That, of course, allows us to do a lot of things that we've gotten used to in the last century particularly, such as taking advantage of monetary policy to address short-term economic concerns. If alternative currencies catch on, that's something that governments will have less power to do - or at least, less power to do directly and predictably. Certainly, governments are going to push back on that, and probably try to discredit or disable alternative currencies. At the end of the day, though, while money can be determined by fiat, value is determined subjectively, so if alternative currencies catch on (which I think they well), it will necessitate a shift in the way that people think about money. (Not unlike the way that the Internet has shifted the way people think about tradable goods and IP law - just take a look at SOPA.)

kiba 15y ago
Bitcoin is also a technology. It can do more than just being money. For example, the technology is used in namecoin, which help facilitate the rise of a decentralized DNS system not subject to government control. After all, the DNS record is contained in every namecoin blockchain in the world. (OF course, the bigger issue is how the heck will namecoin get adopted as de facto DNS?) I even wrote an article on unexpected technological niche outbreak of bitcoin: http://bitcoinweekly.com/articles/technological-jailbreak-bitcoin-to-namecoin http://bitcoinweekly.com/articles/technological-jailbreak-bi... I think in time, we will start seeing Bitcoin technologies adopted in more areas and more areas that have nothing to do with money or our financial system.
- SkyMarshal 15y ago
  Agreed. Bitcoin's fundamental value is a feasible solution to the Byzantine General's Problem, or distributed consensus among untrusted parties. That solution can and is being repurposed, Namecoin being among the first. The cat is very out of the bag, and it's one of the most interesting spaces in technology right now.
  - jc123 15y ago
    Good layman's explanation of bitcoin and Byzantine Generals' Problem: http://news.ycombinator.com/item?id=2667486 http://news.ycombinator.com/item?id=2667486
  - nazgulnarsil 15y ago
    I wouldn't call it a solution so much as a working approximation to a solution. AFAIK a complete solution would mean you could quantify how much each party trusts each other party at any given time.
  - Egregore 15y ago
    What are other problems (besides namecoin) which can be solved by bitcoin technology?
    - SkyMarshal 15y ago
      Contracts, for one. https://en.bitcoin.it/wiki/Contracts https://en.bitcoin.it/wiki/Contracts
- tomjen3 15y ago
  It is fairly easy to get it accepted as the standard DNS. First you have to package it so it is reasonably easy to setup Joe the regular user. It does not have to be perfect. Then you have to offer an incentive. Napster (at the time the most popular program ever written) had tons of MP3 music as the bait. Bittorrent was seeded (ha a triple pun, win) with pornography. In other words we have used lust and greed. Perhaps vanity or envy could be used to seed namecoin? Click here to see what your friends are saying behind your back? This is what they won't let you know about famous celebrity.
  - trout 15y ago
    From the graph, it looks like drugs are the bait for bitcoins. It looks like every geek with a drug tweak bought in to bitcoin in the days after the Gawker article. It's not DNS related nor is it 100% responsible for the spike, but it is a unique solution for anonymous drug trade.
jpdoctor 15y ago
> but it's actually only fairly recent in history that we use fiat money. What do you consider to be the starting year of fiat money?
- chimeracoder 15y ago
  As with many things in history, I don't think there is a single year that we can point to as the turning point, since it's a somewhat gradual shift. Think about it this way - a few hundred years ago, it was commonplace to pay dues to the government using precious metals (like gold). In some parts of the world, this is still the case, but in the majority of the developed world, public and private debts are paid with money that gets its value by fiat. This change can't happen overnight, even if you force it to; if people continue to accept gold (for example) has having liquid value, then it will continue to be used as a currency. I wouldn't even use the beginning or end of Bretton Woods as the turning point (though it was certainly a turning point), because the point is less whether people can convert currency to gold than it is a question of whether they do.
  - jpdoctor 15y ago
    > * I don't think there is a single year that we can point to as the turning point, since it's a somewhat gradual shift.* Over what years do you think this shift occurred? Or put another way, you do realize that fiat has been in use at least since the Romans?
    - surrealize 15y ago
      There's a difference between "in use, somewhere" and "almost universally used".
- mckoss 15y ago
  A good book covering the subject is The History of Money (Jack Weatherford). Money was has had a tradition of being valuable in its own right (gold and silver coin), and eventually banks created paper money that represented an amount of gold held in reserve. The Bank of England, was at first a private entity (established in 1688) and was only nationalized in 1946[1]. The notes they issued were backed by deposits of coin, gold, or silver. They broke with the gold standard in 1931, and it's then we see money tied not to a specific asset, but rather as a debt instrument; it's valuable only because someone promises to pay you back. When the debtor is a nation-state, we have fiat money, and the money is backed only by the faith and credit of the nation who issues it. As Weatherford's book points out, fiat currency was not invented by the British, as the Chinese were using a similar system in the 1st or 2nd century, and continued to use a paper money system until 1399. Abuses destroyed the value of the paper currency, and it did not reappear in China until the 20th century. [1] http://en.wikipedia.org/wiki/Bank_of_England http://en.wikipedia.org/wiki/Bank_of_England
sethg 15y ago
Note that long before governments had fiat currency in the “we will print as many dollar bills as we want to” sense, devaluation of specie-based currency was not uncommon. According to Wikipedia, the Roman denarius had about 4.9g of silver when it was introduced under the Republic, 3.9g under Augustus (about 200 years later), and 3g in the later eras of the empire (a few centuries after that). The Byzantine histamenon coin was high-quality gold when it was introduced in the late 10th century, and had almost no gold by the late 11th. The English penny started out in the late 8th century as 1.5g of fine silver, then went to sterling (92.5%) silver in the 12th, reduced its weight to 0.97g in the early 15th, to 0.78g in the mid-15th, and so on.

kiba 15y ago

Bitcoin is also a technology. It can do more than just being money. For example, the technology is used in namecoin, which help facilitate the rise of a decentralized DNS system not subject to government control. After all, the DNS record is contained in every namecoin blockchain in the world. (OF course, the bigger issue is how the heck will namecoin get adopted as de facto DNS?) I even wrote an article on unexpected technological niche outbreak of bitcoin: http://bitcoinweekly.com/articles/technological-jailbreak-bitcoin-to-namecoin http://bitcoinweekly.com/articles/technological-jailbreak-bi... I think in time, we will start seeing Bitcoin technologies adopted in more areas and more areas that have nothing to do with money or our financial system.

SkyMarshal 15y ago
Agreed. Bitcoin's fundamental value is a feasible solution to the Byzantine General's Problem, or distributed consensus among untrusted parties. That solution can and is being repurposed, Namecoin being among the first. The cat is very out of the bag, and it's one of the most interesting spaces in technology right now.
- jc123 15y ago
  Good layman's explanation of bitcoin and Byzantine Generals' Problem: http://news.ycombinator.com/item?id=2667486 http://news.ycombinator.com/item?id=2667486
- nazgulnarsil 15y ago
  I wouldn't call it a solution so much as a working approximation to a solution. AFAIK a complete solution would mean you could quantify how much each party trusts each other party at any given time.
- Egregore 15y ago
  What are other problems (besides namecoin) which can be solved by bitcoin technology?
  - SkyMarshal 15y ago
    Contracts, for one. https://en.bitcoin.it/wiki/Contracts https://en.bitcoin.it/wiki/Contracts
tomjen3 15y ago
It is fairly easy to get it accepted as the standard DNS. First you have to package it so it is reasonably easy to setup Joe the regular user. It does not have to be perfect. Then you have to offer an incentive. Napster (at the time the most popular program ever written) had tons of MP3 music as the bait. Bittorrent was seeded (ha a triple pun, win) with pornography. In other words we have used lust and greed. Perhaps vanity or envy could be used to seed namecoin? Click here to see what your friends are saying behind your back? This is what they won't let you know about famous celebrity.
- trout 15y ago
  From the graph, it looks like drugs are the bait for bitcoins. It looks like every geek with a drug tweak bought in to bitcoin in the days after the Gawker article. It's not DNS related nor is it 100% responsible for the spike, but it is a unique solution for anonymous drug trade.

jpdoctor 15y ago

> but it's actually only fairly recent in history that we use fiat money. What do you consider to be the starting year of fiat money?

chimeracoder 15y ago
As with many things in history, I don't think there is a single year that we can point to as the turning point, since it's a somewhat gradual shift. Think about it this way - a few hundred years ago, it was commonplace to pay dues to the government using precious metals (like gold). In some parts of the world, this is still the case, but in the majority of the developed world, public and private debts are paid with money that gets its value by fiat. This change can't happen overnight, even if you force it to; if people continue to accept gold (for example) has having liquid value, then it will continue to be used as a currency. I wouldn't even use the beginning or end of Bretton Woods as the turning point (though it was certainly a turning point), because the point is less whether people can convert currency to gold than it is a question of whether they do.
- jpdoctor 15y ago
  > * I don't think there is a single year that we can point to as the turning point, since it's a somewhat gradual shift.* Over what years do you think this shift occurred? Or put another way, you do realize that fiat has been in use at least since the Romans?
  - surrealize 15y ago
    There's a difference between "in use, somewhere" and "almost universally used".
mckoss 15y ago
A good book covering the subject is The History of Money (Jack Weatherford). Money was has had a tradition of being valuable in its own right (gold and silver coin), and eventually banks created paper money that represented an amount of gold held in reserve. The Bank of England, was at first a private entity (established in 1688) and was only nationalized in 1946[1]. The notes they issued were backed by deposits of coin, gold, or silver. They broke with the gold standard in 1931, and it's then we see money tied not to a specific asset, but rather as a debt instrument; it's valuable only because someone promises to pay you back. When the debtor is a nation-state, we have fiat money, and the money is backed only by the faith and credit of the nation who issues it. As Weatherford's book points out, fiat currency was not invented by the British, as the Chinese were using a similar system in the 1st or 2nd century, and continued to use a paper money system until 1399. Abuses destroyed the value of the paper currency, and it did not reappear in China until the 20th century. [1] http://en.wikipedia.org/wiki/Bank_of_England http://en.wikipedia.org/wiki/Bank_of_England

sethg 15y ago

Note that long before governments had fiat currency in the “we will print as many dollar bills as we want to” sense, devaluation of specie-based currency was not uncommon. According to Wikipedia, the Roman denarius had about 4.9g of silver when it was introduced under the Republic, 3.9g under Augustus (about 200 years later), and 3g in the later eras of the empire (a few centuries after that). The Byzantine histamenon coin was high-quality gold when it was introduced in the late 10th century, and had almost no gold by the late 11th. The English penny started out in the late 8th century as 1.5g of fine silver, then went to sterling (92.5%) silver in the 12th, reduced its weight to 0.97g in the early 15th, to 0.78g in the mid-15th, and so on.