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With Euro Zone Problems, Bitcoin Experiencing Boost In Legitimacy

Soulskill posted about 2 years ago | from the any-old-port-in-the-storm dept.

Bitcoin 430

derekmead writes "Despite being used for drugs and beef jerky, Bitcoin is finding legitimate purposes. Bitcoin's decentralized convenience means international efficiency, in areas where local restrictions on money transfers to foreign companies make legal businesses cumbersome. 'I've been able to have cash in my bank account in a matter of hours using Bitcoin, rather than three days with traditional banking,' one British businessman in China told Reuters. In embattled Europe, Bitcoin offers some a viable alternative against central banks, said a Greek owner of an island bar and restaurant who accepts payment in Bitcoin. 'I don't put money in the banks. I trust the euro as a note, but I don't trust banks. I don't want them making money out of my earnings.' Indeed, Europe's financial woes are caused an unprecedented surge of interest in the alternative currency, as the continent loses economic credibility with each new bailout, according to a report by the Financial Post."

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What?? (2, Insightful)

Anonymous Coward | about 2 years ago | (#40305071)

Let me be first to say:


You know what has more legitimacy than bitcoin? Zimbabwe Dollar!

Beef jerky lolwut? (5, Funny)

Anonymous Coward | about 2 years ago | (#40305105)

"Despite being used for drugs and beef jerky, Bitcoin is finding legitimate purposes"
Is buying beef jerky NOT a legitimate purpose?

Or is "beef jerky" here a euphemism... and if so, dare I ask what for? ("prostitution" would be the obvious companion to drugs, and I'm familiar with a handful of "beef" related euphemisms, but jerky? Hookers with hard, dry vulvas that will abrade the skin off your dick?)

Re:Beef jerky lolwut? (0, Offtopic)

Anonymous Coward | about 2 years ago | (#40305159)

Tying that in with the Zimbabwe Dollar comment above: I heard a number of african groups enjoy dry pussy and in fact may lightly towel them to ensure a proper lack of lube.

Supposedly this was an additional problem to condom usage for reducing AIDS transmission in Africa (I don't remember which country it actually was, but it seemed like a good joke to tie it all together.)

Re:Beef jerky lolwut? (0)

Anonymous Coward | about 2 years ago | (#40305559)

Hookers with hard, dry vulvas that will abrade the skin off your dick?)

That happens to be my fetish, you insensitive clod!

Re:Beef jerky lolwut? (0)

Anonymous Coward | about 2 years ago | (#40305625)

Or is "beef jerky" here a euphemism... and if so, dare I ask what for?

Hand job?

first post (-1)

Anonymous Coward | about 2 years ago | (#40305121)

posting is broken

....someone get that link... (1, Interesting)

joocemann (1273720) | about 2 years ago | (#40305135)

... the one about a month ago where someone stole lots of bitcoins or spoofed or whatever...

Yeh... sure... mod me vague, or offtopic for bringing it up, but if you know what link I'm too lazy andon-a-phone to dig up, you're probably right with me on the disbelief of bitcoin as a smart idea.

The gist of the article, IIRC, was that an exploit to the system existed that produced undeserved wealth for one guy and everyone else got devalued....

Who has the link???

Re:....someone get that link... (3, Insightful)

cheater512 (783349) | about 2 years ago | (#40305163)

And no one has ever robbed a bank of course.

Not sure what you mean by the latter part of your post.
Its not possible to exploit the system that way. Some of the websites or groups using Bitcoin perhaps, but not Bitcoin its self.

Re:....someone get that link... (1)

bmo (77928) | about 2 years ago | (#40305209)

>And no one has ever robbed a bank of course.

Banks are insured.

Bitcoin brokers aren't. They simply can't get insurance. They get robbed, and it's simply *gone.*


Re:....someone get that link... (1)

Omnifarious (11933) | about 2 years ago | (#40305381)

And what do you suppose the finances of insurance look like? It's not like the money appears out of thin air or anything. Sure, the insurance company will pay out when someplace is robbed, but that just means that all your transactions with them are more expensive. You pay for that reduced risk.

If you think bitcoin brokers should be insured, go ahead and start one that is and see if people think the risk reduction is worth the price you pay.

Re:....someone get that link... (1)

tftp (111690) | about 2 years ago | (#40305549)

Sure, the insurance company will pay out when someplace is robbed, but that just means that all your transactions with them are more expensive. You pay for that reduced risk.

Amazingly, not only bank's clients don't have to chip in for the insurance - the bank even pays them INTEREST! Imagine that!

Who then pays for the insurance? Those who want to borrow money today in exchange of returning more money tomorrow. Without them banks would close their doors.

But of course banks' losses from robberies are a drop in the ocean, compared to just daily expenses to keep the lights on. Branches don't even have much cash on hand. Loans do cost money, but out of that cost 99% is the insurance against the risk of your default - not against the risk of some robber getting away with $20K in small bills.

Re:....someone get that link... (4, Insightful)

obarthelemy (160321) | about 2 years ago | (#40305219)

When a bank is robbed, its customers don't lose money. When a bitcoin repository is robbed... ?

Re:....someone get that link... (5, Informative)

Sir_Sri (199544) | about 2 years ago | (#40305287)

Not necessarily true. Banks are only insured so much against failure. Including, for example, if they hold massive amounts of loans to construction companies and construction workers in spain and will not be able to collect those loans.

Thus far the Eurozone has, through various mechanisms, organized bailouts of banks to prevent them from collapsing and to prevent bank runs. However, there is not actual insurance system keeping the banks afloat. There's just the implicit expectation that eurozone governments will cough up the cash to keep all their banks from collapsing and taking the rest of the economy with them.

Re:....someone get that link... (0)

Anonymous Coward | about 2 years ago | (#40305545)

Note: GP may be from USA, where all consumer banks are in fact insured through a Federal corporation, up to a half million or so per depositor. We also have rather more restrictive fractional-reserve regulation, with a reserve requirement of 10% for large banks.

Re:....someone get that link... (1)

Sir_Sri (199544) | about 2 years ago | (#40305631)

yes. And the US government has had to bail out its own banks for the same reason.

Unlike the US the Eurozone doesn't really have one overarching banking rules afaik (FDIC I guess in the US? I'm in canada we have an equivalent here as well), that would insure private deposits.

Basically in all cases the insurer of last resort is the government. If the government can't pay, the bank collapses. Or, as you say, they're insured up to an amount, which may be very high. But it's still just an amount.

You're better off with banks than bitcoins for a slew of reasons, and you're definitely better off in theft scenario with a bank than a bitcoin. But banks still have risks.

Re:....someone get that link... (1)

Opportunist (166417) | about 2 years ago | (#40305797)

All depends on whether it's robbed from the inside or the outside, and whether it's "too big to fail"...

I don't want them making money out of my earnings (2, Insightful)

Osgeld (1900440) | about 2 years ago | (#40305167)

I trust banks more than bitcoin and mattresses, coming from someone who has little credit, zero debt, and as the bank stated a "substantial" account (not that I am rich by any means I just dont go racking up debt ... mainly since I have never had much of any credit from 18 to 33)

life is not all peaches n cream like that either, its GREAT to be debt free ... when you have the crap you want, but more difficult when you sort of need it. Though times get rough its a comfort to know that there's a stash in the savings that may only be earning fractions of a percent a year for when the car blows up, or I break a leg versus HOPING bitcoin values are not tanked, if even still around.

Re:I don't want them making money out of my earnin (4, Interesting)

Darkness404 (1287218) | about 2 years ago | (#40305319)

There are plenty of problems with banks:

A) Capital controls. If you look at the places that have had currency troubles this is the first thing that happens. It starts innocently enough, first you have to "declare" that you have a "large" amount of cash and fill out a form. Next there are limits to how much cash can be brought in and out of the country. Next there are limits to how much money you can take out of the ATM and spend on your debit card.

B) Government reporting.

C) Possibility of collapse. I'm not just talking about a major economic crisis but minor ones such as 9/11 where many banks were not open and were not functioning fully.

D) Inflation will eat up your savings. How much interest is your savings account earning? My guess is ~.5% depending on your bank. The Federal Reserve's official (manipulated) inflation statistics say inflation is at 2.3%, using the older methods of calculating inflation which are not prone to manipulation, inflation is somewhere around 5%. That means you are taking a guaranteed loss. Of course putting cash in something else such as gold, silver, stocks, land, or heck, bitcoins carries some risk, there is at least a potential for reward, it is not a guaranteed loss.

Re:I don't want them making money out of my earnin (1)

DogDude (805747) | about 2 years ago | (#40305439)

None of these "problems" that you mention are best solved by using a made-up Internet currency. All of them are either inherent in government controlled money systems, or the fault of clueless individuals who still use commercial, for-profit banks.

Re:I don't want them making money out of my earnin (2)

Bert64 (520050) | about 2 years ago | (#40305621)

A government controlled currency is still "made up"...
There are not always alternatives to commercial banks.

Re:I don't want them making money out of my earnin (2, Insightful)

Anonymous Coward | about 2 years ago | (#40305449)

That 2.4% inflationary loss isn't a good long term investment.

Losing 80%, like many have in bitcoin, is fucking retarded.

Re:I don't want them making money out of my earnin (0)

Anonymous Coward | about 2 years ago | (#40305529)

I know more people who have 1000% gains in bitcoin in last 18 month than those who lost 80% by buying during a very short period (a week or two) while it was all raging bubble about a year ago.

I also see many viable business working in Bitcoin economy and growing nicely.

There are new projects are in the works behind the scenes as well.

Of course, slashdot public mostly prefer to ignore the reality and whine about their stupid speculative bets. Carry on.

Re:I don't want them making money out of my earnin (3, Insightful)

artor3 (1344997) | about 2 years ago | (#40305617)

And there are people who made 1000% gains investing in real estate in the mid 2000s. That doesn't mean its a good investment, it just means that some people will always be the lucky ones.

It's the height of irony, by the way, that you would tout 1000% gains and end by mocking the "stupid speculative bets" of others.

Re:I don't want them making money out of my earnin (0)

Anonymous Coward | about 2 years ago | (#40305653)

it just means that the rich people will always be the lucky ones.


Re:I don't want them making money out of my earnin (2)

Bert64 (520050) | about 2 years ago | (#40305643)

People have lost 80%, or even larger amounts investing in traditional financial systems too... Look at the large "safe" companies/banks that have collapsed in recent years.
A high risk investment is a high risk investment.

Re:I don't want them making money out of my earnin (1)

Osgeld (1900440) | about 2 years ago | (#40305493)

its not my only investment, and like the ac stated below

That 2.4% inflationary loss isn't a good long term investment.

Losing 80%, like many have in bitcoin, is fucking retarded.

Re:I don't want them making money out of my earnin (3, Insightful)

artor3 (1344997) | about 2 years ago | (#40305615)

A) The limits on withdrawals on your debit card are for your own protection. You don't want someone cleaning you out because they stole your card. If bitcoin were to catch on (big if), it would need something equivalent to a debit card, and such cards would have limits. There are likewise good reasons to be suspicious of people carrying hundreds of thousands of dollars in cash across national borders.

B) "Government reporting" is pretty vague. What exactly is the problem?

C) Bitcoin can collapse just like any other currency. I'm not sure what could lead you to think otherwise.

D) Inflation affects bitcoin just like everything else. You're right that the GP is silly for thinking that his "fractions of a percent a year" is at all meaningful, but that 2-3% loss each year is a constant, and it will hit you regardless of whether or not you're investing your money. So it's always a guaranteed loss. It should be treated as a sunk cost, and investing versus not investing should be looked at separately.

You've taken the bait of the red herring (1, Insightful)

dbIII (701233) | about 2 years ago | (#40305869)

The bank angle here is an irrelevant distraction to be used as a handy bit of misdirection. It really doesn't matter how good or bad the banks are, the question is whether it makes any sense at all to get involved in the old fashioned ponzi scheme in new clothes that is bitcoin or not.
The way bitcoin is set up the you can't have everyone as a winner - if someone makes a killing it is at the expense of a later participant in the pyramid scheme. It's a cynical ploy that relies on the expectation that currency is fiat and not a measure of useful production (sorry kids, the window dressing calculation in bitcoin is not useful production), so the scam relies on supposed invention of another fiat currency.

To sum up, this forced comparison is just designed to make people think that their little non-bank scheme is not bad simply by pointing at a bad bank and pretending to look more respectable than a badly run bank.

As for C), possibility of collapse, with a ponzi scheme that can be replaced by certainty of collapse. I'm sure many of the early adopters of bitcoin that get out in time will do well financially, but I don't think they necessarily deserve even the respect that a convicted embezzling banker or other financial criminal gets. That may sound harsh but wake up - it's an incredibly fucking obvious scam kids and a million miles away from the cool stuff you read about in "Cryptonomicon" that it pretends to be.

Governments can't inflate the currency (2)

Okian Warrior (537106) | about 2 years ago | (#40305189)

As I understand it, inflation is when the government prints more money than the value of goods and services produced.

So for example, in a static economy with fixed production, the government prints 5% more currency per year and spends it, so that inflation is 5% and the value of peoples' money gradually diminishes. (The for-real economy grows with increases in efficiency of production etc, and money wears out and needs to be replaced, but the principle is the same.)

This is a hidden tax on money. It devalues savings, and encourages people to spend and invest rather than save.

It occurs to me that bitcoins can't be abused in this way. It's impossible for a government to blithely print money except by mining, for which there are diminishing returns.

Take away the governments ability to raise revenue by inflating the currency, and you take away a large portion of their income and some of their influence over the economy.

Hmmm... I wonder what will happen when governments eventually figure this out?

Re:Governments can't inflate the currency (1)

Osgeld (1900440) | about 2 years ago | (#40305221)

Ideally they start cutting back, just like you would during a time of decreased income or even no income, realistically they rack up enormous debt to keep the pockets full of those least effected.

For the next guy who shouts BAMMA or BUSH, piss off, this has been "the way" for longer than most of your parents lifetime, and its going to be a bitch to break.

Re:Governments can't inflate the currency (2)

TapeCutter (624760) | about 2 years ago | (#40305841)

The only reason governments cut programs during a time of recession is that they can't get their shit together when things are good. Ideally a government should save more during the good times and spend more during the bad in order deflate bubbles and stimulate the economy respectively. As for bitcoin, the idea that it is a serious competitor to the euro is ludicrous, at best it's a competitor to casino based money laundering services.

Re:Governments can't inflate the currency (1)

Darkness404 (1287218) | about 2 years ago | (#40305245)

The problem with bitcoins is at the end of the day, at the end of the system, they are still worthless. A fun project, fun to have, fun to look at all the technical details, but still worthless. The only value that fake money has (such as the dollar and Euro today) is that you can use them to pay the thieves that demand your income (via taxation) something that bitcoins can't and will most likely never be able to do.

The better solution would be to barter directly or use barter substitutes that are universally recognized for their scarcity, ease to determine if they are genuine, are always in high demand, and throughout mankind's history have never been worthless, such as gold, silver and copper. The biggest problem with that is transactions online still might be detectable so it would not be anonymous the way bitcoin is today.

Re:Governments can't inflate the currency (5, Insightful)

Sir_Sri (199544) | about 2 years ago | (#40305555)

Now the problem with barter is inefficiency, that you can't really pay me in chickens for software with effective granularity. So we really need a unit of exchange that can be broken down into small parts that are easily tradable. Say rice. Well the problem with rice if you have a bumper crop you have massive inflation in rice, and anyone who can grow rice will grow rice rather than something actually useful, since they think they're printing money. If crops fail there's not enough rice to supply both food and currency needs and everyone goes broke. So then we try gold. Gold has it's perks. It can be broken down a lot, it doesn't degrade, it has only limited commercial value which derives mostly from it's being money at all (jewelry). But then there's a constant tick of inflation in gold assuming production can keep up with inflation, and since china, south africa and australia produce a crap load of gold (and especially the latter two who out produce the US), you can end up with one country controlling the value of gold in the US or China or wherever, offering to supply gold cheap, or flooding the market with gold, preventing the US from buying goods abroad or the reverse, making things prohibitively expensive. Oh and since they have gold, they can pay for an army to defend themselves.

Since rice, and gold don't work. lets come up with a new system. The Bimetal, erm.. bigood system, which uses both as a currency, but their individual problems remain. So now lets add into the mix iron, silver, nickel, oil and a few other things, a giant aggregate basket of things to barter with. So to buy a video game from me you need to give me 1 chicken, 25g of silver, 10g of iron, and 250ml of oil. Or just one half of a barrel of oil, but since a barrel of oil is 158 litres, trying to carry around 79 litres of oil is kind of a pain, I'd rather the chicken and the metal, a barbecued chicken sounds good right now. .

So now we've done this for a while, and you get sick of carrying around a large jar of oil, and having to have armed guards for your 2 bricks of gold in your basement, and the equipment needed to shave off slices for payments for valuable things. We agree that we're going to just write down these transactions. But since I don't trust you, because you're a raving fucking loon, and you don't trust me, because I'm an asshole who makes software we need a 3rd party to do it. You and I agree that Okian Warrior is a sufficiently neutral party that any exchanges we make we'll file with him on paper, and it's up to him to decide how much value things have. We start by having everything considered as 'equivalent to gold' but since everything in our wagons full of things used as money fluctuates relative to gold and frankly, we don't want to think about this shit anymore, we have actual work to do, we leave it up to him. He decides that the best way to do this is to only have official notes that he issued and tracked, of course this takes time for him, so he takes a cut. But then, we don't have to pay for armed guards for our gold, so we're net ahead. In the course of this little experience I've had kids, and they're in the software business, and you've had kids and they're in the gold/rice/oil/iron business. And Okian now has to make sure they can get enough of his notes to account for the fact that they have increased the production of software and other goods. More people = more production. So he starts making more notes. The problem with this plan is that he's not really sure how productive my kid is. Lines of code is a terrible metric. So he decides it's better to err on the side of caution, and create a little bit more money than we need, rather than to little. Because if he creates too little you and I can't fulfill our contracts, and never will, but if he creates just a little bit too much we can still fulfill our contracts and we've only lost out a little bit. We still don't need to lug around jars of oil and bricks of gold, or have personal guards for our gold, and we just pay a little bit to Okian for his making sure all the notes are all legitimate and tracking if anyone steals them etc.

Now that we have okian making sure the money is good we decide that we are getting concerned with crime. All these damn kids. Where do they come from? Anyway, they're running around damaging things and we need to get this under control. So we agree to hire Osgeld to keep the kids from stealing and destroying stuff. And we figure that since Okian is getting a bit of money from us every month for managing all these notes we could just give him more money, and he can pay osgeld. Since well, I don't want to have to keep track of that guy we hired to teach our kids, that guy we hired to keep our kids from being murdered from our neighbours across the river, or that guy we now have keeping them from stealing stuff.

So now someone moves in and they want to start trading in gold again. But their kids are protected by the guy we hired to guard them, even if only indirectly because he just guards the river, he doesn't guard individually. They want to go to school with our kids. And they want Osgeld to keep our kids from beating up his kids, and to stop stealing his stuff. But Okian is only paid in okian issued notes. So this guy trying to trade in gold is doing it underground. He doesn't want people to realize he's not really paying for any of that teaching or protection money he has. Or that fire service we got etc.

Now lets give Okian the job 'government' and make sure that every 4-5 years we vote on who gets to be the 'government'. And call the 'barter system' the 'underground economy' which is a giant mechanism to circumvent the guy in 'government' from getting money to pay for all th things we asked him to pay for, so we could focus on our own shit.

Does that sound like a better system to you? Cause I could agree to that. In fact, so can everyone else in the world. So if you don't like living with me, because, by now you probably realized, I'm an asshole with asshole kids, you're free to move somewhere else with people you like more. And vote with them on who you'd like to have in this job of 'government'.

Re:Governments can't inflate the currency (0)

Anonymous Coward | about 2 years ago | (#40305273)

That was quite funny..but you just have no clue about economy and inflation...

Re:Governments can't inflate the currency (1)

Sir_Sri (199544) | about 2 years ago | (#40305371)

Governments understand this perfectly well. In fact bitcoins are built with an explicit inflationary mechanism in mind, as it can be inflated indefinitely to a point.

Once you end up with a fixed total currency you end up with a much much much much much more insidious problem than inflation. Deflation.

Governments don't just print money to devalue currency. They print money to keep up the supply of money with population growth, economic growth etc. If they undershoot then the currency per person goes down. When that happens... well things get bad. Fast. It means debt grows, both personal private, in relative terms, wages need to be clawed back. It's bad all ways around. The biggest problem is debt growing. Your mortgage at 300k when you have an income of 60k looks a lot less approachable when your income is now 50k. And if you want to sell your house well... you'll get less for it, because everything is worth that much less.

Small persistent inflation is vastly preferable to deflation. How small depends. Some inflation lets debt riddled societies claw their way out over time. Right now the eurozone and the US fed should be targeting something up around 3 or 4%. At a rate that small people who deserve more money can always get raises, and people who have money can still get more.

Re:Governments can't inflate the currency (3, Interesting)

Orgasmatron (8103) | about 2 years ago | (#40305551)


The currency generation function in bitcoin is a shift operator. Bitcoins are limited to a precise discrete value. A move to wider registers could allow that number to be higher by a tiny, tiny, tiny amount. There is no "indefinitely" about it.

The rest of your post is just Keynesian nonsense. We get the message. You love debt. You want to reward debtors, which is the same thing as punishing savers.

Deflation is the natural state of an advancing world. Computers have deflated massively against other technologies, and we are all cheering about it. The only people that think that inflation is better are statists and bankers (when they own the statists). Banks create money out of thin air, and they get to sell it (to you!) right away, before it starts chasing assets and driving their prices up. If inflation came from a different mechanism, bankers would hate it too, since it would devalue their holdings then, just like it devalues yours and mine.

It doesn't matter why governments devalue currency, what matters is that they do. Always and without fail. In practical terms, Congress really likes having a bottomless checkbook. That it destroys the value of our currency is a problem for someone else to solve, like our kids.

Re:Governments can't inflate the currency (1)

superdave80 (1226592) | about 2 years ago | (#40305633)

...as it can be inflated indefinitely to a point.

Indefinitely... to a point? I do not think that word means what you think it means.

Re:Governments can't inflate the currency (0)

Anonymous Coward | about 2 years ago | (#40305375)

As I understand it, inflation is when the government prints more money than the value of goods and services produced.

That is one possible cause of inflation. There are many others. Printing money will not cause inflation in theory, and does not seem to in practice, when the desire for savings pushes the intrest rate on "safe" investments (like treasury bonds) to zero. This is a complex subject, and you will not be able to reason correctly about it unless you understand the details.

Please be aware that inflation is an incredibly emotional issue for hard-money types. Learning about economics from slashdot comments is like learning about birth control in a forum full of devout Catholics. Most people who talk about it have a strong opinion, and a weak understanding of the economics. Please use an economics textbook to learn about this topic.

Re:Governments can't inflate the currency (2)

iluvcapra (782887) | about 2 years ago | (#40305445)

As I understand it, inflation is when the government prints more money than the value of goods and services produced.

Inflation is an increase in the average price level. It can be caused by an increase in the quantity of money, or a decrease in the velocity of money, or a decrease in goods and services in the economy.

This is a hidden tax on money. It devalues savings, and encourages people to spend and invest rather than save.

It's an explicit tax on risk-free saving. It's particularly damaging in the current US situation, because banks just take your savings and plow it back into government bonds. Saving in the currency of the state is the number one way of enabling the state's borrowing, unless you stick the dollars under your mattress. Risk-free saving is really just an form of rent; it's getting something, safety, for nothing. TANSTAAFL.

Currency is for short-term liquidity, it's a public service and using it for hoarding is an abuse of a public service.

It occurs to me that bitcoins can't be abused in this way.

Why bother inflating Bitcoins, when you can abuse and defraud the users, delay their redemptions, indefinitely detain their savings, and avoid any kind of institutional accountability, and after all that, they keep coming back?

Re:Governments can't inflate the currency (5, Insightful)

Nursie (632944) | about 2 years ago | (#40305465)

Oh for god's sake....

This is also one of the main flaws in bitcoin. There are a set amount, therefore there must be deflation if it ever takes off. Deflation encourages hoarding because money is likely worth more tomorrow than today. Hoarding encourages further deflation, and we go round.

A small inflationary pressure encourages use, rather than hoarding, of money, and helps grow economic activity. Furthermore, having a central control on currency allows the adjustment of the amount of money to ensure there is enough of it to keep the economy rolling.

A bitcoin-based county-sized economy would be as much a failure as the old gold-based ones were. You, as a hoarder, may feel that inflation is theft. I, as a realist, see moderate inflation as essential.

Re:Governments can't inflate the currency (3, Informative)

this great guy (922511) | about 2 years ago | (#40305557)

You are wrong. The "hoarding" argument has been beaten to death. Current evidence shows that people are NOT hoarding the coins: every day, 40 thousand coins change hands on the single largest exchange: http://bitcoincharts.com/markets/mtgoxUSD.html [bitcoincharts.com] This is six times the number of coins created daily by the network (7 thousand).

In other words, people are not hoarding them, but are trading them very, very frequently.

And this is just measuring MtGox's volume. Other trades (merchant sales, other exchanges, etc) are likely doing even bigger volume...

Re:Governments can't inflate the currency (1)

Nursie (632944) | about 2 years ago | (#40305591)

40k? So what? 40k coins traded daily is irrelevant noise, especially if it's often the same coins going round and round and round.

AFAICT Gox is the not only the largest BTC exchange, but the main financial activity in bitcoin, dwarfing any/all other use. I'd be fascinated if you had data to the contrary.

Also note that the deflationary argument becomes more relevant as the size of the bitcoin economy grows. I see no convincing data that there is a bitcoin economy outside of the exchanges, let alone that it's a growing one.

So why is that? (2)

Fred Ferrigno (122319) | about 2 years ago | (#40305767)

Why aren't people hoarding, if they know BitCoins are supposed to be more valuable tomorrow than they are today? My guess is people still don't trust that their BitCoins will be worth anything at all tomorrow.

Re:Governments can't inflate the currency (2)

Orgasmatron (8103) | about 2 years ago | (#40305589)

Who cares if money is hoarded? The real problem is hoarding of wealth.

If that doesn't make sense to you, it is because you think that money is wealth, but it is not.

Inflation encourages people to hold onto their assets, because tomorrow those same assets will buy more dollars, and the dollars they buy with them tomorrow won't be able to buy the same asset back the next day. Wealth at work is capital. Money at work is debt.

Re:Governments can't inflate the currency (3, Insightful)

Nursie (632944) | about 2 years ago | (#40305607)

If the money supply is hoarded then more and more economic power goes to the hoarders, who are doing nothing but sitting on it.

If you wish to reward inactivity then be my guest. This is not a system I feel I can endorse.

Re:Governments can't inflate the currency (1)

shentino (1139071) | about 2 years ago | (#40305637)

What I'm more concerned about is that lax security will make bitcoins easier to steal than to spend unless you're a technophile. Already it's valuable enough to be specifically targeted by malware.

So if it succeeds it will make geeks an elite.

That plus the sheer lulz of destroying a fortune of someone else's bitcoin stash by sending it to 0 or nuking their wallet will encourage some mavericks to try to ruin one person's wealth to make their own a little more valuable.

Re:Governments can't inflate the currency (1)

Nursie (632944) | about 2 years ago | (#40305695)

Ah, the 'goldfinger' gambit! I like it.

Though of course because it's a currency based on mutually agreed value, instead of a commodity in itself, you would have to do this without destroying confidence in the whole thing. A tricky balance to strike methinks...

Re:Governments can't inflate the currency (1)

im_thatoneguy (819432) | about 2 years ago | (#40305691)

Yep. The economic term for this is "Velocity".

Sure your money might diminish by 5% but if it's sitting in a savings account its value is 0% as far as GDP is concerned.

If I have $100 and I spend all $100 on a haircut and then you spend $100 on a massage and then the masseuse spends $100 on software and so on and so forth. From the GDP's perspective you have 400% the value of the $100 being spent in a day, great return!. Obviously that example is impossible since there is going to be loss of value at each step of the stage due to expendables (e.g. fuel and other overhead items). But unlike someone's money sitting in a bank account that $100 can move through lots of hands and contribute to GDP.

Re:Governments can't inflate the currency (0)

Anonymous Coward | about 2 years ago | (#40305775)

Tell me one thing. Let's say, gold encourages hoarding and USD doesn't. What is the difference in the growth of economic activity between switching to gold from USD for hoarding and using gold directly?

To me, mathematically, it's the same thing. If there were nothing that could be hoarded, we could argue whether it would be better for growth. But there always is, and hoarders are going to hoard.

Gold-based economies fail because fiat currency strengthens the central power. It doesn't follow that fiat is better for you though, citizen.

Re:Governments can't inflate the currency (1)

diamondmagic (877411) | about 2 years ago | (#40305781)

If everyone really thought the price would go up, the price would be that high already. If we knew 100% for sure that tomorrow Bitcoin would trade at 100 USD/BTC, guess what the price would be *right now*? $100 minus the price of time. This is also known as the Black–Scholes formula. There's no positive feedback loop here. Much of analyzing supply and demand revolves around the equilibrium, maybe you've heard of it. The price to buy Bitcoin is, you know, where supply meets demand.

I'm not sure what you mean by "horde". If I hold Bitcoin, that's because I believe it's a better option than any other, which would be investment, or the goods I could buy with it. How does one "horde" currency anyways? It sounds indistinguishable from savings. You don't just print it up out of thin air, you have to trade for it, and you have to profitably trade for it. All those things are good things.

Re:Governments can't inflate the currency (4, Informative)

wrook (134116) | about 2 years ago | (#40305573)

Inflation is a feature not a bug. In fact, you have listed the main benefits yourself without realizing it.

Imagine a world where your currency didn't devalue. Let's take an extreme example, where your currency actually increased in value. Sounds great, doesn't it? Put money under your mattress and in 10 years time it's worth a lot more than when you got it. Except, how would that work? Let's say that the world produces an amount of goods and services which we'll call X. Let's say we have a perfect economy where people receive money equivalent to the goods and services they produce -- also X. So in year 1 we sell all our goods and services and have X dollars.

The next year we don't produce any more money since we don't want it to devalue. Everyone is expecting the currency to go up in value so they save 10% of what they earned (0.1X) and spend 90% (0.9X). Since there is less money for the same amount of goods, this means that the currency goes up in value. Hurray! Everyone again saves 10%. Now there is 0.19X saved and 0.81X in circulation. Let's do this for 10 years. At that point we have about 0.65X in savings and about 0.35X in ciculation. And the currency is worth nearly 3 times it's original. Hurray! Hurray! Hurray! Let's spend our savings!

But the entire output of the economy is 0.35X and we have 0.65X in savings to spend. If we spend it, it causes the value of the currency to crash dramatically. The problem is that the currency value was being kept artificially high by limiting its availability. As soon as we want to spend it, we're in big trouble.

The point of a currency from an economic point of view is to ease trade. If you can not get access to the resources you need, you can't produce. We want to distribute as much money as we can to people who can use it to produce something. Saving (some call it "hording" to distinguish it from investing) causes massive problems when you reintroduce the money into the economy. So you want to encourage people to either spend or invest money rather than putting it under a mattress.

Another major issue is borrowing. If you have a job to do but do not have the resources you need, you won't produce value. If you have money, you can buy the resources. What do you do if you don't have money? Ideally we want to be able to borrow the money. Remember we want as many people as possible to have money if they are able to use it productively. What happens if we have a currency without inflation?

Let's say I borrowed Y on year one. In the first year I can afford to pay back 0.1Y. But in the second year there is less currency around (people are saving) so I can only pay back 0.09Y. The next, I can only pay 0.081Y, etc etc. By year 10 I can only pay back 0.035Y. I'm paying back the same amount of value each year, but since the currency is deflating, I get to a point where I may never be able to pay back the loan fully.

To avoid this problem, people will avoid borrowing money. This means that they will not be productive and society suffers.

Deflationary currencies are extremely bad. Currencies with moderate inflation are exactly what we want. Our current fiscal problems do not come from the inflationary nature of the currency. They come because of bad loans. Money was lent to people who were not going to be productive with the money (for example they simply invested it in an overstocked property market that was at the height of it's price). Our problems really *are* due to unscrupulous and stupid commercial banks. It is highly regretteble that we were forced to bail out most of them. It is even more regrettable that the average voter can not understand the issue well enough to ensure that the government doesn't allow it to happen again.

Re:Governments can't inflate the currency (1)

englishknnigits (1568303) | about 2 years ago | (#40305747)

If anything like bitcoin ever really took off the government would label it a good/service and start taxing it like it does gold and silver coins to maintain its monopoly position with regards to currency. That would still be better than dealing in a currency that is hyper inflating but the US and Europe aren't quite there yet.

Why? (0)

Darkness404 (1287218) | about 2 years ago | (#40305201)

The one and only "advantage" to the fictional currencies such as the dollar and the Euro is that they can be used to pay for taxes since they are legal tender for those purposes. This is something Bitcoin does not have. Bitcoin is a fiat currency and is intrinsically worthless. While it is convenient for anonymous transactions done online, why not instead go for something with intrinsic value that can easily be bartered such as gold, silver or copper?

Yeah, Bitcoin is neat, yeah, the technology behind it is interesting, but at the end of the day its a made up currency with none of the advantages of the rest of the made up currencies. Why not just stick with gold and silver? Especially since TFA mentions physical transactions.

Re:Why? (1)

Omnifarious (11933) | about 2 years ago | (#40305411)

Do you really want to carry around a bunch of gold in your pocket all the time? Do you think it'll be fun to split it up so you can hand someone a penny's worth of gold?

Re:Why? (1)

Darkness404 (1287218) | about 2 years ago | (#40305469)

Which is why people will also have copper and silver coins, exactly how they did when currency was real and had intrinsic value.

Re:Why? (1)

Prune (557140) | about 2 years ago | (#40305831)

Currency never had intrinsic value. You can't eat gold or silver. Their utilitarian value is miniscule compared to their value as a currency. And that comes purely from shared belief that it is worth something. Kind of like government or central bank issued notes, except the latter are institutionally-backed.

Re:Why? (2)

MightyMartian (840721) | about 2 years ago | (#40305471)

And do you want the value of your savings to tank because there's a spike in production of your particular precious metal? Think it doesn't happen, look when China began dumping silver because of the opium wars, causing a massive devaluation of silver prices in the West.

Re:Why? (3, Interesting)

wrook (134116) | about 2 years ago | (#40305645)

I've never understood this argument, so perhaps you can explain it to me. Let's say I want worms for fishing. I have a buddy with a farm that is just crawling with worms. He really likes gumdrops. Everytime I ask him for worms, he says I can have them in exchange for gumdrops. This goes on for quite some time and I start to trust that I can get worms from the guy if I give him gum drops. So I stock some gum drops all the time, just in case I suddenly want to go fishing. Maybe you don't want to say that gum drops are a currency, but surely in this scenario gum drops have value (they are worth X worms).

In the same vein, if I want to buy drugs from the Silk Road or whatever, they want Bitcoins. It doesn't matter how many gold dubbloons I have in my house; I can't email them to the guys who are going to ship me drugs. The gold is worthless in this siuation and the Bitcoins have real value (X bitcoins are worth Y drugs).

In both scenarios, the value is risky. My buddy may suddenly stop liking gumdrops. The Silk Road may get taken down by the FBI. Then my stock of gum drops and Bitcoins is worthless. But they still have value until that point.

The argument that it doesn't have value unless you can pay your taxes wih it baffles me. I don't see how it is connected at all. I can't pay my taxes in saffron, but saffron is incredibly valuable to some people.

Bitcoin has value to some people. This is obvious because people are paying money for them. Actually quite a lot of money is exchanged for Bitcoin every day. They don't hold much value for me since I don't want the things you can buy with them, but that doesn't make them valueless. I tend to agree that Bitcoins will not become popular enough to be as widely accepted as other forms of currency, but that doesn't make them valueless.

Finally, while I touched on it briefly before, the reason why you don't want to use silver or gold is because you can't do electronic transfers of silver or gold with very low fees and without the intervention of banks.

Re:Why? (1)

Prune (557140) | about 2 years ago | (#40305681)

Gold and silver are of limited utility, since, as you pointed out, you can't pay your taxes with them. Indeed, taxes are the government's method of enforcing usage of the currency it issues. Taxes are not for raising money, as most governments that issue their own currency are not revenue constrained, including the US. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 [ssrn.com]

Re:Why? (0)

Anonymous Coward | about 2 years ago | (#40305827)

Why? Because the early adopters want to cash out.

Seriously. Hello Tulips 2.0.

This is great news. (1)

Anonymous Coward | about 2 years ago | (#40305215)

I hope bitcoin becomes a legitimate currency. My bank doesn't trust me with a credit card, so trying to do anything involving money online is a huge pain. I can't believe how incredibly difficult it is to spend your own money online. Why is the defacto standard to borrow someone elses and spend theirs? It's a crazy system.

Re:This is great news. (1)

bmo (77928) | about 2 years ago | (#40305239)

>My bank doesn't trust me with a credit card, so trying to do anything involving money online is a huge pain

Secured credit cards through your bank. How do they effin' work?


Re:This is great news. (1)

Anonymous Coward | about 2 years ago | (#40305363)

Your use of the BMO trademark in a banking context in not authorized. Please send your password to BMO Financial Group and destroy all copies.

Re:This is great news. (2)

wrook (134116) | about 2 years ago | (#40305693)

The banks in my country won't issue me any kind of credit card (secured or not) until I become a landed immigrant. The banks in my country of origin won't issue me any kind of credit card (secured or not) unless I am resident in the country.

I'm very happy that you are easily able to do online monetary transactions. Not everybody is you. That is why some people would really welcome a way to do electronic transactions without the intervention of a bank. Sure not everybody needs it, but some do.

Re:This is great news. (1)

The Master Control P (655590) | about 2 years ago | (#40305301)

If you've really proven so irresponsible that they won't trust you with so much as a teenager's "My First $300 Limit Credit Card" card, I'm worried about you being online without responsible adult supervision...

Re:This is great news. (0)

Anonymous Coward | about 2 years ago | (#40305657)

I'm not the OP but I remember what that was like. I've had a stable job for over fifteen years, I have a mortgage that is always paid on time, and still for some reason up until two years ago no bank would issue me a credit card. One finally accepted my application, two years ago, but I've tried to apply for other cards since and for some reason they still reject me. I don't know what they think of me that they keep rejecting my applications, when I haven't been anywhere close to being recklessly irresponsible with my personal finances. The odd thing is that I got a bloody housing loan approved years before they approved a credit card for me! Makes me wonder if I share a name with some reckless spendthrift.

You're worried about banks?? (0)

Anonymous Coward | about 2 years ago | (#40305229)

I bought one bitcoin a long while back, as an experiment. I think it's worth 20-something percent of what it was then.

If some restaurant owner is worried about putting real money in a real bank, he should REALLY stay away from bitcoin.

Put euros under your mattress first.

Re:You're worried about banks?? (0)

Anonymous Coward | about 2 years ago | (#40305667)

mmmph. don't ever change, /. crowd. as long as you're all down on bitcoin it's doing great.

never mind the millions of VC capital pouring into it. never mind the businesses growing by leaps and bounds.

truly you are my bellwether, and i'm doing pretty damn good.


http://science.slashdot.org/story/12/06/12/2148229/why-smart-people-are-stupid ...just four stories down.

Re:You're worried about banks?? (1)

Nursie (632944) | about 2 years ago | (#40305757)

Millions of VC Capital?

Well, taht's not really an indicator of anything right now, we're in Web Bubble 2.0. And the businesses? I see exchanges, many of which fold after either hacks or just failing to become profitable.

BTC is an amusing experiment, but it has so many flaws built right into the design that it's nothing more than that - an interesting experiment in crypto-currency with few real world applications.

Beef jerky... (1)

nimid (774403) | about 2 years ago | (#40305343)

...is buying beef jerky not a legitimate use of Bitcoin or is 'beef jerky' a euphemism for some nefarious deed in the Bitcoin world?

Re:Beef jerky... (1)

SeaFox (739806) | about 2 years ago | (#40305393)

...is buying beef jerky not a legitimate use of Bitcoin or is 'beef jerky' a euphemism for some nefarious deed in the Bitcoin world?

"Bitcoin beef jerky is made of game sprites!" /charltonheston

ha ha ha ha (0)

Anonymous Coward | about 2 years ago | (#40305347)

really? a electronic only currency? food, gold & ammo are they only safe bets these days.

never mind reality (1)

Anonymous Coward | about 2 years ago | (#40305377)

Bitcoin, bitcoin, rah rah rah!

Never mind that it's lost more of its value more suddenly than the Dollar or the Euro have in any of our lifetimes. Never mind that I can't spend them at the grocery, or Amazon, or Newegg, or any restaurant I eat at, or.... oh, very nearly *anywhere*.

Never mind any of that. Bitcoin, bitcoin, rah rah rah!

I wonder how much the bitcoin people are paying for these slashvertizements.

What about TEMs? (1)

gmuslera (3436) | about 2 years ago | (#40305391)

Tought that they were becoming widely used in Greece instead of euros, at least were a lot of talk about it [ajc.com]... bitcoins werent even under the radar.

Money is losing its original meaning, going back to barter could have some sense.

Re:What about TEMs? (2)

MightyMartian (840721) | about 2 years ago | (#40305483)

So I want to open a widget factory. What do you propose I barter to get financing?

Money evolved precisely because bartering does not scale well. You cannot build a large scale economy with such a system. Even the Romans knew that. They didn't build an empire by trading chickens and bushels of wheat.

Re:What about TEMs? (1)

Prune (557140) | about 2 years ago | (#40305723)

It doesn't make sense unless you want to abolish government, since government needs fiat currency to have serious impact on the economy. This is the case whether you're a fiscalist or a monetarist--different approaches, still economic levers. Even heterodox economics such as the Austrians believe in having some sort of currency and don't go for direct barter (though their ideas are little better).

Re:What about TEMs? (1)

BlueStrat (756137) | about 2 years ago | (#40305779)

It doesn't make sense unless you want to abolish government, since government needs fiat currency to have serious impact on the economy.

Government should not have the ability "to have serious impact on the economy".

This is a bug, not a feature.

Governments that have the levers of a national economy at their disposal and try to manage an economy always end up screwing it up badly. This has always been true. Governments are notoriously and historically horrendous at managing national economies.

See: The US and the EU/PIGS for more recent examples.


Re:What about TEMs? (1)

Prune (557140) | about 2 years ago | (#40305847)

If you think it's a bug, go somewhere else where government does not have the ability to seriously impact the economy. Oh, wait, no such place! I guess people learned their lesson from the Great Depression, which was greatly exacerbated by having gold-backed currency.

Re:What about TEMs? (1)

Prune (557140) | about 2 years ago | (#40305737)

This won't become widespread. In most places, barter is fully taxable, and you can only pay tax to a government in the currency it issues. Indeed, this is the primary purpose of taxation--enforce use of the government-issued currency.

Re:What about TEMs? (1)

MightyMartian (840721) | about 2 years ago | (#40305845)

What the fuck are you talking about? Taxation predates currency of any kind by a thousand years at least, and probably much longer than that( and since the earliest urban societies has had the same primary function to create a centralized infrastructure. Whether that's canals, armies, bureaucracy, courts or whatever, that is the purpose of taxation.

Re:What about TEMs? (1)

Prune (557140) | about 2 years ago | (#40305901)

You're talking about the traditional purpose of taxation. This has not been the case since Nixon nixed the last vestiges of gold-backing of the US dollar. You seem to have no idea how the modern monetary system actually works. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 [ssrn.com] As well as here http://bilbo.economicoutlook.net/blog/?p=11218 [economicoutlook.net] note esp. "Given the national government can issue paper currency units or accounting information at the central bank at will, tax payments do not provide the state with any additional capacity (reflux) to spend." This is because governments which issue their own currency are not revenue constrained. There's no operational connection between deficit spending and tax collection.

In "might" we trust. (0)

Anonymous Coward | about 2 years ago | (#40305429)

So which powerful entity is backing Bitcoin again?

Re:In "might" we trust. (0)

Anonymous Coward | about 2 years ago | (#40305485)

The People

Plunk! (1)

EzInKy (115248) | about 2 years ago | (#40305457)

So how many bitcoins do I need to plunk into the soda machine to get a coke, and what bank to I go to to have a few of them jingling in my pocket?

What legitimacy? (0)

Anonymous Coward | about 2 years ago | (#40305601)

As I understand it, about half all Bitcoins there will ever be have already been mined, even though presently almost no one knows about it and the Greek from the article is the exception rather than the rule. This means that no government that cares for its people will recognise it until a way is provided to a) turn back the clock to day one and b) to inflate the currency both to keep the economy going and to keep their citizens' debt from spinning out of control. And until that happens you cannot pay your taxes with it; and although in theory the currency is anonymous, you'll still be expected to declare your income and if a discrepancy is found, just like when you deal on the black market today, the tax man will make you pay. In real money.

No wonder the Greeks think BitCoins are great. (4, Informative)

oobayly (1056050) | about 2 years ago | (#40305743)

They'll do anything to avoid paying tax. It's the main reason why their economy is so fucked.

Example: A mate of mine is an RYA (Royal Yachting Association) Instructor, and has been asked to run a course down in Greece, so he has to book some accomodation - decides on a nice 4 star hotel. After he booked, he was called up and told that if he paid in cash it would be half price. There they are complaining of austerity measures, whilst not paying tax.

The other currency alternative for Greece . . . (2)

PolygamousRanchKid (1290638) | about 2 years ago | (#40305785)

From The Economist, "Leaving the euro: My big fat Greek divorce" http://www.economist.com/node/21556583 [economist.com]

Some economists think that Greece could nonetheless avoid a sudden departure from the euro. The government could pay some of its bills by issuing its own IOUs direct to its domestic creditors. These notes (“scrip”) would start to circulate at a steep discount to euros. In effect, argues Thomas Mayer, an adviser to Deutsche Bank, Greece could create its own parallel and depreciated currency while still remaining in the monetary union.

Something similar happened in Argentina as it struggled to retain its rigid link between the peso and the dollar before the link eventually snapped in early 2002. Bankrupt regional governments started to pay their workers in scrip, such as the patacones issued by Buenos Aires Province. But these desperate measures were desperately unpopular because the patacones immediately fell in value. Within just a few months, the Argentine government restricted withdrawals of bank deposits, defaulted on its debts and broke the link with the dollar, allowing the peso to devalue.

Mario Blejer, who was Argentina’s central-bank governor in the middle of the crisis, says that resorting to scrip would be even worse than creating a new currency outright (which he thinks would be disastrous). It would create monetary chaos and generate inflationary pressure before the exit that would inevitably ensue.

So if you are in Greece, you seem to have a bad option for storing your cash, and an even worse one.

Take your pick.

Re:The other currency alternative for Greece . . . (1)

Prune (557140) | about 2 years ago | (#40305883)

MMT predicted long ago that the Euro is a horrible idea and would end in disaster. It makes no sense to have a single currency for such a heterogeneous collection as the various Eurozone members. Without fiscal and economic integration, a monetary one makes no sense. A mercantilist economy such as Germany, with its trade surplus driven by wage suppression at home, hoards Euros and beggars its neighbors. The weakest one feels the deepest pain from the Eurozone's cannibalistic process. Say Greece exits. What then? Then the next weakest, be it Spain or Italy or whoever. And so on. The process cannot end while there is a unified currency while economies are mismatched. Different economies need to have different currencies so the floating exchange rate can allow rebalancing.

BitCoin will never be legit (1)

Aindriu (1663081) | about 2 years ago | (#40305893)

Any currency that can take a massive dive on the foreign exchange market due to Internet trolls posting on one single message board is a currency that will never have a single shred of credibility. Just because legitimate businesses accept it doesnt suddenly eliminate the huge amount of risk associated with trading in that currency. There are also plenty of other ways of transferring cash within a day.
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