Muhuhahaha (evil laugh), and my parents thought I was crazy when I told them there was a new digital currency you kept in files, that had no inflation, was (almost) completely anonymous, and - get this - that it was real and traded on actual markets. When I started talking about Bitcoin mining, that was when they seriously thought I was going off the deep end. And really, most non-tech-savvy people would think the idea was crazy.
Crazy enough that it's genius.
I smile a little every time I see "Bitcoin Now Accepted Here". I personally don't use them, but the ideology behind the currency is fascinating and remarkable. Not to mention the credibility WordPress gives it (and hopefully soon, Reddit...).
ideology behind the currency is fascinating and remarkable
I'm going to take the liberty to nit pick.
There isn't any ideology behind bitcoin. It's just a protocol.
Among existing serious bitcoin users, there's a pretty diverse range of political opinions (some of which I find pretty distasteful), plus disagreement on the actual merits and potential demerits of bitcoin.
> There isn't any ideology behind bitcoin. It's just a protocol.
I disagree. It was motivated by particular strains of cryptopunk thought, has features designed specifically for long-desired applications like multi-signing or a built-in programming language for stuff like Szabo's smart contracts, the original Satoshi whitepaper was explicit about goals, and multiple design choices were made for non-technical reasons (such as a hardwired limit to coin issuance). Finally, in the very first block in the official blockchain, Satoshi included a newspaper quote about bank bailouts! Not the most neutral non-ideologically-charged topic in the world, let us say.
Certainly serious Bitcoin users have a wide range of views, but to say 'there isn't any ideology behind Bitcoin' is to just plain ignore everything about its conception.
"Monetary policy" and "ideology" are two distinct and separate concepts.
I'm not even sure I would be in favor of labelling bitcoin as having a "monetary policy." Monetary policy describes governmental policy-making. The rules of the bitcon protocol are also unlike "policy" in that they can never change.
I know I'm nit picking, but I think that it's really important to keep concepts clear and crisp. (There's a bit of ideology for you!)
I disagree, bitcoin does have a hardcoded monetary policy of nominal money supply targeting. The policy is primitive and will not provide any of the benefits of contemporary monetary policy, but it should provide an interesting case study.
Notice how many are focused on inflation (CPI and price level as measures of inflation/deflation). All of them are used by central banks to influence the markets. None make much sense for an virtual medium of exchange.
Now supposing there was a central bitcoin bank I'd suggest a policy of targeting low volatility. Bitcoins utility as a medium of exchange is a function of transaction cost and volatility risk. Still even without a central bank both attributes will improve with time. Thus the lack of central bank may become a feature by removing human fallibility.
What are the benefits of a contemporary monetary policy? There was a piece I saw by George Selgin lately showing that modern monetary policy has caused the economy to be measurably less stable than in the old days. I haven't followed the responses to it, though.
The Milton Friedman/John Taylor position is that markets will adapt to pretty much any monetary rule as long as it is stable and predictable. Bitcoin's monetary rule is about as predictable as you can get.
The one part of the Keynesian story that I find compelling is the part about inflation being needed to address the problem of sticky wages. But wages in web sectors tend to be much less sticky. Free money's time has come.
I mean, the definition of monetary policy given at the top of the Wikipedia page you linked to rules out there being such a thing as a "monetary policy" hardcoded into bitcoin.
Ideologically, bitcoin is a currency. But, apart from fringe speculators, ideologues & novelty seekers its gaining traction as a payment method.
That's great because a better payment methody something we really need. A payment method for a world where computers exist. Credit cards, paypal and friends are doing this job terribly, inequitably, opaquely and at a high cost.
For "card not present" transactions credit cards work like this: (1) a merchant tells CC company (through payment gateways) that a customer wants to pay them some amount (2) the credit card company says OK (or no) (3) If at any point in the next 6 months the customer demands that money back, they take it out of the merchants account. If this happens too often, they cut off the merchant's ability to accept credit cards.
Step 3 puts the entire cost of fraud on the merchant. They then find their own way of minimizing it. There's the cost of the actual payment processing (2%-4%), the cost of fraud & the cost of preventing fraud. That's around 2.5%-10% of gross. In some cases it just completely prevents entire business categories. This also amounts to a pretty steep competency requirement just to accept payments.
There are a lot of businesses and business categories that just don't exist because the basic infrastructure of the digital economy (money) is crap. We're basically using seashells.
Accepting Bitcoin is much easier than it was a year ago. At NameTerrific[1] we use Blockchain Wallet[2] to temporarily hold transactional funds.
Whenever a customer places an order and chooses to pay by Bitcoin, we will use Blockchain API to generate a Bitcoin address for the invoice. After the customer pays, they can press a "Check Payment" button and then the system will simply check the balance of the Bitcoin address generated. If it's greater than or equal to the invoice balance, it's considered "paid".
We keep a history of Bitcoin exchange rates (the NameTerrific rate) for tax purposes. All invoices have records of the applied BTC/USD exchange rate so they can be translated into fiat amounts in the books. For Australians, the GST is being accounted using the daily rate method (BTC/USD rate from the invoice, and daily AUD/USD rate from an official source).
The wallet gets cleared every 10 BTC or so to prevent theft.
That endeavor may be "unknown" in general, but it is super well-known in the "Bitcoin community" and the subject of unending discussion/debate/conspiracy theories.
Personally, I like the idea of digital currency, but the knowledge that it is based on completely useless computations (gold at least has many practical applications and looks nice) annoys my programmer side. I know money do not have to be otherwise useful, but still the feeling is there.
As far as I am aware, they are not completely useless computations. Isn't the model supposed to be that transactions are verified using calculations of effectively a tuned brute force method where the brute force needed is tuned to the power of the network. Tuning the difficulty means that no-one else can beat it to the brute force goal without having comparable computational power.
In that sense the computation no less useless than any other cryptographic technique that has complexity to thwart brute force attacks.
[I may be completely off base here, I wouldn't call myself a bitcoin expert, but this is how I perceived it]
In a completely distributed system where malicious participants are trying to attack the system, you need some kind of mechanism to get a consensus about the state of the world. Obviously, a simple majority vote wouldn't work because an attacker could cheaply spawn many nodes on the network. In bitcoin this is solved by tying the "vote" to proof of work: the explicit assumption is that the majority of the computing power is controlled by participants who aren't trying to attack the system.
There is another mechanism that could reduce the need for proof-of-work though: the participants could instead show proof-of-stake[1], i.e. prove that they control a certain amount of currency. Somebody has created ppcoin[2] (a bitcoin fork) to experiment with this.
In bitcoin this is solved by tying the "vote" to proof of work: the explicit assumption is that the majority of the computing power is controlled by participants who aren't trying to attack the system.
...and if these Bitcoin-mining ASICs are primarily purchased by people trying to attack the system?
Compared to the Federal Reserve that creates money out of thin air, whenever they want, and dilute the value of the currency in the same time? That doesn't worry you at all?
"Whenever they want" says it all. When its needed. Bitcoins work on an algorithm, that is insensitive to need. Which allows boom-and-bust coinage.
Here in the US Midwest, in museums there are old coupons, tokens, wooden nickels printed by local banks, business, bars(!) and pressed into service in the 1800's when coins became scarce. The US Mint didn't respond for years, leaving us essentially without money. Caused a local recession.
For monetary policy to respond properly the fed has to read aggregate demand and react accordingly as quickly as possible. There are extreme incentives for the fed to keep interest rates low to encourage borrowing and economic growth, there is little encouragement to think long term and turn up the interest rates so that currency is protected.
Bitcoin may be flawed, but at least its obviously and predictably flawed. This stability should in the long run allow for much better planning on an individual level.
How you reached this conclusion? Is there any limit of what one person is allowed to be worried about and I was unlucky to get only one worry subject allotted to me?
It is fascinating how people may misconstrue the plainest topics to turn them into something completely different. The subject of Fed creating the money has very little to do with current topic, and I did not express any indication that I somehow not worried about it (if you want to know so badly, yes, I am worried, very much, are you happy now?). However both nature of this problem and its causes are completely different from the topic at hand - and I specifically only compared bitcoin to gold and not paper money to avoid any temptation to this completely irrelevant turn. Of course, I was destined to fail.
This is not particular to Bitcoin. It is a basic economic principle that those with the most capital can invest to make the most returns (in this case investing in a chip). How is this unfair?
Very interesting to see a major brand starting to accept Bitcoin. I guess that's a huge next step. So where are the reliable exchanges right now? Haven't really looked into BTC since the Mt Gox incident.
Also http://bitcoin.com/ looks way more accessible and polished compared to last year. What are the major obstacles for mainstream adoption?
Bitfloor is also really good and seems to be run by great people (plus it's located in NYC instead of Japan, which I think is nice), but you have to be willing to forgive them for a security breach in the recent past. (Never leave large amount of BTC in an exchange.)
CampBX is another good option, they are located in Atlanta, GA.
Sorry if I've left out anyone's pet exchange.
A (generally) better way to acquire bitcoins for spending (as opposed to speculation/wealth storage) is to use bitinstant. You can literally buy bitcoins at Wal-Mart and CVS (which are super ubiquitous where I'm from) using bitinstant.
edit: apparently you can also buy them using coinbase (a YC company). I didn't realize you could do that until someone else mentioned it, since they advertise themselves as a hosted bitcoin wallet.
AFAIK CampBX has never had any issues whatsoever, but I actually would prefer an exchange that has had issues and worked them out in a professional manner in the past.
Anyway, all bitcoin exchanges are perfectly reliable for exchanging. Where they have had problems in the past is when people use them as a bank. Don't leave your fiat currency or coin there. Do your exchanging and then take your money out.
As far as I'm aware, Mt. Gox is the most secure exchange around right now and hasn't had an incident since its big one last year. Even so, you only have three fears: 0) You poorly secure your account and someone logs in as you and takes your coins 1) Bitcoin's value plummets and you lose all your invested money. 2) Mt. Gox loses some of their actual coins, and refuses to let you withdraw from your balance with them. 0 and 2 are theft, which is a constant concern to anyone regardless of what is being stolen. While I don't think Mt. Gox insures any of its deposits with something similar to FDIC insurance, I bet there's an insurance company out there that will insure your bitcoins for a fee.
Also, it's easy to get rid of #0 as a fear. Does your bank (or more analogously if you have stocks, your account for some company's online trading interface) support YubiKeys or similar? http://www.yubico.com/ Mt. Gox has given quite a few of them away for free. (Mine was free.)
I have a fourth fear with Mt. Gox. For a European the only way to directly buy Bitcoins there is a SEPA transfer. Mt. Gox will only accepts this after I send a scanned identification document and a proof of residency without ANY alterations.
I understand why they need this and I appreciate that they are thorough in their measures to prevent fraud and money laundering. I even sent my passport to other companies, but only altered in a way that makes it unusable for identity theft.
But still: I don't trust them enough that I don't fear my passport scan gets leaked some day and is used for identity theft.
I worried about the same thing about sending something that exposed my Social Security Number. So I submitted my driver's license and car insurance policy for identity and residence respectively. (It was kind of a pain to find a proof of residence they accepted since I had no bills in my name.)
For anyone browsing the thread, this is part of an email their support desk sent me for accepted documents, which is significantly more permissive than the upload page for verification suggests:
1 A copy of your government issued photo ID such as:
- Passport
- Permanent residence card
- Driver’s license
2. Proof of Residence that is not older than 3 months such as:
- Monthly utility bill
- Internet Bill
- Cellphone Bill
- Tax Return document
- Residency Certificate
- Voting registration form
- Medical insurance
- Pay Slip
- Car Insurance Policy
- Medical Bill
Actually, the Pro Bundle doesn't include all our other upgrades just a selection of our most popular upgrades at a discounted price.
The Pro Bundle includes:
A Custom Domain (Either a new one or map one you already own). The Custom Design Upgrade - Fonts, Colours, CSS. VideoPress video hosting. Makes your site Ad-Free. An extra 10GB of storage for your images/videos.
According to my understanding, the bitcoin economy is small enough that all clients can have a record of all transactions. Bitcoin was designed for a truly distributed model, but this aspect is untested in practice.
It seems to me that the move from "everyone knows everything" to a truly distributed model entails a lot of risk, and it's possible that the protocol just may not work at this scale. Is this a reasonable concern?
With Wordpress accepting BTC, Reddit considering it and a complete hardware store http://www.bitcoinstore.com/ bitcoin comes of age, now trading at 11 USD.
Wow, that's big news. Now they just need a client that doesn't take days to download the block chain :| Seriously, I wonder if one of the bigger barriers to bitcoin adoption is the lame official application.
Electrum looks interesting, due to simplicity. What does it mean by using a remote server though? Do they just use a single block chain remotely and tell you what your balance is for keys <a-z> ?
I'm not sure about the balance part, but I do know that they basically have the block chain on their server(s) and verified it's integrity. Still, now I have to trust some third party.
This is being worked on, but I don't know the details.
However, for just spending coin, it's easier to use a hosted wallet like coinbase.com (a YC company).
You don't need to run an actual bitcoin node yourself unless you're doing something beyond just using bitcoin for spending. (e.g. holding large sums for long periods of time, mining, building some service, etc.)
Oh, definitely easier. But everyone links to the official client / a site which describes BitCoin and links to the official client. It's still a horrible experience for would-be users.
I've been using blockchain.info for the past week and love it, the Android app is great, the wallet is encrypted client-side, it backs up to Dropbox, it's just great.
You can use a Simplified Payment Verification (SPV) client like MultiBit (see http://multibit.org). From scratch it takes about 5 minutes to start using Bitcoin.
I couldn't agree more. The user experience is downright terrible. And when you eventually catch up but don't run the client for a couple of days your stuck in purgatory again.
If you are interested in buying bitcoins, please check out a guide I help maintain called "How do you buy bitcoins?". It's 100% free, and we are on a quest to provide custom guides for every country. It's really easy to buy bitcoins these days, especially in the United States.
This is rather exciting, as I've written in the past, the main problem with us not being able to adopt Bitcoin is the legal uncertainty surrounding it. With Wordpress plunging full-steam ahead, that question should get resolved in the next few months.
Yes. For example, both the FBI and the ECB have written on bitcoin in a way that acknowledges it as a useful medium of exchange.
What are you looking for? https://en.bitcoin.it/wiki/Main_Page has a lot of good info on a lot of stuff. reddit.com/r/bitcoin is a pretty helpful place to ask casual questions.
I'd love to read on thoughts about how a digital currency will change economic policies, the market, and just things in general. If its decentralized (i.e. the currency is not distributed from a central bank), then presumably you can't deflate or inflate the value of the currency in order to encourage economic growth (am I getting this right?). Also I'm wondering what Bitcoin means in terms of banks. If I don't need a physical safe to hold my money anymore, then obviously banks will be forced to go digital as well right? And what does that mean for financial instruments? How does a digital currency play in with high-frequency trading?
So many questions. Bitcoin is really making re-evaluate a lot of things. I think I've given you a sense of what I'm looking for.
Long story short: The ECB is worried about Bitcoin because unlike e-gold and other centrally clearing solutions, the peer-to-peer bitcoin doesn't have a central guy doing all the transaction clearing so there is no-one to bully and arrest.
If I don't need a physical safe to hold my money anymore, then obviously banks will be forced to go digital as well right?
I'm no expert, but I don't think that most banks would actually hold paper notes for every dollar they are storing for their account holders. In reality banks are already pretty much digital for most transactions.
What I am wondering is when* various governments are going to start enforcing existing regulations^, that apply to banks, on the various bitcoin exchanges.
* perhaps the exchanges already comply with these regulations, but I would be surprised.
^ don't ask me what the regulations are, I am guessing that banking is/should be a heavily regulated industry in most countries.
Oh no not at all, you're right. I'm not sure if this is the correct terminology but, googling it, I think it's called reserve requirement. "The reserve requirement sets the minimum reserves each bank must hold to demand deposits and banknotes." [1] An example they give is Hong Kong whose banks must hold 25% of their liabilities.
During the subprime mortgage, American banks (and some foreign banks but I can't recall them) were deregulated in a way that allowed them to have a higher ratio between their liabilities and what they actually held. This meant they could increase their financial investments without really having the money. I can't remember the exact ratio but it was something like 40-1.
There is absolutely zero concensus on these things, within and without the bitcoin community. So, you can chat with people about it, but there are no "canonical" answers to those questions, except to the degree that you can answer them yourself to your own satisfaction.
Intentional inflation and deflation of bitcoin is impossible, but one could imagine the creation of a digital currency where it would be possible.
You don't need to put bitcoins in a bank for "safe keeping," but in a mature bitcoin economy, you'd probably want to invest them in some form, so there would be banks that give out loans. They can't use fractional reserve banking unless they issue their own "notes" (digital or otherwise) that are redeemable for bitcoin. In such a case, there would be no required fractional reserve, unless one were to be instituted by law. Basically, in all these aspects, you can really think of bitcoin as a digital fom of gold. Banks used to hold gold in their vaults and give out redeemable bank notes, so this has happened before historically.
Aren't there regulations around trade with certain countries? Can anybody speak to the issues around a US company accepting payments from people in countries that aren't too friendly with the US?
Easy: some blogger in an embargoed country gains some notoriety, and then somebody else notices that they have a premium WP.com subscription. That's probably enough suspicious evidence to cause some headaches for the service provider.
There are some tax issues with receiving money from certain foreign countries ("terrorist" nations or "israel boycott" nations) that limits tax attributes related to income received from such nations, so you get taxed on such income but generally are limited in your ability to deduct expenses related to such income.
Legally, there are some export laws that may apply, but those depend on the good or service being exchanged.
That's very interesting. There are two things, which seems to be crucial if Bitcoin will become more popular.
- How banks would react? They would loose they power of creating money (which is good, since they create mostly sick kind of money - http://www.moneyasdebt.net)
- How goverments would react? Would they try to tax Bitcoin incomes, if yes, how to do this?
For some reason, I always thought it was matter of time that Bitcoin would be declared illegal. People say different things regarding its legality so I will continue to stay away from it, at least for now.
Though, I think Automattic wouldn't accept it as a form of payment if there was such a possibility.
Is there anyone who can enlighten me about the legality of Bitcoin?
BitCoin's price seems to be stabilizing a bit, which means it's less deflationary. This I think is whats starting to encourage people to use it for commerce instead of just holding.
It will be interesting to see what happens to these initiatives next time there is either an upward or downward move in price.
The bigger the economy behind it starts to become, the less it will be affected by speculation-based transactions, too. So in the future I doubt we'll see crashes like the one from $30 to $10 again.
Does anyone know if Paypal gave a reason for blocking Bitcoin? Is it simply because it can be a competitor in the future? Oh well, more market for Coinbase and the others then.
I think they have a general policy against using PayPal to exchange digital currencies?
The _real_ reason is that lots of scammers used paypal to buy bitcoins, and would then initiate a chargeback. High chargeback rates are painful for payment processors, and lead them to dropping those merchants with the highest rates.
Fraud issues aside, I'd be surprised if there weren't regulatory concerns, especially considering how many countries PayPal is licensed in. Currency exchange might not be covered by their money transmission and banking licenses in all regions. The U.S. federal government has shut down other "virtual currency" companies in the past as well.
And the Euro. But yes, I think so. My only concern is that if it becomes a 1 trillion $ worth of economy, you'll be talking in very small decimals of Bitcoin. Everything will cost like 0.000000x Bitcoins. I think this will be a very poor UX for most people. Unless they give the smallest decimal another name (Bits, coins, nanocoins, whatever), and then everyone deals in nanocoins, rather than Bitcoins.
I wish the designer of Bitcoin would've thought about this before creating it. Maybe he just didn't think Bitcoin will become that popular, and become orders of magnitude more valuable than a dollar in a more distant future.
Actually Satoshi discusses this in his original paper many years back. People will just transact in a smaller unit, like micro bitcoins. The official client has the ability to display your balance in a smaller unit. It all works quite well.
What will WordPress do with the Bitcoins they receive? Do they have business costs that can be paid with Bitcoins, or will they simply trade them for a "real" currency like USD?
lots on news this week n accpeting bitocoin! reddit is looking into this too!
the world is shifting to bitcoin!! if it is indeed less inflationary/deflationary than we can just transfer USD into bitcoin on www.coinbase.com (which is pretty much paypal for bitcoin) - S12 YC company
I think that wins the prize for the most hyped remark on HN, ever. Really, the world has not shifted to bitcoin, it won't shift to bitcoin in the near future and possibly never.
Bitcoins are interesting, a very nice implementation of the idea of a digital currency with some thought provoking possible consequences. (See: http://en.wikipedia.org/wiki/Assassination_market), but it isn't a general currency at all, let alone that the world is switching to it.
What you are seeing is that a few companies have caught on to using bitcoin as a way to promote themselves because 'accepting bitcoin' is a way to get free press.
Can you get by for a month just spending bitcoin without any other resources than bitcoins at the beginning of the month, sufficient for a normal months' worth expenses?
When you can go to your local greengrocer and buy an apple with bitcoin I'll cede to you that the world has indeed switched to bitcoin. Until then, it's neat but not quite there yet.
There's nothing "thought-provoking" about assassination markets, especially in the context of bitcoins. Maybe that's just because it's 2012.
The guys at https://www.bitinstant.com/ are in the process of making a debit card backed by bitcoins, so when that's out, you will indeed be able to buy everything you currently buy with a card. However, at that point I still wouldn't agree with the assessment that the world is shifting to bitcoin. For that I'd need to see at least a few billion dollars market-cap, I'd be much more comfortable with a trillion dollar market-cap.
There are bitcoin exchanges using various methods, for example by SEPA bank transfer.
I think many people without credit cards can use Paypal but don't want to.
I know it doesn't matter, but I think its still kinda funny that revenue in one day on the Amazon store is more than the entire net worth of the whole Bitcoin network.
This just means its early days for Bitcoin. I fear governments will present themselves as a major obstacle in the next 5 years. Lets hope i'm wrong, the idea of Bitcoin is really interesting (in a good way).
Crazy enough that it's genius.
I smile a little every time I see "Bitcoin Now Accepted Here". I personally don't use them, but the ideology behind the currency is fascinating and remarkable. Not to mention the credibility WordPress gives it (and hopefully soon, Reddit...).