Bitcoin and cryptocurrencies

[objectiveMan]

Have any of you looked into Bitcoin and cryptocurrencies in general? There are a lot of libertarian type of people in those communities, because obviously the idea of a currency which is not controlled by a government is pretty nice. That is what got me excited about it, because it just fits into an Objectivist/libertarian philosophy. Of course it also attracts the extreme left, anarchists and the like.

[Selene]

Have any of you looked into Bitcoin and cryptocurrencies in general? There are a lot of libertarian type of people in those communities, because obviously the idea of a currency which is not controlled by a government is pretty nice. That is what got me excited about it, because it just fits into an Objectivist/libertarian philosophy. Of course it also attracts the extreme left, anarchists and the like.

If you use the search function and put in bitcoin here on OL, there are a few intense threads.

[Objectifish]

I went on a big bitcoin-reading binge earlier this year.

Oversimplifying a little, but there seem to be 2 or 3 views predominant in the bitcoin world.

Before I explain these 3 views, remember the basic theory is that a currency has 3 functions: store of value, medium of exchange, medium of account. It's interesting to look at parts of the world with a weak currency which end up with a two-tier system: the local currency for everyday transactions (medium of exchange) but keep their money in USD (or sometimes gold, or stocks, or farmland - any safe store of value).

The goldbug argument is that gold is a better store of value than the dollar (no-one prints gold) and so in the long run will come to dominate.

As for bitcoin:

Position 1 is that bitcoin is a better medium of exchange: i.e. that because its anonymous, lower transaction fees, requires no trusted third party it will "disrupt" Visa, Mastercard etc (but possibly not displace USD or other fiat currencies) This viewpoint seems to be held implicitly by most bitcoin startups and mainstream tech commentators.

Position 2 is that bitcoin is a better store of value: the supply is fixed, which long-term makes it "harder than gold". (The bitcoin supply grows rapidly right now, and miners tend to dump new coin on the markets, which depresses the price, but long-term this will not be true). Here's one exponent of this viewpoint: http://nakamotoinstitute.org/mempool/im-hoarding-bitcoins-and-no-you-cant-have-any/.

Position 1.a is that bitcoin is a protocol, i.e., that it's not bitcoin itself that's interesting, but the underlying "blockchain" idea which could be used as a platform for other innovations. This viewpoint is espoused by some Silicon Valley types (Marc Andreesen is one big one) but personally I think it's not grounded in reality.

The divide between 1 and 2 showed up in the debate over increasing the blockchain length. If bitcoin is a "better visa", increasing the blockchain size increases consumer convenience and eases mass adoption. If it's a "better gold", increased blockchain size lowers security and makes it easier for governments to subvert it.

Position 2 is not widespread but I think it does make some sense. What doesn't help that group is that its main exponent is a highly intelligent but rather unsavoury character (hang out in the bitcoin world long enough and you'll know who I mean). Humorously enough for Objectivists, he's a rare example of a libertarian Kantian. He's a student of physics and philosophy who espouses his hardcore anti-government, pro-capitalist views to his little clique of followers, but unlike John Galt he wraps it all up in a deontological framework where having goals and purposes is morally suspect (he actually said this). Instead, the right action is intrinsically knowable from the situation. He thinks bitcoin is self-evidently the only form of money worth caring about, and will inevitably win - indeed it has already won. Ergo no action needs to be taken except acting clever on IRC all day.

For myself, having travelled a lot over the last year the existing means of sending money around are already pretty good, so #1 doesn't have much to "disrupt", and most bitcoin companies are struggling to deal with fraud checks, security, regulatory requirements etc which the existing financial system has already created infrastructure to solve. Witness e.g. the MtGox hack, the pireat40 scam, etc.

#1a appeals to ungrounded SV types who like constructing elaborate theories about innovation, but the "blockchain" itself isn't that interesting. #2 has legs -- most people with lots of USD try to park it somewhere safer, usually stocks or commodity futures, less frequently gold -- and maybe bitcoin could become the safe haven. But to do that it needs much more investment in reliable services built around it -- and I don't see that happening.

As a result I'm more bearish than I was when I first got into it. I'm probably gonna sell half my current holdings, wanna buy a bitcoin or 2?

[Selene]

ABC - Always Be Closing...

I'll pass.

Take a look at "Enter The Dean" I just pulled it up and you may find it valuable.

A...

[objectiveMan]

Position 1 is that bitcoin is a better medium of exchange: i.e. that because its anonymous, lower transaction fees, requires no trusted third party

Position 2 is that bitcoin is a better store of value: the supply is fixed, which long-term makes it "harder than gold".

Position 3, which for me is most interesting, is the ideological one. The fact that it works by objective rules governed by math, so that it cannot be changed at whim by the government. I think it is a truly "free market" alternative to currency, and is pretty groundbreaking in that sense. I support a minimal government, so I am always excited when some function of society can be successfully transferred from government to "the market". And what could be more profound function of society than money? By successful I mean it is working as a proof of concept.

Obviously people who care about position #3 are a tiny minority, and the reason why this has almost no impact on bitcoin adoption in practice. The masses are perfectly happy with the government running every part of their lives, and the currency is the smallest of their concerns when it comes to government exceeding their reasonable power. That is why I am not particularly bullish on the Bitcoin price in long term.

Take a look at "Enter The Dean" I just pulled it up and you may find it valuable.

I looked at the thread. This Dean was a pretty interesting character I must say.

[Peter]

Bitcoins seem like old Confederate money, but more ephemeral and of course, electronic. Those old rebel bills are worth something (not a lot) to collectors but watch out for counterfeits. I think the fraud factor and the fact that bitcoins have no intrinsic value makes them a novelty but not something anyone should buy in bulk. They seem like a Ponzi scheme. On Downton Abbey the patriarch was thinking about investing in the original Ponzi’s scheme and I am sure a lot of viewers were yelling at the TV to don’t do it, Hugh! So, don’t buy bitcoins either!

When I was a kid, my grandfather used to give me a silver dollar when we met and I saved them as something more than plain paper money because they were silver and they were from him. And they did have more than nostalgic value when I sold some a few years ago. I remember when the U.S. stopped using silver in its coins in 1964 and a lot of merchants were sorting their coins for the silver’s added value.
Peter

[objectiveMan]

Bitcoins seem like old Confederate money, but more ephemeral and of course, electronic. Those old rebel bills are worth something (not a lot) to collectors but watch out for counterfeits. I think the fraud factor and the fact that bitcoins have no intrinsic value makes them a novelty but not something anyone should buy in bulk. They seem like a Ponzi scheme. On Downton Abbey the patriarch was thinking about investing in the original Ponzi’s scheme and I am sure a lot of viewers were yelling at the TV to don’t do it, Hugh! So, don’t buy bitcoins either!

When I was a kid, my grandfather used to give me a silver dollar when we met and I saved them as something more than plain paper money because they were silver and they were from him. And they did have more than nostalgic value when I sold some a few years ago. I remember when the U.S. stopped using silver in its coins in 1964 and a lot of merchants were sorting their coins for the silver’s added value.

Peter

I am definitely not recommending Bitcoin as an investment. Though I am fairly sure that it is not a Ponzi scheme.

The idea of "intrinsic value" is difficult for me. I don't see any intrinsic value in Fiat money either. Gold may have little intrinsic value because of industrial uses, but I am sure that alone would not support the current price. I do see intrinsic value in stocks.

[Peter]

From dictionary.com: Intrinsic, an adjective, belonging to a thing by its very nature: the intrinsic value of a gold ring.

It is a difficult concept using gold as an example. The only value any metal would have to a non-metallurgist like me, would be how much someone else would pay for it. If I were a manufacturer or a jeweler gold or jewels could be improved upon and make me more money than I paid for them. How can that be valuable by its very nature, because I don’t prosper by stacking coins or collecting gold dust, but only by selling it? If the stock market has intrinsic worth are intellectual property, beautiful paintings, technology in general, electronic or paper money earning interest or increasing in value, jokes to a comedian, a theme song like Bob Hope’s “Thanks for the Memories,” and genomes (as with new strains of corn), also intrinsic?
Peter

[objectiveMan]

People accept a currency as payment for their goods and services only because they believe other people will do the same (accept it as payment for their goods and services). It is essentially based on trust. This is same for dollars, bitcoin and gold, and there's really nothing "intrinsic" about it. If trust in the medium of exchange disappears, so does its value.

Bitcoin is entirely digital, just a computer program, and nothing "tangible", so it doesn't feel as real as a currency that you can hold in your hand. But it does have a set amount of coins which cannot be arbitrarily changed, giving it rarity. What gives its value is simply the fact that people choose to value it, and use it as a currency.

Stocks, on the other hand, are something completely different. I think Ayn Rand said that the source of all weath is man's mind. When I buy a share of a company, I am essentially buying a share of the minds of all their employees. I am buying a share of their intellectual and productive effort. This is something fundamentally different than buying gold. With gold, I am betting someone else will pay more for it later. With stocks, I am betting men will continue to work and use their intellect.

[RobinReborn]

Their most practical use is for purchasing illegal goods and services. They do have desirable features in some respects, but they are completely volatile in terms of exchange rates.

[deanwins]

Hello,

Hey, its Bitcoin, one of my favorite subjects!

In the past, gold as money has been shut down by the federal government via confinscation and taxing banks. Hence USD's monopoly position on money has been enforced. The federal government confinscates all sorts of wealth from producers, and channels that wealth towards all sorts of things that would be considered wealth redistribuition rather than "protecting the property of innocent citizens".

1. Federal Reserve & Big Banks print money for themselves and their friends, stealing market purchasing power from wage earners and other producers.

2. They buy the news channels and manipulate the sheeple

3. They advertise their political picks and marginalize the free market opposition, giving the sheeple only 2 false alternatives for their political representatives.

4. Sheeple are trained to believe Keynesian fantasy rather than Austrian economic consequences, and they are frequently ok with wealth redistribuiton, empowerd by the government

5. Federal Reserve is now buying/holding US Treasuries: funding the federal government via money printing

Bitcoin has the potential to break the shackles of the current USD money monopoly. Bitcoin is not as vulnerable as gold to taxation and confinscation. As more people store wealth in Bitcoin rather than USD, the market purchasing power available to the bankers and federal government and will be diminished. Hence Bitcoin is one of my favorite things.

I would recommend Bitcoin as an investment, and as a store of wealth, and as a means of trade, and as a means to protect yourself from monopoly money inflation. Similarly I would also recommend gold, but of course with different properties and different risks. I think gold is undervalued at the moment. Bitcoin is a new technology, that as a money is not very well proven, so of course it is a risky investment.

Might I point out that Bitcoin's use to purchase (illegal) drugs is a good thing, enabiling people to do what they want with thier own bodies with less risk and cost than previous channels of purchasing from local gangs. Drugs should not be illegal. Government should get out of approving/banning drugs and licensing sellers. I personally don't do drugs, but I'm a proponent of self ownership.

Cheers,

Dean

[objectiveMan]

Hello,

Hey, its Bitcoin, one of my favorite subjects!

Hi Dean,

nice to meet you. Thanks for the input.

[Brant Gaede]

Bitcoin is only a sock puppet deflecting attention from other forms of wealth transfer, exchange and protection which must exist--and I don't mean real estate although that can work--completely private through electronic means at least in an ad hoc way.

--Brant

[objectiveMan]

Bitcoin is only a sock puppet deflecting attention from other forms of wealth transfer, exchange and protection which must exist--and I don't mean real estate although that can work--completely private through electronic means at least in an ad hoc way.

--Brant

I have no idea what this means. Care to explain a bit?

[Selene]

Bitcoin is only a sock puppet deflecting attention from other forms of wealth transfer, exchange and protection which must exist--and I don't mean real estate although that can work--completely private through electronic means at least in an ad hoc way.

--Brant

I have no idea what this means. Care to explain a bit?

The Brant speaks in intricate philosophical tongues...

[objectiveMan]

Bitcoin is only a sock puppet deflecting attention from other forms of wealth transfer, exchange and protection which must exist--and I don't mean real estate although that can work--completely private through electronic means at least in an ad hoc way.

--Brant

I have no idea what this means. Care to explain a bit?

The Brant speaks in intricate philosophical tongues...

Can anyone translate Brant to English?

[dldelancey]

I'm guessing Brant thinks bitcoin is a distraction from other potential means of achieving the same thing. Whether or not he thinks it's a good distraction or a bad one, I have no idea.

[Brant Gaede]

Depends. Are they good guys or bad guys? Regardless, it has to be going on. I'm hardly expert. It's the available technology.

--Brant

[Brant Gaede]

Bitcoin is only a sock puppet deflecting attention from other forms of wealth transfer, exchange and protection which must exist--and I don't mean real estate although that can work--completely private through electronic means at least in an ad hoc way.

--Brant

I have no idea what this means. Care to explain a bit?

The Brant speaks in intricate philosophical tongues...

Can anyone translate Brant to English?

I sure can't.

--Peter

[Brant Gaede]

Bitcoin is only a sock puppet deflecting attention from other forms of wealth transfer, exchange and protection which must exist--and I don't mean real estate although that can work--completely private through electronic means at least in an ad hoc way.

--Brant

I have no idea what this means. Care to explain a bit?

A sock puppet is a distraction, intentional or not, from the authorities who might want to control such as Bitcoin or shut it down. There must be other forms of under-the-radar money transfers made possible by new technology. (Real estate has been used, is being used, to get money out of China and Russia. That's part of the why there are record high re prices in NYC, London and Vancouver.)

--Brant

[Selene]

Bitcoin is only a sock puppet deflecting attention from other forms of wealth transfer, exchange and protection which must exist--and I don't mean real estate although that can work--completely private through electronic means at least in an ad hoc way.

--Brant

I have no idea what this means. Care to explain a bit?

A sock puppet is a distraction, intentional or not, from the authorities who might want to control such as Bitcoin or shut it down. There must be other forms of under-the-radar money transfers made possible by new technology. (Real estate has been used, is being used, to get money out of China and Russia. That's part of the why there are record high re prices in NYC, London and Vancouver.)

--Brant

And "art" also? Brant

[Brant Gaede]

When I hear "art" I reach for my--uh, oops!

--Brant

that was embarrassing

[objectiveMan]

The price has been going wild for the last few days, hitting $500 today. Anyone else own any? I am guessing Dean has some.

[Peter]

Investing and speculating? Beware! Play safe! Like the price of diamonds and gold, bitcoin prices are manipulated by the people who own or control the most. Sure I have heard the same fix is in to a degree with the stock market, but it has a history that is extensively scrutinized, well known, and makes relative sense. Remember some past investments that were artificially high like Beanie Babies, fantasy football, collectables, and back in Holland, tulips? Even in a “tanked” market like today's commercial real estate the land is usually still sellable at the assessed tax value.
Peter

Notes.
Answers dotcom. Martetan Rees, I am Dutch and lived here all my life. The tulip was introduced in the Netherlands in 17th century when Holland was a wealthy country. Rich merchants had enough money and started trading bulbs on the stock market, similar to futures. Bulbs were overpriced (like the internet bubble) and investors began to cash their profits. Some buyers did not pay for their purchase and people were afraid that they would be stuck with their bulbs and trading ceased. Many people lost huge amounts of money.

Yahoo Finance November 5, 2015 10:35 AM
The price of Bitcoin, the world's most popular virtual, digital currency, is on the rise again. After trading in a range of $200 to $250 for most of the year, the price of one Bitcoin shot up to $500 this week, although it has since fallen back to $392 on Thursday. A great surge to $1,000 at the end of 2013 ended in disaster for investors as the currency lost three-quarters of its value in ensuing months. But what's behind the latest rally and will it stick? Here are three possible explanations:

Perhaps questionable Chinese interest
As often happens with bitcoin price surges, a lot of the trading is coming out of China. And there is a social financial network called MMM Global growing massively in China that requires users to buy bitcoin and share it around with other members. The Financial Times has said MMM has elements typical of pyramid schemes. The site was founded by a former Russian legislator who was jailed for fraud over a pyramid scheme he operated in the 1990s. China has also tightened capital controls recently, making it harder for its citizens to send money abroad. Some bitcoin buying may be related to efforts to get around the crackdown.

Growing legitimate business interest
At the Money 20/20 conference last week, many companies announced new bitcoin-based services. The Nasdaq (NDAQ), for example, will be recording transactions in private stocks using bitcoin's public ledger, known as the blockchain. And Mastercard (MA) joined the long list of establishment institutions investing in bitcoin startups. And, two weeks ago, the European Union's top court agreed that virtual currencies like bitcoin can be traded like established currencies without triggering taxes applied to sales of goods and services. Past rallies have been linked with speculative bets that these kinds of deals and rulings would popularize the cryptocurrency and lead to greater demand which would push up the price.

Jamie Dimon. The always opinionated CEO of JPMorgan Chase (JPM) says bitcoin has no future -- governments will shut it down, he said at Fortune's Global Forum on Wednesday. “Virtual currency, where it’s called a bitcoin vs. a U.S. dollar, that’s going to be stopped,” Dimon said.

[Brant Gaede]

Bitcoin is only a sock puppet deflecting attention from other forms of wealth transfer, exchange and protection which must exist--and I don't mean real estate although that can work--completely private through electronic means at least in an ad hoc way.

--Brant

I have no idea what this means. Care to explain a bit?

A sock puppet is a distraction, intentional or not, from the authorities who might want to control such as Bitcoin or shut it down. There must be other forms of under-the-radar money transfers made possible by new technology. (Real estate has been used, is being used, to get money out of China and Russia. That's part of the why there are record high re prices in NYC, London and Vancouver.)

--Brant

And "art" also? Brant

I doubt it. Not fungible.

--Brant

re is fungible--slightly