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This article is quite opinionated, but one thing I liked: This brings us to another lesson that Bitcoin has taught us. Money is like any other good in society

This article is quite opinionated, but one thing I liked: This brings us to another lesson that Bitcoin has taught us. Money is like any other good in society in that it can be produced and managed entirely by the free market. This is the reverse of what scholarly opinion has said for more than 100 years.

betterunix 14y ago
Bitcoin has not taught us that money can be produced and managed by "the free market." Bitcoin would be worthless if it could not be exchanged for fiat currencies, and there is no reason to think that will ever change.
- gyom 14y ago
  They're not worthless if you can purchase real stuff with it instead of converting back into fiat currencies. The same can be said of every fiat currency : they're useless unless you can get real stuff (or services) for it at the end of the day.
  - betterunix 14y ago
    Except that fiat currencies are useful for paying your taxes, which is how governments back them. Tax laws, debt laws, torts, fees, and all of the other ways governments collect money from their citizens are what give fiat currencies utility. Even if a business only dealt in Bitcoin money it would still need to exchange at least some of its earnings for fiat currency if it had any intention of following the law. That is why Bitcoin exchanges matter: even if a business did transactions with both Bitcoin and fiat currency, there would be times when that business did not have enough fiat currency and would have to exchange its Bitcoin money to survive. There is a reason that everyone talks about the value of Bitcoin relative to other currencies, and it is that people must use other currencies to conduct some of their business. On the other hand, fiat currencies do not require foreign exchange to be valuable. It was very difficult to convert the Soviet Ruble to foreign currencies, but in the USSR the Soviet Ruble was money and had value.
T-hawk 14y ago
That's always been true. Scrip has existed forever. http://en.wikipedia.org/wiki/Scrip http://en.wikipedia.org/wiki/Scrip Any private party can issue a form of currency. Its value is limited by trust in that private party to keep the supply stable and uncounterfeitable (not double spendable), and the expectation that merchants will accept it for goods and services. What Bitcoin introduces is a money supply with that question of trust removed, with enforcement by mathematical means. This only became possible recently of course, with the advent of enormous computational processing power and interconnectivity. The latter part of adoption by merchants seems to have very recently reached critical mass by way of networking effects. So Bitcoin could indeed be on the rise to become the world's monetary system. At this point, Bitcoin's biggest danger is not obscurity and oblivion or a free market crash, it's regulation or illegalization from governments that may be hostile to the existence and usage of a currency system they don't and can't control. The US and EU governments are the entities with possible power to kill Bitcoin, because they possess legalized force outside of the Bitcoin protocol and ecosystem.
- betterunix 14y ago
  "What Bitcoin introduces is a money supply with that question of trust removed, with enforcement by mathematical means" Except that there is no formal definition of the security for Bitcoin, so there is no meaningful "enforcement." Formal definitions of security for digital cash systems cannot be applied to Bitcoin because of the lack of a central authority. The security of Bitcoin is extremely vague, based on hand-waving arguments about computational power that are extremely difficult to analyze. Even if somehow we overlook that lack of rigor, "enforcement" is not accurate. There is a known, polynomial time, practical attack that allows Bitcoin money to be double-spent. That does not sound like "enforcement by mathematical means" to me, at least not if the "mathematics" you are referring to are cryptography, game theory, or related fields (and I am not sure what other mathematics would even be used to enforce rules).
  - wnight 14y ago
    Double-spending bitcoins is hard, counterfeiting and general fraud are easy enough crooks can do them. Also, this is a ridiculous argument because all fist currencies are being manipulated now to avoid a default-inspired crash. Your cash is rotting in your pocket, and your investments aren't making back inflation let alone a profit.

betterunix 14y ago

Bitcoin has not taught us that money can be produced and managed by "the free market." Bitcoin would be worthless if it could not be exchanged for fiat currencies, and there is no reason to think that will ever change.

gyom 14y ago
They're not worthless if you can purchase real stuff with it instead of converting back into fiat currencies. The same can be said of every fiat currency : they're useless unless you can get real stuff (or services) for it at the end of the day.
- betterunix 14y ago
  Except that fiat currencies are useful for paying your taxes, which is how governments back them. Tax laws, debt laws, torts, fees, and all of the other ways governments collect money from their citizens are what give fiat currencies utility. Even if a business only dealt in Bitcoin money it would still need to exchange at least some of its earnings for fiat currency if it had any intention of following the law. That is why Bitcoin exchanges matter: even if a business did transactions with both Bitcoin and fiat currency, there would be times when that business did not have enough fiat currency and would have to exchange its Bitcoin money to survive. There is a reason that everyone talks about the value of Bitcoin relative to other currencies, and it is that people must use other currencies to conduct some of their business. On the other hand, fiat currencies do not require foreign exchange to be valuable. It was very difficult to convert the Soviet Ruble to foreign currencies, but in the USSR the Soviet Ruble was money and had value.

T-hawk 14y ago

That's always been true. Scrip has existed forever. http://en.wikipedia.org/wiki/Scrip http://en.wikipedia.org/wiki/Scrip Any private party can issue a form of currency. Its value is limited by trust in that private party to keep the supply stable and uncounterfeitable (not double spendable), and the expectation that merchants will accept it for goods and services. What Bitcoin introduces is a money supply with that question of trust removed, with enforcement by mathematical means. This only became possible recently of course, with the advent of enormous computational processing power and interconnectivity. The latter part of adoption by merchants seems to have very recently reached critical mass by way of networking effects. So Bitcoin could indeed be on the rise to become the world's monetary system. At this point, Bitcoin's biggest danger is not obscurity and oblivion or a free market crash, it's regulation or illegalization from governments that may be hostile to the existence and usage of a currency system they don't and can't control. The US and EU governments are the entities with possible power to kill Bitcoin, because they possess legalized force outside of the Bitcoin protocol and ecosystem.

betterunix 14y ago
"What Bitcoin introduces is a money supply with that question of trust removed, with enforcement by mathematical means" Except that there is no formal definition of the security for Bitcoin, so there is no meaningful "enforcement." Formal definitions of security for digital cash systems cannot be applied to Bitcoin because of the lack of a central authority. The security of Bitcoin is extremely vague, based on hand-waving arguments about computational power that are extremely difficult to analyze. Even if somehow we overlook that lack of rigor, "enforcement" is not accurate. There is a known, polynomial time, practical attack that allows Bitcoin money to be double-spent. That does not sound like "enforcement by mathematical means" to me, at least not if the "mathematics" you are referring to are cryptography, game theory, or related fields (and I am not sure what other mathematics would even be used to enforce rules).
- wnight 14y ago
  Double-spending bitcoins is hard, counterfeiting and general fraud are easy enough crooks can do them. Also, this is a ridiculous argument because all fist currencies are being manipulated now to avoid a default-inspired crash. Your cash is rotting in your pocket, and your investments aren't making back inflation let alone a profit.