> The dollar is said to be "elastic," as the Fed can increase or decrease the money supply at any given time essentially by telling the Bureau of Engraving and Printing to simply print more money using fancy moneymaking machines and crazy-complicated inks and textiles.
Or they could just tell them to conduct open-market operations and buy an existing US Treasury bond from the lowest bidder on the open market. Which is what they really do to manipulate the supply.
(To say nothing of banks creating money with loans...)
Don't you hate it when people conflate money with credit. That's why all the bitcoin fans can never win; even if bitcoin was the world reserve currency (similar to how gold still is today - held by central banks), it would mean jack shit because everyone would use fractional reserve lending and credit, like we've done for ages, with the booms and busts and skimming that go with it. So IMHO nothing will ever change.
Did I just realize that all money in our current form is credit and I never actually own anything? And whom ever controls the biggest source of credit controls the value of the "money" in my pocket at anytime? The only truly valuable thing is experience.
> Did I just realize that all money in our current form is credit and I never actually own anything?
You own whatever you exchange your money for, in the simplest terms. Even if it's a bitcoin or a "financial security" or a share or a chunk of gold, or indeed a pork-belly, an iPad etc. etc.
it would mean a distributed work-based hashing process would be the determinant of money supply of the world reserve currency.
The world reserve currency is the US dollar. Even if a central bank holds gold as a store of value, they price it and their own currency in the US dollar. If any commodity was to be labeled a de-facto 'world currency' it would be petroleum, as it is a commodity that everyone MUST purchase in some fashion.
The monetary supply of the US dollar is determined by the Fed, which has no oversight from or obligation to the countries which that monetary supply affects. It's clear moral hazard, on a global scale.
people would still use fractional reserve lending, and credit. But, no one sovereignty would be in control of the supply of the the medium of exchange they used.
I'm not arguing it would improve anything, but it would certainly be different.
We already had, in essence, a 'proof of work' system with gold. Gold supply increases by only a percent or two per year, and it is highly resource / energy intensive. And note that many central banks, including US, China, Russia, have and /or are even adding to their gold reserves. (Ben Bernanke says it's for 'tradition' - cough, cough, eye roll, cough)
But as JP Morgan said, "gold is money. everything else is credit." Banks don't care about the underlying reserve money as long as they control the credit, which gets used as if it were money.
>but it would certainly be different.
I don't see how. And even if it were, the powers that be like things just the way they are.
> We already had, in essence, a 'proof of work' system with gold. Gold supply increases by only a percent or two per year, and it is highly resource / energy intensive.
But the people doing a lot of the hardest dangerous work get very very lite for doing so. Money is made by pushing buttens at the right time to move numbers around a network.
>Money is made by pushing buttens at the right time to move numbers around a network.
Yes, and that's probably not going to ever change, not sure what your point was....
But here's where people get REALLY rich. Banks financing government debt (pushing a button, as you say) which is cosigned by 300 million of us serfs, for stupid unsustainable shit like wars and welfare. The banks and credit masters win, and the rest of us are FUCKED.
PS guns and butter was what led to the end of the gold standard. If you think bitcoin is going to somehow stop governments from over spending, or banks from over lending, foreclosing, and buying assets for pennies on the dollar, you need a history lesson.
“The whole point is that we’re not a quick scam," Nathan
Gudmunson, the chairman of the Worldcoin Foundation, told
Ars. "Our coin is clearly not that, and we’re trying to
build up a payment system around it.
...well that didn't turn out too well. Gudmunson and several other (now former) Worldcoin Foundation board members started an exchange/payment system called Scharmbeck. Scharmbeck took large amount of investor money by selling "fee shares." Scharmbeck shut down shortly after. Gudmunson and several other members were removed from the Worldcoin Foundation board, the cryptocurrency collapsed and has never recovered. Investors holding Scharmbeck "fee shares" will likely never see a return and have lost almost all of their initial investments
This has been predicted by Ethereum's founder (and others, I'm sure). There will be millions of crypto-coins in the future. Any company could launch its own crypto-coin, as some sort of "shares" from the company, and a way to fund the company as some sort of mini-IPO. Think of it like Kickstarter for crowdfunding, but you'd actually own part of the company by buying their coins, and your coins will grow in value as the company's value grows. You could also easily sell those coins back into other currencies whenever you want.
Of course, this would be much easier if all of these millions of coins would be built on top of a crypto-coin platform, where you could also have P2P exchanges that can exchange these currencies much more easily and securely than a centralized exchange can. Things could get easier still for doing this, if companies just become Decentralized Autonomous Organizations. That's basically what Ethereum is trying to achieve, among other things.
> There will be millions of crypto-coins in the future
This doesn't make sense. If everyone had their own altcoin, even if they all used Scrypt, nobody would be secure because a 50% attack on your personal blockchain would be trivial. Bitcoins security relies solely on it being one of few significant coins of its kind.
In any case, Bitcoin is huge because its decentralised and nobody has to make decisions. If everyone had to decide what chains to trust then you may as well switch to a superior cryptographic protocol that allows you to mint your own coin without a blockchain. These exist, there's just no incentive for them inside the traditional banking system (too anonymous), or indeed on the inter-personal micro scale (too inconvenient).
Coloured coins make sense, but that's not really the same thing.
So a form of arbitrage against Bitcoin may be to create your own cryptocurrency, mint a few million of them for yourself, hype it on HN, then cash out and profit? Sounds like a classic pump-and-dump junk bond scam, to me.
> Bitcoins security relies solely on it being one of few significant coins of its kind.
So there's no technical security at all then, just the hope that hash power won't switch away to a new currency (which they have incentive to do - get in on the ground floor and cash out, as another poster said) It's all 'trust'. And a guaranteed cartel structure - the rich / powerful control 50% of the hashing power anyway.
There's security... because there's no incentive for most to risk investing in a new currency, especially when it's a minefield. The structure of the mining pools is what you want watch if you want an indicator of how safe Bitcoin is though, the original grassroots appeal of mining on your own own CPU/GPU is gone, and now its all in the hands of commercial outfits with ASICs and enthusiasts in denial.
It wouldn't surprise me if we had a Bitcoin Miners Council at some point in the future.
which they have incentive to do - get in on the ground floor and cash out
So they have savings in Bitcoin, plus an income in the form of mining fees, and they have an incentive to destroy those savings and income because they can invest instead in a completely new coin, of which 99%+ fail without ever getting anywhere? That makes no sense.
Why is hash power required to have 'savings in bitcoin'? I can see mining fees.
Regardless, you haven't refuted the 'no technical security' assertion. It's just a question of incentives, dealing, and collusion, which comes down to human nature. Not very appealing - I'll stick with hard assets, thanks.
Why is hash power required to have 'savings in bitcoin'?
Because without hash power the currency can be manipulated (e.g. double spent), which means that people won't accept Bitcoins, which means their savings would be worth their weight in Zimbabwe dollars.
Everyone holding BTC has an incentive to keep the hash power high.
Regardless, you haven't refuted the 'no technical security' assertion. It's just a question of incentives, dealing, and collusion, which comes down to human nature.
Which is the same thing preventing another Executive Order 6102. You can't escape human nature.
Wow. This really isn't making me very confident of bitcoin. You're saying that people (i.e. joe schmo) who have bitcoin deposits need to constantly make sure that the majority of computer hashing power in the world can't be used against them? So, like, the fastest computers in the world need to be focused solely on bitcoin mining otherwise the system isn't stable/secure? Jay-sus. Lets ignore 'dark pools' of compute power that are suddenly turned on during an attack (or even make a threat of an attack, and extort people into 'protection' money), or collusion between 'pools'... yeah, the double spending attack really is uh..dumb... You know, if a government had proposed this system (bitcoin), people would be all over it pointing out how weak it is.
> You can't escape human nature.
Total agreement there. Just get out of the herd's way. Edit: and right now I see the herd running into bitcoin.
Edit 2: I read some smart people got around that executive order (at the time) by buying foreign currency that had already done the devaluation (timing is everything!). (Which lead to unwanted strengthening of those foreign currencies)
You're saying that people (i.e. joe schmo) who have bitcoin deposits need to constantly make sure that the majority of computer hashing power in the world can't be used against them?
It's not like it can be used against someone personally. It can't steal someone's coins. What the attacker can do is:
- Revert their own transactions (I pay you 10BTC, then I revert that payment and I use the same BTC to pay someone else). This is what is called double-spending.
(Essentially, it's something like a chargeback, which aren't supposed to exist in Bitcoin.)
- Prevent the validations of some or all transactions, for as long as they control the blockchain.
So, if they just do a temporary attack, it'd cause some troubles (as it has in the past already), but not necessarily catastrophic.
You know, if a government had proposed this system (bitcoin), people would be all over it pointing out how weak it is.
I'm sure they would, yet everyone uses Credit Cards despite the $190 billion of losses due to fraud that occur every year.
Just get out of the herd's way. Edit: and right now I see the herd running into bitcoin.
That's completely contradictory with your previous statement. If there's an herd, it has been towards buying gold. Bitcoin is a blip in the radar. HN is far from representative.
> If there's an herd, it has been towards buying gold. Bitcoin is a blip in the radar.
Fair enough. Gold market cap ~$8 trillion, BTC ~$8 billion.
I do find BTC quite intriguing for international movement of assets - particularly if you can do it in small chunks at a time (to limit risk, like the double spending attack, or counter party / exchange risk in general...).
Going even further, a cryptocurrency could be like shares in a company which can earn profit by performing services that couldn't be done except by a distributed autonomous entity.
The founder of Ethereum used to be a founder at Invictus, a company with several DACs in the pipeline (check out http://invictus.io/bitsharesx.php). He was asked to resign for mysterious reasons.
"If I had before me a fly and an elephant, having never seen more than one such magnitude of either kind; and if the fly were to endeavor to persuade me that he was larger than the elephant, I might by possibility be placed in a difficulty. The apparently little creature might use such arguments about the effect of distance, and might appeal to such laws of sight and hearing as I, if unlearned in those things, might be unable wholly to reject. But if there were a thousand flies, all buzzing, to appearance, about the great creature; and, to a fly, declaring, each one for himself, that he was bigger than the quadruped; and all giving different and frequently contradictory reasons; and each one despising and opposing the reasons of the others—I should feel quite at my ease. I should certainly say, My little friends, the case of each one of you is destroyed by the rest. I intend to show flies in the swarm, with a few larger animals, for reasons to be given."
> "how shall I maintain my faith that bitcoin has a value these others don't"
If you believe currency value derives from scarcity, you should never have believed bitcoin had any particular value. If you believe value derives from the network of other people who agree to use it for transactions, then scarcity was little more than a marketing bullet-point for the early adopters.
I think they're more against institutionalized violence that is necessary to make these fiat currencies sustainable [1]. If consenting adults want to trade in monopoly money, knock yourself out. Just don't hold me at gunpoint and make me trade in your monopoly money.
You know, one of the things I've learnt from libertarianism is that institutionalised (and therefore restricted) violence is actually necessary to the operation of society. The alternative is unregulated, private violence, possibly by external actors (qv Ukraine)
Would you agree that the ideal number of gangs to occupy a territory is 1? Because if you had two, they would fight each other, and if you have 0, you might get something worse than the last gang? While I'd disagree, I can't really fault that logic.
I think it's simplistic to call a democratic government a "gang", but even within the analogy, the danger of having zero is that the resulting power vacuum isn't a stable system. Gangs will spontaneously arise as people who have the talent and skill to lead men in organized violence realize that doing so is the rational course of action in a world with no higher power to stop them.
Interestingly, all the Bitcoin heists are great examples of this. What are they other than (digital) violence? I think they clearly demonstrate that when people are unrestrained by some power, that many people will realize it is advantageous to take rather than to transact in mutual ways. Now, I'm willing to entertain the idea that there are solutions to this problem that don't involve centralized power, but I disagree with libertarians who throw around the word "violence" as if it's some creation of government rather than something intrinsic to and widespread within society. It's not something that can be taken off the table with a declaration, but a problem that must be managed through some mechanism.
Of course it's simplistic. A gang is made up of criminals and criminals are defined by the largest occupying gang. Gangs are like government startups if you will. They offer protection and services and represent themselves with flags and other branded accessories to distinguish themselves from competing enterprises. Fortunately in this market customer consent isn't entirely necessary. It's an industry where the market share is determined only by what you can extort or point a gun at. Taking neighboring turf is risky, but highly profitable. The higher ups will send the low ranking gangsters to serve a higher cause such as brotherhood and civility, and ultimately serve bullets to the neighboring gangsters (as identified by their distinguishable uniforms). Sure they may die, but they did it serving a greater cause. Of course, all parallels drawn here are merely coincidental.
What is it called when hank paulson puts the members of congress in a room and tells them to write him a blank check? Somehow, I don't really think 'we the people' are running things, or ever have.
No, I'd go with Montesquieu; it's beneficial to have multiple power groups provided that they generally prefer to compete peacefully adnd procedurally. If one group or actor decides to do something unacceptable, they get defeated by the others.
Well, they would, if they weren't fiercely denying any fact that might undercut the pitch that got them on board: "fiat currency bad. mathematically-enforced deflation good!"
The main pitch of bitcoin is electronic transactions with no central coordinating system. If bitcoin didn't heavily favor early adopters, no one would have gotten on board.
It's even still technically possible for bitcoin users to agree on a code change that would keep making coins forever (like dogecoin). It would result in a hard fork of the blockchain, but if most clients agreed to it, it would work just fine.
I guess it's the same as with paintings. Bitcoin is like a Picasso. There are just so many and you have to pay a lot of money to get one.
On the other hand, if you go to the next university and visit the art classes, you'll find enough talented people who'll sell you their own pictures for a lot less.
My neighbour two doors down is a regionally known full time professional painter hustling between teaching and shows and creating works that start at a few thousand dollars and sell at those prices.
But a few years ago the artist's agent brought an offer that was too good to refuse - license some works to a high end retailer for Giclee prints. It provides a real base income that pays the mortgage and the heat and the water bill.
For those not familiar with the term "Giclee"[1], it's faux-French for "Serious art collectors will pay us more if we use a made up French term instead of inkjet."
Things have value because they have demand. Things have demand because they provide utility. Relative utility determines relative value. And actual price is the ratio of demand:supply. So ask yourself, do any of these altcoins provide some utility bitcoin doesn't? To the extent any do, they will have value to the extent of their marginal utility over bitoin and other altcoins.
Every altcoin is trying to provide some marginal technical improvement over Bitcoin, and hence some marginal value. But Bitcoin's first mover advantage, resulting network effects, and stable/reliable core dev team and non-profit foundation all provide significantly more utility - namely trust - than the marginal technical improvements of most altcoins, hence why most will never approach Bitcoin in value.
Litecoin is one exception, as the first widely trusted altcoin with a few technical improvements over Bitcoin. Ethereum could also be a possible exception to this, if they can make it work. Very ambitious, will probably have growing pains for a few years at least.
It appears to me that much of the exchange value of bitcoin has been driven by speculation upon future rewards. If true, maybe JesusCoin has more merit than it appears at first blush. As Pascal might say, "what have you got to lose?"
+ I find the use of "altcoin" to cover all CryptoCurrency that isn't bitcoin an interesting coption of terminology.
+ Non-profit doesn't mean charity. One hypothesis is that bitcoin foundation members had a vested interest in putting off MtGox's collapse for as long as possible. I'm not sure if this is better or worse than the alternative hypothesis that the most knowledgeable minds in the bitcoin industry had no clue that MtGox was insolvent.
+ The technical sophistication of the bitcoin team provided the false halo that created trust of organizations in the bitcoin industry who have to roll their own security - i.e. the cryptographic sophistication of bitcoin does not make a bitcoin exchange secure. None of the "altcoins" solve the problem of stolen coins.
+ Altair was the first mover in the personal computer space.
And Ebay was the first mover in the online auction space. I'm sure we can cherrypick counterexamples all day, but in general the first mover enjoys an advantage those that come after do not.
I think there's two kinds of value. A short term (definitely less than a year, medium of exchange), and long term (saving for retirement). Clearly the long term value is questionable given there is no scarcity; that would seem to be a necessary but not sufficient requirement.
So yes, you hit the nail on the head. I have pointed out the same thing before, that there is an infinite supply of crypto currency.
If you ask me, I'd prefer south sea shares for long term saving. No, just kidding, I'm a tulip bulb guy - those are at least finite.
Tulip bulbs are no better than Milo Minderbender's Egyptian cotton, but if you cover CryptoCurrency with chocolate, you can't even taste the CryptoCurrency.
> there is an infinite supply of crypto currency.
> I'm a tulip bulb guy - those are at least finite.
Surely this is exactly back to front? Tulip bulbs are part of a reproducing organism and hence theoretically infinite, whereas Bitcoin and most other cryptocurrencies have a maximum number of coins that can be mined. Sure, there's an infinite supply of cryptocurrencies but that isn't the same at all. There's also an infinite supply of printed bits of paper, modulo trees and ink, but that doesn't mean the dollar is worthless.
"The heat being emitted by this funny looking computer in a milk crate is a key trust indicator for you." Now go back to liking photos of people holding things to their head pretending they are talking to the President about the Ukraine situation.
Out of all the altcoins, seems like this one has strong real-world application and brings a lot of value to these Indian tribes. Similar to what Bitcoin has done in other nations that lack a strong national currency.
MazaCoin is also the "official national currency" of a Sovereign Nation, so it can't "technically" be outlawed. Huge step forward for crypto currencies? Outright scam? What do you guys think?
Thoughts on this coin in specific? Altcoins/cryptocurrency in general?
For now it's just another altcoin (zetacoin clone) that is riding the same speculative trend as auroracoin has been for the last couple weeks. If it is actually officially recognized by the tribe and if it starts getting used more like a real currency on tribal lands, it stands a chance at establishing a more stable value and breaking new ground as a cryptocurrency. I figure this is at least several years off and is highly speculative in itself. The coin additionally still has the problem that all the others do, and most of them will end up in the hands of cryptocurrency speculators and not indians, which would seem to cast a rather uncertain future on the coin.
That being said, I bought some and am mining some, I think it's cool.
Why not "ArsTechnica Electronic Coin" or "Ars e-coin"?
These could be used to purchase "ArsTechnica Electronic Hats" or "Ars e-hats" for avatars. Spend more coin, get a bigger hat. The biggest arsehat would have invested in acquiring the most arsecoin.
Yes, I'm giving away my best startup idea so far today.
Soon there will be a "make your own crypturrency" kit and every little retailer will offer them like giftcards. It's almost like the rise of money all over again, expect this time instead of nationstates, it will be large multinational corporations likely to dominate. What's the Target/Walmart rate today on the forex?
I'd be surprised if Paypal (or the people likely to kill them) aren't secretly chewing on this as we speak.
Which will be kind of like the olden days of a hundred or two hundred years ago, when every state issued its own currency, or every bank, or every goldsmith.
Which is to say that it will fly in the face of the general trend of development of these things, which has been towards fewer currencies, not more. More currencies means more friction in trade and commerce, since it makes price comparisons harder and forces buyer and seller to constantly be making conversions; this in turn means less commerce happens, which makes everyone poorer. That's a bad thing, not a good thing.
If only there was some sort of device that could automate the conversion process, perhaps to the extent that humans never have to worry about any friction on their level at all.
"Just give me a few minutes to upload my XCoins from my XWallet to XY-Exchange, convert them to YCoins, and a few more minutes to transfer my YCoins to my YWallet".
Either that or you keep all your coins sitting in said exchange so you can instantaneously convert them and pay out. And then lose them all permanently when the exchange has a security flaw.
I provided the convenient option. It's just that it leaves your funds massively exposed. The relatively lengthy transaction times built into *-coin transfers are going to make most conversions 'clumsy'. What alternative would you recommend?
One possible option that required 10 seconds of thought to come up with- multicoin wallets on both ends of the transaction.
Why can't people (on this site of all places) spend just a little bit of time thinking about how things could work well instead of merely pointing out problems?
Not sure that's a good idea, as it lets people create their own giftcards by mining coins. If a company make a cryptocurrency that isn't accepted anywhere else, they essentially end up giving away free stuff.
Getting paid for a good or service with USD is useful because you can spend it to cover your expenses. If Overstock made OverstockCoins instead of accepting bitcoins, how do they pay their suppliers?
I guess that's more or less what Ars is doing, but I don't see how it makes any sense.
Would they really want an easily tradable currency to replace giftcards? I don't know what the redemption rate of gift cards is, but I imagine it's much less than 100%, which is pure profit.
Also, people have an incentive to concentrate on the strongest currency. The one with the most mining is most secure against 51% attacks, and the one with the most users is most useful.
> The one with the most mining is most secure against 51% attacks
Do you mean: A. an attack by the rest of the earth's computing power (e.g. you try to have miners control 51% of the earth's computing power - highly doubtful) or B. an attack by colluding mining pools?
It seems like the B (collusion) attack is simply a matter of the number of pools which have to collude, and not actually related to the absolute value of CPU power. And for A, I'm struggling to see how much [non-colluded] miner power you'd need to fight off an external attack.
The whole value proposition [of cryptocurrency] is the digital
scarcity, and if you have a million of these things then you’ve
devalued all of them.
...
I say the more the merrier, the more people trying stuff. You can
create these economies out of nothing! ... I will buy any coins I
can get my hands on.
I haven't seen much discussion of this topic. If you assume that Bitcoin and Litecoin have value, and that value is preserved through scarcity, what does it mean when anyone can clone it and create their own currency?
Value comes through scarcity but more importantly willingness to accept the currency for goods and services. Anyone can make a currency out of shells and beads, but it will only have real value when more people will accept it as payment.
I imagine it's not much different than different real world currencies; they'll all become relative to one another through a common conversion rate (ie. USD).
Plus somewhere in the middle someone will create a meta-cryptocurrency payment service and sign up vendors to accept any type of cryptocurrency while making a conversion fee.
Maybe the value comes from the network of miners and users of the altcoin.
If a new cryptocurrency becomes popular and steals miners and users from an old cryptocurrency, the value of the new coin will increase at the expense of the old coin.
But if the new cryptocurrency brings in new miners and users, like Dogecoin has, then the value of both old and new can grow.
The creation of a new coin has no bearing on the scarcity of another.
Scarcity is just one requirement for something to act as a currency; another would be that it can be exchanged for goods and services (read: other things that people value, and for which they want things that they also value).
> have value, and that value is preserved through scarcity
Adam Smith, Benjamin Franklin, Thomad Malthus, David Ricardo, Jean-Baptiste Say, Thomas Malthus, John Stuart Mill etc. and all the early economists did not believe value was preserved through scarcity.
People tried to change this idea in the 19th century, but in the early 1950s the idea that value was preserved through scarcity was only held widely in the USA, and perhaps in some quarters in Western Europe.
Nowadays things are contradictory. Contradictory in the sense that the establishment speaks about government and free market in a certain way, then flips to the total opposite idea and demands banks be bailed out by taxpayers, then flips back to what they were originally saying once that is done.
The establishment economists say value is through scarcity. Then they demand that mp3's, movies etc. not be "pirated" because "artists deserve the fruit of their labors" and the value they imputed to these mp3's, movies etc. But how can that be if value is derived through scarcity? If things are write once, read many, then there is no unfairness going on if no one buys movies and songs and "pirates" them.
The mainstream economists say value is derived through scarcity, but then, when things can be reproduced digitially with no more scarcity, they try to impose the old legal system on things - the legal system which always more-or-less acknowledged that value came from labor time, whether or not the idealogues acknowledged things as such.
This is also why Bitcoins are as worthless as tulips were in 1637 Holland ( http://en.wikipedia.org/wiki/Tulip_mania ), or bum real estate projects in 2008, or Pets.com and Webvan stock in 2000 etc. The Mt. Gox collapse and such is just the heralding of the inevitable collapse of the worth of Bitcoins.
In science, facts, such as say the inevitable collapse as Bitcoin, or the contradiction of where mp3's derive their value, and so forth, change established theory. But as who gets a bigger piece of the big pie is not a scientific endeavor, it's a struggle with lots of propaganda and such. If scientists predicted something, and then the evidence showed them wrong, they would change their theories. The inevitable collapse of Bitcoin will not change its slick huckster's propaganda one iota. They'll just sucker you into buying into their next MLM scheme. How long until it happens? However long Dutch tulip bulbs, or the housing bubble, or the dot-com bubble went on should be a clue. As Keynes said, markets can remain irrational longer than you can remain solvent. But those who want to understand how the world really works, will look at the inevitable crash of Bitcoin, meaning when they are worth not $630 or so each, but 63 cents each, or less - those who want to understand how the world works will see when that happens and will reconsider whether value comes from scarcity or not. Most won't. The ones who hype it today will have other reasons for why that collapse, which today they say will never happen, will have had happened. The propaganda will go on. But those who want to understand the world can take that time to reconsider things. Even though the discourse will be dominated even then by the phonies and hucksters who were just proven to be frauds. That day will come in the next few years, as it is impossible for Bitcoins to retain value due to "scarcity".
I would be inclined to agree; that value is _not_ entirely caused by scarcity. (Though I will point out that if a resource is scarce, people might put more value on it and try to acquire more now because they're afraid they might not be able to get it later.)
However, for a currency, scarcity is critical! Let's say it was easy (and cheap) for people to print their own dollars. You then want to buy an apple. How much is an apple these days, about $1? That doesn't make sense, the apple store can easily print $1 worth of money and keep the apple. What about for $100? Same thing: it's still one bill. What about $1000000? Maybe. Depends how much harder it is to acquire that amount of paper and ink than the apple. At this point, congratulations, your currency is basically paper and ink. Buying anything remotely expensive (like groceries) involves hauling around tons of paper and ink.
Currency is a commodity, just like any other commodity. Why have certain commodities, such as gold, often become currencies over the past millennia? Because certain commodities like gold are durable, divisible, portable, uniform etc. and thus make good currencies. The US dollar was just a note exchangable for equivalent gold at the Federal Reserve until 1971.
States have tried to issue currencies without backing for thousands of years. Have any of those currencies lasted long? The answer is no. There's nothing about the US dollar which makes me think it will be any different than such schemes hatched in Ancient Mesopotamia or Greece. In fact the worth of three dollars today is about equivalent to one 1980 dollar. The dollar will not retain its value over time, while an ounce of gold from 4000 years ago has a somewhat equivalent value to an ounce of gold today. Inevitably there will be a crisis of confidence, and the dollar, euro, yen etc. will either become worthless, or will be backed by gold, or silver or the like. It's not as if governments today have some magic which makes their dollars and euros valuable in a way that governments 2000 years ago could not.
I can pay taxes with dollars, I can go to USPS and buy stuff, I can go to an Army PX and buy stuff - but this only goes so far. The day will come, maybe decades from now, maybe a century or two from now, when a crisis of confidence happens and the dollar either becomes worthless or backed by gold from Fort Knox.
If the dollar has a real underlying value - WHY does the government still stockpile gold in Fort Knox?
Again I want to stress I'm talking historically and what must happen in a century or two. I am not claiming the dollar's value will collapse in the next year. But if it is not backed by a real commodity once a real crisis of confidence occurs, then it will inevitably lose its value.
Scarcity has nothing to do with it. The dollar until 1971 backed by the commodity gold, is the historical norm. The past 40-something years is the historic abnormality. Which will inevitably transform back to the old way.
You are just confusing exchange value with use value. From the words of Adam Smith:
The word VALUE, it is to be observed, has two different meanings, and
sometimes expresses the utility of some particular object, and
sometimes the power of purchasing other goods which the possession of
that object conveys.
Something can have use value without being scarce. But in the context of a currency, what matters is exchange value, and does require scarcity to be preserved.
In fact, his quote continues:
The things which have the greatest value in use have frequently little
or no value in exchange; on the contrary, those which have the greatest
value in exchange have frequently little or no value in use.
I am not confusing exchange value with use value. Everything you said is correct, except for the bit about scarcity.
If scarcity is needed for value, then how are write-once read many commodities worth anything? Mp3's, software, electronic books, mpeg's? They have no scarcity whatsoever. Their value is not imputed by scarcity, but as Adam Smith pointed out, by the labor it took to create them.
Almost all of the businesses on this website are about the creation of commodities because they are "scaleable". They are scaleable because they are not scarce, like a car, they are WORM (write once, read many).
If scarcity is needed for value, then how are write-once read many commodities worth anything? Mp3's, software, electronic books, mpeg's? They have no scarcity whatsoever.
They aren't. If you believe they are, I have a collection of MP3 files to sell you. Tell me how much do you think each song is worth, I'll sell you for half of that, and you can make some profit. Deal?
Almost all of the businesses on this website are about the creation of commodities because they are "scaleable". They are scaleable because they are not scarce, like a car, they are WORM (write once, read many).
It's not scarce for them, but it's scarce for the consumer. Why do you think everyone here is building SaaS apps and not Free Software licensed desktop applications?
Not that you can't make money with Free Software - I should know, since my paycheck comes from writing it. But what our costumers pay for isn't the software as it is, which many have already downloaded for free when they come to us.
You know what would be totally awesome? A cryptocoin whose core workings are derived from Charity. A coin based on Charity† would offer stronger safety guarantees for complex contracts than any other existing or proposed coin (certainly more than Ethereum). Especially if extended to implicitly capture complexity.
†If you understand the multiple levels on which that statement works - especially on a site named after a fixed point combinator - then I think you will agree I deserve to feel as clever as I did when I wrote it =D.
A cryptocurrency whose hashing was somehow based on protein folding (i.e. Folding@Home) would be comparatively simple to pitch to laymen. Q: "Where does 'curecoin' come from?" A: "From people who research new medicines. Those who perform the most research for new drugs are occasionally awarded new 'curecoins'. Those coins are eventually spent into the economy." Etc.
Protein folding isn't a good "proof of work" problem. Really the expression "proof of work" is misleading. The main point of mining is not the lottery part. The lottery is only a side effect.
The main point of mining is to extend the blockchain. Pick the last block in the blockchain, add the recent transactions and create a new block in a way that is almost imposible to forge. The blockchain keeps all the transactions without a central autority.
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Q: How are we sure that nobody replaced the old blocks with fake versions?
A: Chain the blocks, so they have to forge the old the chains of block up to the newest.
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Q: How are we sure that it's difficult to forge a lot of blocks?
A: Made it as difficult as possible, but not so difficult that it's impossible to find the next block. Pick a problem where we can predict and adjust the difficulty of the problem.
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Q: How are we sure that the blocks are legit?
A: Made it easy to verify. Finding a block should be difficult, but checking it should be easy.
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Q: How are we sure that it's really difficult to forge them?
A: Use some cryptographic secure problem (and hope that it's secure). Don't create your own apparent difficult problem.
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Q: How do we convince people to mine?
A: A lottery! Give 50 BTC for each block they found, plus fees.
Could you elaborate a bit? This sounds promising but I'm having trouble understanding how it would work. You need to donate to charity to verify a transaction?
I have no idea what he means, but there's an interesting crypto called Devcoin that allocates 90% of the mined coins to selected open source developers. It's sort of a charity coin, in a sense. Opens up other possibilities, certainly.
While they haven't yet figured out how to make a proof-of-work do useful work, one can make a relatively low-power one that mostly (95%) substitutes memory latency for computation, as in my https://github.com/tromp/cuckoo
If I were smarter, I would make a folding@home encryption algorithm so that when the NSA is breaking our https encrypted cat photos, they would be curing cancer. Afaik, they have over half the super computer power in the world and always have. Think about that, integrate under that curve, hell of a lot of wasted flops.
"if you look at Bitcoin and you see the contributor list, it’s a dozen people writing a majority of the code. If you lower the barrier to entry and allow people to experiment, you bring more people to develop it in the space."
So true, the biggest complaint from the Bitcoin core devs is that there are few people contributing. Especially when there are heavily funded companies relying on this code.
I have always wondered that why we cannot make intangibles like happiness, emotions as a currency. Even though they are more often than not treated as the real wealth a person can have, we have never ever been able to count these intangibles and store them.
Of course this seems to be an absurd idea at first. But, lets try to think about it, doesn't matter how ridiculous or implausible this might sound.
My mind goes back to the movie "In Time", where time was treated as currency, something on which your life depended, literally.
Can't the smartest people on this planet, think of some thing absolutely fascinating, that may let us, mortal people gather our happiness and maybe able to trade it.
Consider for example that someone who helps people out, people who may not have enough money, but who have the intention to bless that person. Can't that person count/take the blessings and become rich in process.
If this is possible, their might a big motivation for everyone to do good, help people out, get their genuine blessings ...
I know this all sounds really crazy!! Just wanted to dish my thoughts out :)
I think we need a thin client on your Google Glass that feeds your personal interactions continuously to an AI engine in the cloud.
Having established that you were the recipient of a well-merited compliment that significantly pleased you, the identity of the complimenter, and the fact that your benefactor is HappyCoin(tm)-enabled, the engine would automatically calculate the exact monetary value of your happiness and create a microtransaction as payment, which you would then hopefully approve while still uplifted.
There's a Bruce Sterling story, "Maneki Neko", that's always fascinated me as model for a potential future. In it, a master computer tells people to perform certain actions it knows will fulfill other people's needs. The more you put in, the more you're eligible to get out. It is, in essence, a gift economy organized by the cloud.
It's the sort of idea that seems tantalizingly plausible with smartphones and the cloud, but is hard to actually put into practice. It's definitely the kind of thing that could drive a host of startup ideas, though.
I am not sure that an Arse-coin sounds that cool, rather it hits a bum note, has a whiff of suspicion, people might get wind of it, and what happens if it gets wiped (out)?
Or they could just tell them to conduct open-market operations and buy an existing US Treasury bond from the lowest bidder on the open market. Which is what they really do to manipulate the supply.
(To say nothing of banks creating money with loans...)