Tuesday, December 05, 2017


There is a lot of attention currently being paid to cryptocurrencies. On the one hand there are those who claim that their rise in value is actually a symptom that conventional, fiat currencies are crashing. This begs the question as to why precious metals aren’t skyrocketing, and the usual answer is that their prices are being manipulated using the futures market that keeps “paper” gold cheap while “physical” gold is growing scarce; at some point these manipulations will stop working and gold will shoot up to $10,000 an ounce. (Sounds good to me!) This also begs the question as to why, if fiat currencies are crashing, there isn’t much inflation at all. Even in countries that have been plagued with high inflation for decades, such as Russia, this is no longer a problem; there, inflation is now under 3%. There isn’t much inflation in the US either, provided you exclude from it all of the local extortion rackets: real estate, health care and education. (Armed robbery usually isn’t part of the basket of products and services used to compute inflation.) Hyperinflation is not hard to find (in Venezuela) but this is not commonly seen as a worldwide, systemic problem.

On the other hand there are those who think that cryptocurrencies are another type of tulip mania or South Sea bubble: just another irrationally exuberant event that will end with a resounding crash. The standard retorts are “Bah, humbug!” and “This time, it’s different!” A more thoughtful retort is that Bitcoin (and other cryptos) are works of genius, based on the innovation of the blockchain (a sort of distributed ledger where every anonymous participant gets to verify every transaction) and the “proof of work” principle by which Bitcoin is “mined” using computers. In essence, instead of putting their trust in governments (which print money) and central banks (which really print money), Bitcoin users put their trust in algorithms, which are open source and defended through lack of public acceptance of any modification that might compromise them.

Cryptocurrency fans sometimes go on to say how cryptocurrencies are all about liberty and anarchism, cutting out the middlemen—the bloodsucking bankers and governments—and allowing people to trade one on one, simply by rubbing their digital wallets together and trusting the clever algorithms to sort it out. This sounds good, until you examine some of the details.

First, bloodsucking bankers and governments are unlikely to be defeated by an algorithm, no matter how clever, because they use far less technical means to enforce their interests: security agencies, criminal investigators and prosecutors, tax auditors, courts and prisons.

Already, any use of Bitcoin is, under US tax regime, a potentially taxable transaction: if you got paid in Bitcoin and then bought something with it, and if its price went up in the meantime, then you get to pay 20% capital gains tax on the difference. With its promise of anonymity and its ability to transcend borders and circumvent fiscal and monetary authorities, Bitcoin has become a magnet for drug dealers, narcotraffickers, human traffickers, hackers/extortionists and other bad actors. If you use Bitcoin, you automatically end up on the radar of those who hunt for them.

And at a very simple level that should be easy for everyone to understand, if some government decides that Bitcoin is not its friend, it can simply ask you, nicely at first, to relinquish your cyberwallet to it. I doubt that too many of the Saudi princes that were recently disencumbered of much of their net worth while being tortured by Prince Mohammed bin Salman at the Ritz-Carlton in Riyadh ended up playing coy with their Bitcoin stash. Remember, Bitcoin is a popular instrument of extortion, and governments are the biggest extortionists in the world.

Worse yet, if a government decides that Bitcoin is its friend, it can ask, nicely at first, that all Bitcoin transactions be disclosed to it in a timely manner, complete with the tax ID of the party at each end of every transaction. This would be a clever way for a government to shift to using digital cash without having to pay for any of it. All it would have to do is order “compliance”; Bitcoin’s developers would then have to bring their architecture into compliance or risk prosecution for noncompliance. This seems like a cheap and cost-effective way to move closer to financial totalitarianism, placing every single transaction under the government’s microscope.

Second, few people have the technical savvy to understand all the intricacies of the protocols, and as the old saying goes, “A fool and his money are soon parted.” Your digital wallet can be stolen (hacked) or become corrupted, and there is no accurate estimate of the number of Bitcoins that will never be heard from again, making the current market capitalization claims less than reliable. Any world-savvy grandmother can sew a few gold coins into the hem of a grandchild’s coat as a safeguard against unforeseen expenses; but how many grandmothers, or grandchildren, would know how to do that with crypto?

Third, there is the matter of durability and access. Gold does not rust or tarnish. It can become lost, but then it can (at least theoretically) be recovered. A digital wallet, once corrupted, cannot be recovered. A single electromagnetic discharge from a sun flare or a stratospheric nuclear explosion from one of Kim Jong Un’s rockets can wipe out a huge amount of cryptocurrency. Network outages render cryptocurrencies inaccessible. How much Bitcoin trading went on in Domenica, Barbuda or Puerto Rico after the recent hurricane? Unlike a physical pot of gold, cryptocurrency is invisible and cannot be validated without special equipment connected to the internet.

Finally, one feature of cryptocurrency is its essential uselessness as a substance. Gold can be made into wedding bands and communion chalices; it can be pounded into ultra-thin sheets that are used to guild picture frames and onion domes; it is an excellent electrical conductor used for plating contacts and for semiconductor bonding wires; a thin, transparent coating of gold produces window panes that keep out much of the infrared radiation; the list goes on and on…

Cryptocurrency has none of these useful properties. A Bitcoin is a predetermined string of digits appended with another, arbitrary string of digits, called a nonce, that has a certain “useful” property: for example, that its SHA-256 hash starts with some specific number (the SHA-256 hash is a mathematical function that turns a string of digits into another string of digits in a way that makes the original string of digits impossible to compute). Once you’ve come up with it, it is trivial to verify (most computers can compute millions of SHA-256 hashes per second), but coming up with it takes “work.” The difficulty of the work is automatically adjusted so that no Bitcoin miner can produce valid “work” faster than once every 10 minutes, on average. Currently, this “work” is taking up less than 1% of the world’s total electricity consumption, but it’s growing. Gold mining (of ores that are now below 3 parts per million gold) is a huge waste of energy too, but it produces a substance that’s actually useful.

Bitcoin’s one useful property is that at the moment numerous people around the world are willing to treat it as valuable. But what if they are all idiots? Is it your theory that lots of people can’t be idiots all at once because there’s, you know… a lot of them? That’s not a theory—that’s a hypothesis, and it’s been disproven countless times. Yes indeed, large groups of people can and sometimes do behave like idiots.

Back when I was in school I temporarily belonged to a certain hippie commune experimental government program which held an annual retreat at a summer camp. And at that retreat I, along with a friend, once ran a social experiment. We rummaged around in a janitorial closet, found a jug of some chemical or other, peeled off the label and in its place wrote “Useless Substance” in large, friendly letters. Then we placed the jug on a table, sat back and discussed it until it became the center of conversation in the room. A lot of the kids thought a jug labeled “useless substance” was pretty cool; a few (us among them) thought that it was the ultimate in stupid and had fun laughing at the rest. But a few of the cool kids thought it was cool, and most of the not-so-cool kids copied them, hoping that this would make them slightly cooler.

And it would appear that some of those kids, both the cool and the not-so-cool, grew up to contribute to the following phenomenon, which I believe lays out the issue in some detail. Over the past few days a phenomenal amount of real money has been spent on the game CryptoKitties, which allows you to invest in “virtual kittens.” The kittens are priced in Ethereum (a Bitcoin-like cryptocurrency). A few kittens were sold for 50 ETH (around $23k), while the most expensive kitten so far went for 246 ETH ($113k). Prices are rising rapidly, and currently the cheapest kitten is going for $140. People are buying up kittens in order to “breed” them—to produce very “rare” kittens and sell them for even more outrageous sums. The trading is done using Ethereum “smart contracts.” Users interact with the game through their own Ethereum address, via MetaMask, a Chrome browser plug-in. Currently, 15% of all Ethereum traffic is related to the CryptoKitties game.

All of this reminded me of another, much older game. While growing up I spent quite a bit of time playing a card game called Durak, which is the Russian word for “fool.” Unlike most card games, in which the object of the game is to win, the object of Durak is to identify the loser. Cards are valued high-to-low as A-K-Q-J-10-9-8-7-6 (all cards below six are discarded). Higher-value cards beat lower-value cards of the same suit, except for the trump suit, which is determined when cards are initially dealt out. Six cards are dealt out to each player. The next card is flipped over and identifies the trump suit (trump cards beat other trump cards of lower value and all other cards) and the rest of the deck is placed on top of it face down. The game is placed clockwise. The player who holds the lowest-value trump (to be shown to others) goes first, attacking the player on his left. If nobody has a trump, the hands are discarded and the cards are dealt again from the stack. In each turn, the attacker starts by serving a card. The defender has to beat that card using a higher-value card of the same suit, any trump card, or a higher-value trump in order to beat a trump card. The attacker can continue to serve more cards of the same values as any of those already in play, and the defender has to beat them all. If the defender fails to beat them all, he has to pick up all of the cards in play and misses a turn. If the defender succeeds, all the cards in play are discarded. After each turn, players pick up cards from the deck, clockwise starting with the attacker, until there are six in each hand, or until the deck (including the trump card at its bottom) is depleted. The game continues until there is just one “fool” left who is still holding cards. The game can result in a tie if the final attack fails and all the cards are discarded. Variants of the game include: “pitch-in”, where other players, in addition to the attacker, can lay down cards; “shift”, where the defender can shift the attack over to the next person by serving a card of the same value, thus contributing to the attack; and “partners”, where there are four players and those seated across from each other cooperate and may examine each others’ hands in order to strategize. Variations on the variants include being able to “shift” at any point during a turn rather than just at the beginning, “partners” where the partners can exchange their hands at will (though generally not in the middle of a turn), “piling on” where attackers can “pitch in” in any order rather than going clockwise, and quite a few others. Although the rules are supposed to be agreed upon prior to each game, this rarely happens; instead, somebody tries to get away with something, and then the rest of the players take a vote, generally by acclamation, as to whether that’s allowed or not. A special case is when the final, successful attack that ends the game is made using a six of trumps; the “fool” then has to wear it as a badge of dishonor.

I believe that cryptocurrencies share an important property with the game of Durak. “Mining” is not much different from picking up cards from the deck. The way each turn is played is superficially similar to the blockchain. And the person left holding some very valuable cards at the end of the game is identical to the person left holding some very valuable cryptocurrency at the end of this bout of madness. The only really notable difference is that in the game of Durak there is just one “fool” while the game of cryptocurrency is much more “scalable” because there can be arbitrarily many fools.


Trmist said...

Nice to see you defend the virtues of gold. Your gold analysis is probably spot on.
I’m fairly certain that crypto-mania will end in disaster for most.
The speed of the digital realm will accelerate the process.
Giving up on gold many alternative financial commentators are now promting crypto currencies.
I’d like disclosure from all those promoting crypto currencies.
As always thanks for eying the voice of reason.

Unknown said...

Virtual Kittens? Now I know Cryptocurrencies are a Scam. I found it amusing that the Daily Mail reported that the WinkleVoss twins invested Just 11 million in Bit Coin and became Billionaires. Just 11 million like it was walking around money for these guys. What a joke.

Felix5 said...

If you believe in Bitcoin, perhaps the following may curb your enthusiasm a little bit:

If you wonder who is Falkvinge, watch Sophie Shevardnadze interviewing him on RT:

See also this:

And this:

Gruff said...

All the gold ever mined and refined comprises a cube 111 YARDS on a side! Suggesting that an economic system as large as this country’s can be managed by such a minuscule amount of anything, including gold, would be funny were it not so stupendously absurd. They only currency of worth are BTUs ( or other basic energy units) because without energy there is no economy. Period. End of story. Until society begins to understand this immutable realty economic chaos will continue to be the order of the day.

Unknown said...

Thanks for the lucid and entertaining description and comparison. I have been puzzled by bitcoin. My conservative instincts have caused me to be repelled by the phenomenon of crypto-currencies, yet I have had the nagging feeling that I have been missing something in it. My technical knowledge has and continues to be inadequate for me to figure out for myself what that something might be.

Through your writings, I have come to regard you as a very bright guy whose way of thinking appeals to me. That you are dumping on bitcoin is somewhat of a relief. I can now rest easy with my decision to stay away from it.

Peter VE said...

Most of our regular currency is liable to many of the same problems as the crypto currencies. Accounts can get hacked or the power goes down, and the "money" you think you have evaporates, or is unusable. At the very least, keep a stash of cash and old silver coins.

Isabella said...

I, too, a very long way from expert in any of this "Bitcoin" issue, looked somewhat dubuiously at something which purported to hold value, and could be wiped out so easily. I wondered why I was going to believe that I should exchange something which, although diminishing in value, still bought be bread at a corner store, for soemthing for which I would have much difficultury in finding a buyer for that "value.
However, I should make one word of warning about buying gold. Much to my surprise, it doesn't translate internationally as easily as one might think. I have a - very - little gold. When I wanted to sell some here in Ecuador early this year, I discovered that in fact there is no-one in Ecuador who buys gold. Moreover, there is also no-one who would take it back to the Perth Mint [Australia] from whence it came. DHL and Fed-Ex only move papers!! There are no couriers. !! I took it wiht me to Russia - Vladivostok, where I was informed even by the Sperbank branch, that they had no precious metals assayist, for all they knew it could be fake, and thus they too refused to buy it. Luckily for me, I had a private backup for funds, but - it could have been dicey.
Probably in Moscow I could have found a buyer, as there are assayists there. The other issue is that American and Canadian places online wont give as much as spot price for gold not their own issue.
So - yes, gold is a great store of value, and I'm glad I've got a little - but until and unless the world goes finally over the cliff - it's not easily transportable, and this needs to be born in mind.
As to your experiment Dmitry about people and value - it made me laugh. It reminded me of an incident in Australia, when some people, renovating their kitchen, decided the old but working fridge had to go. They put it out in front of the house with a sign "Free to good home. Works well, just take it away". It sat there and sat there for a couple of weeks. Finally they took it away, wiped off the dust, and put it back outside with a sign "$100. Please apply and pay in the house" . It was gone by morning !!!

Unknown said...

Thank you for this analysis, Dmitry. Bitcoin and other cryptos seem to have severely limited utility for purchasing non-DeepWeb goods and services. So then its price would lie in its ability to "store value," or as a vehicle for speculation, or both. You've outlined nicely why Bitcoin is at the mercy of electric grids, internet server farms, hacking, governments, etc., so its ability to store real value is dubious.

Max Keiser has been a cheerleader for Bitcoin since its inception. As an astute investor, he probably started with a sizeable portfolio, and Bitcoin may have made him a very rich man. I'm curious whether you think Max is a true believer, or is simply riding a speculation wave to its crest for a spectacular payday. Have you spoken to him regarding Bitcoin's vulnerabilities?

Alex said...

I'm a little bit underversed in this subject: Dmitry, would you mind doing a post on economics at some point, explaining the workings of it? I think money is a unit in a sort of "voluntary dynamic extinction" (meaning that people go about pretending that they can't do an action without enough of these tokens & without them, their actions come to a halt- kids play freeze tag in the same manner). Voluntary dynamic extinction reminds me a lot of OCD- if someone won't leave the house without patting themselves on the head three times & someone else won't take a resource without doing a transfer ritual of a certain intensity, what's the difference?

rudyspeaks said...

Dmitri, May I suggest to you and the "peak oil community" generally that a great bit of Retro-technology exists for funding. Checks! I'd love to send you $25 for 1 year of access (twice your requested contribution). But I hate using PayPal (and thus losing $ to "bankers", skimmers who shave our contributions) and risking the dangers of ANY internet transactions involving charge cards, bank accounts (I have never set up "on-line banking" although my bank offers it). You lose some convenience, but gain almost 25 cents on every dollar. I recently sent a bundle to CounterPunch, as I depend on their essays, but you, Kunstler, Greer should be compensated too. Anyway, just a note to raise this possibility in case I'm not the only one with this concern. PS: Great articles.

RB Seymour said...

Of course it isn't a store of value.
But it does seem like a good anonymous cross border transaction vehicle.
But this dependents on proximity and reliability of local exchanges.
And what if the exchanges are subject to government regulation?
At this point it still might be safer than using a bank.

Beagle Juice said...

The biggest advantage of Bitcoin to the banking class is that it makes "investments" in money-losing companies seem like a stodgy and conservative thing to do. Besides, now that Bitcoin is trading on the Wall St. futures market, it belongs to them. Forget about the distributed ledger, they are going to ride Bitcoin like a rented mule (poor mule)!

horizonstar said...

I'm reminded of the Video of a reporter wandering the streets of New York with a Canadian Maple leaf coin in hand, offering to sell it for a few US Dollars. Most pedestrians assume he is just a scammer trying to pass some worthless foreign money and ignore him. Takes a number of rejections before he finds anybody willing to part with their pocket change in exchange for $1100 in gold.

Now follow along with the travelers on McCarthy's post-apoptotic "The Road". Which 'store of value" do you think would command the highest price, a 10 pound brick of gold or an ounce of lead fashioned into a bullet and cartridge of common caliber?

What is the source of value for Bitcoin? The ability to move large amounts of "value" from one fiefdom to another on the other side of the world instantly and clandestinely. It remains extremely valuable as long as it works. Price is another thing entirely. Price is only vaguely connected to utility once something scales up to become an object of trade. Price is simply an estimation of how much traders think the next fool in line will pay.

Ganapati said...

Stanislav Datskovskiy,
I don't think the US government will ever come after bitcoin developers making demands to make the code comply with their requirements(what if the developers are in another country) or attempt to ban it. However, there is an easy way for them to kill the perceived value of bitcoin and I think the first step has already been taken towards it.

One big lie that contributed to the popularity and ever increasing price of bitcoin is the claim that there can never be more than 21 millions units of it. While it is true that there can never be more than 21 million units of bitcoin on one blockchain, there is no limit on the number of blockchains that can be created one per each network of peers mining the coins. I am not even talking about hard forks that resulted in the bitcoin cash. I am talking about an entirely new blockchain running the exact same bitcoin code. Of course, the code has to be modified to replace hardcoded references to the resources pointing to servers mining on the current blockchain, but even a beginner in C++ programming can complete the task in a few minutes to a few hours. Of course, coins mined on one blockchain cannot be transferred from one blockchain to another, but since no blockchain is inherently superior to another, technically speaking, that should make no difference. Of course, that doesn't mean the market will value coins on different blockchains equally.

Here comes the move by the US officialdom that can tilt the market perceptions. The Securities and Exchanges Commission recently approved the starting of a bitcoin futures' exchange. This exchange has to first define what is bitcoin whose futures will be traded on it. Given that an infinite number of blockchains are possible, they have to first identify the blockchain the coins on whose futures can be traded on it. That, of course, isn't too difficult. They only have to deploy a full node that joins the currently popular network and declare that coins on the blockchain on that node will be the bitcoin that will be traded on the exchange. Then they have to choose whether the futures contracts will be settled in cash or delivery of bitcoin is mandatory for the shorts. If they choose exclusive cash settlement option, they need to identify a spot exchange and time (bitcoin is traded 24/7 on all exchanges) to identify the price for settling the futures' contracts. Further more, if there is a fork in future which branch of the fork will be used to settle the contracts entered into before the fork and being settled after the fork? What if the reference exchange does not even trade in the branch the SEC approved exchange decides will be the branch to treat as bitcoin for the purpose of futures' settlement? Only satisfactory solution to all these issues is for the futures' exchange to deploy its node on a new blockchain/network, declare the code is frozen in its current state (no possibility of forks), start a bitcoin spot exchange trading in coins on this exchange and use that as a reference for price for settling all trades in cash or mandate delivery of coins by shorts. Whether or not bitcoin futures' exchange starts it with this infrastructure in place, it is bound to end up there because of the issues I pointed out.

When all the US institutional investor money interested in "investing" in bitcoin flows into the coins on this blockchain, what do you think will happen to its price and the price of bitcoin on the currently popular blockchain and other decentralised cryptos?

Stanislav Datskovskiy said...


As I understand, you have in fact described the actual "official" USG Bitcoin-control strategy since 2014 or so -- to support the cranking out of "altcoins" of various descriptions, and to give some of them Official favours (e.g. advertise in Pravda, err, NYT, or MIT press, etc).

It sort-of works : in the sense that it siphons some of the dollars that might otherwise get parked in the market for traditional Bitcoin, into centrally-controlled, properly-censored "alts". At least temporarily. But for some reason the strategy continues to fail to actually kill (in the sense of permanently discouraging buyers and long-term holders, much less destroying the network) traditional Bitcoin.

Evidently there is some appeal in the "real deal", the original "chain", which largely works as described - as opposed to the simulacra, where confiscation typically does not even require catching users and plugging their arms and legs into 220v, but is done "softly", dollar-style, by dilution; or, sometimes, by centrally imposed patches of the client, as in the case of Ethereum ( a popular "alt" . )

The "alts", funnily enough, over the long term appear to actually help the Bitcoinists, by drawing away the more excitable folks whose interest revolves around "get rich quick with pump-and-dump".

As for Bitcoin itself, in so far as my naked eye from the ground can tell, the "lizardmen" (bankers, crowned heads, etc.) have largely learned to live with it, just as they previously lived with the knowledge that some people regularly fly suitcases of diamonds across borders, with invulnerable diplomatic крыша. The most enthusiastic opponents, on the other hand, appear to be the precious metal "remonetization" aficionados, whose thunder the thing (really a half-baked prototype, but sufficiently solid, apparently, so as to resist the combined attack budget of the evil empire to present day, incl. NSA's "acres of crays") "undeservedly stole", similarly to how telephone "stole" the courier's living.

Electrical "bitcoinism" may or may not survive full-bore "Orlovian" collapse in some form; on the other hand, "hawala", pre-mechanization Arabian "Bitcoin of 800 A.D." won't be going anywhere. And future "hawaladars", so long as they can access some form of preserved programmable electronics, will quite likely use some bits of 20th c. cryptography, and come to resemble a Bitcoin node made of flesh. But I don't expect to personally live to see this picture play out.

Roberto said...

Ultimate BTU trading units.... a store room of vodka. Ideal salve for crushed bitcoin retards upcoming.

Ganapati said...

Stanislav Datskovskiy,
I think you completely misread my post.
I wasn't referring to "alt" coins or forks. I was referring to bitcoin (same name), on a different blockchain.
No one has a trademark on the name bitcoin and given the enormous publicity given to bitcoin (Central Bank heads and IMF Managing Director mentioning it by name and excluding mentioning anything else) no one expects any "alt" coins to be a threat to bitcoin. But bitcoin on another blockchain with a ready pool of investors with deep pockets (US Institutional Investors) will dry up the demand for bitcoin on the currently popular blockchain and with it the rest of the cryptos. More importantly, the public will realise that since infinite blockchains of any crypto can be created and if even a crypto as "robust" as bitcoin can be killed off when a competing blockchain with official sanction arrives on the scene, it is not safe to "invest" in any crypto, unless there is a blockchain with official sanction for institutional investors to speculate on.

Unknown said...

Dmitry says a number of things that are factually wrong and show his bias against crypto-currency.

1. "A digital wallet, once corrupted, cannot be recovered. A single electromagnetic discharge from a sun flare or a stratospheric nuclear explosion from one of Kim Jong Un’s rockets can wipe out a huge amount of cryptocurrency."

This is false. A wallet is just a long string of digits that can be printed out on a sheet of papyrus paper which lasts thousands of years. Just go into the British museum and will find many examples. You keep the paper locked in a safe. The number of digits is not so long that you cannot memorize it using memory assocation techniques. As for the block chain transactions, these can be backed up on a special glass disk that is immune to EMC blasts. These glass discs can store 360 TB of data for 13.8 billion Years.


Presumably Mr Satoshi, being a man of great wisdom is regularly backing up the blockchain.

2. "Finally, one feature of cryptocurrency is its essential uselessness as a substance."
Well no, it is not useless, because you can wire it anywhere in the world securely, cheaply and relatively quickly. There are any number of ships lying at the bottom of the deep oceans containing large numbers of gold ingots that were supposed to be delivered to someone on the otherside of the world. Some have been found but many we can only presume, are lost forever.

Unknown said...

Dmitry writes: "Any world-savvy grandmother can sew a few gold coins into the hem of a grandchild’s coat as a safeguard against unforeseen expenses"

A tech-savvy grandmother can sew a piece of a plastic with the public and private key of a bitcoin wallet written on it with indelible ink.
The piece of plastic is not detectable at airports. Gold coins are easily detectable, and maybe confiscated.

Dmitry writes: "but how many grandmothers, or grandchildren, would know how to do that with crypto?"

As they saying goes "there is an app for that". HTTPS is a very complex protocol, but there are millions of grandmothers and children using it everyday with even thinking about it. It's only a matter of time for bitcoin to become as easy to use as HTTPS.

Unknown said...

The size of the bitcoin blockchain is 100 GB

One of these EMC proof glass disks can store 3 blockchains and then some for 13+ billion years.

Ben said...

For really understanding what money is you can go to Karl Marx Capital. Read and UNDERSTAND is the key to deal with most current political and economical problems. The answer that you will come up with in the end is that earning money with money is THEFT. So dealing with Bitcoin is looking smart while being a criminal. Common practice in current western society.

Kind Regards, Ben

Stanislav Datskovskiy said...

Finnian: all of these points are true, but it is important to remember that Bitcoin does require working electronics, and something at least superficially resembling a working Internet, in order to function.

Ben: consider the somewhat less-controversial statement "shooting a man in the back is MURDER". Yet it remains the case that gunpowder -- works. And works equally well for shooting a man in the back as in the front, in a fair fight as well as in a dark alley, etc. Even if, as was the position of the late medieval Catholic Church, its use is "unchivalrous" and "unfit for Christian way of making war" etc. It is important not to conflate the moral and technical side of a question. Wishful thinking, or moral outrage, will not make cryptography go away. Fundamentally there is nothing "magical" about Bitcoin, it is simply a specialized way of crafting difficult-to-forge messages of a particular kind. Not so different from e.g. Babylonian clay seals.

Ganapati: there is already an electronic money system with centralized control, and all of the official backing you could possibly ask for, armies, navies, concentration camps, electric chairs, etc: called "dollar". Let's suppose it were to rename itself to "Bitcoin". Would you find it difficult to distinguish the renamed-dollar from the original P2P network? Why would anyone else? It is not clear to me how this particular attempt to make a disliked reality evaporate, is different from previous attempts.

Re: the dollar "exchange rate", it is somewhat of a red herring -- Bitcoin still worked fundamentally in the same way as now, when it was obtainable for a dollar per "coin". Whoever is bothered by the fact of Bitcoin existing, would have to find a way to make it go to "zero dollar", i.e. become entirely uninteresting to the users. In 2012 I predicted that this would take the form of anyone even suspected of using Bitcoin, being shot without trial, in every major country. Yet for some reason this has not yet happened.