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[Levi]

Entertainingly it looks like gambling sites are embracing it.  Not to surprising as it would probably be the best currency for a scam artist.

[Criptfeind]

Hmm... as far as I can tell, this is the equivalent of letting anyone print your money, but making it very expensive/ time consuming to print, and also putting some kind of limit on how much of it can be produced... right?

As far as I can tell there is no limit. Other differences is the lack of a regulatory body and presumably the ease of counterfeiting from what some people are saying on this thread. But I am not qualified to comment on that part other then 'It sure sounds easy.'

[Bouchart]

Entertainingly it looks like gambling sites are embracing it.  Not to surprising as it would probably be the best currency for a scam artist.

And money laundering.  That alone should make you consider the possibility that it'll be shut down by some federal agency.

[Levi]

Entertainingly it looks like gambling sites are embracing it.  Not to surprising as it would probably be the best currency for a scam artist.

And money laundering.  That alone should make you consider the possibility that it'll be shut down by some federal agency.

Hypothetically, what could a federal agency actually do to shut something like this down?  It doesn't seem to be tied to any particular country.

[Criptfeind]

Make it illegal for one.

Most places will not accept it then, and there will be no way to turn it into real cash (other then with other people doing the buying) and because of these factors it's acceptability will go down. When it's acceptability goes down less places will take it and it will be even harder to turn into real cash.

Spiral. Money dead.

[PTTG??]

That said, if it's outlawed, it only means that only outlaws will use it... which is the main market of the currency anyway.

[nenjin]

Yeah, as long as someone is willing to pledge their resources to converting it to legal tender...they can find a way to make money off it. Especially if they can get average joe internet user to place some kind of value on it.

[Criptfeind]

That said, if it's outlawed, it only means that only outlaws will use it... which is the main market of the currency anyway.

Yeah, but at some point outlaws want to use the money they gain for legitimate purposes. Like buying food. If they can not use these coins to do so, and they can not turn the coins to cash, why would the deal in them?

It would be like (for example) a drug dealer giving out his drugs for free because that made it harder to capture him by tracking his money flow.

[Reelyanoob]

I'm old fashioned.  I like to know that the biggest army in the world will literally kill anyone who tries to debase my currency.  But that's just me.

That's likely to be your own government doing that
I can't see the military lifting a finger (except to hold the protestors at bay).

[thobal]

So how do I short this virtual money?

Simple, you would enter into a legal contract with a person to deliver a certain amount of the items at a certain price at a certain date. You would then wait until agreed upon date arrived and then purchase the items and deliver them to the purchaser.

To profitably short, the value of the item would need to be lower at the time you purchased them than the agreed price.

Buy low, sell high.


Effectively, the same way you short sell anything. This item simply isn't established enough for major brokerages to to deal in these kinds of options. In short, no one needs them. These arnt pork bellies, This isn't corn. This isn't frozen concentrated orange juice. No one needs it. It's an item that serves to store value.

Like gold, the supply is theoretically finite. Theoretically. A data center could attempt to corner the market. Just as any major country could attempt to capture 1986DA and it's 10000 tons of gold(roughly equaling 6% of all the gold mined in all of history).

You might be able to get Lloyd's of London to take you bet, but you'd have to ask them.

[mainiac]

Stocks are treated as investments when often their relative company value is much much less than the share price.

If this were true, then one could very easily short stocks, put that money into something like a Treasury Bond or Certificate of Deposit and make a fortune.  But you can't, because the rate of return on stocks tends to be higher then a t-note or CD.  About as high as you would expect given that stocks are more risky then t-notes or CDs.  It's not a perfect relationship, that's why some people win investing at stocks while others lose.  But if you compare a broad index like the fortune 500 to the rate of return on bonds, CDs, etc., they aren't enormously off over extended periods of time.  That is, after all why capitalism exists, to turn savings into investment.

So how do I short this virtual money?

Simple, you would enter into a legal contract with a person to deliver a certain amount of the items at a certain price at a certain date. You would then wait until agreed upon date arrived and then purchase the items and deliver them to the purchaser.

You might be able to get Lloyd's of London to take you bet, but you'd have to ask them.

I think he was more likely asking where the market for such transactions exists.

[Shinziril]

Seems that supply is controlled by messing with the algorithm that centrally generates the data sequences corresponding to the coins.  These are distributed to whoever solves a certain cryptographic problem relating to a given "batch" of coins first, so more computing power gives you a better chance of obtaining them this way.  These "handouts" are programmed to decrease over time such that no more than 21 million bitcoins will ever be generated. 

The problem with that is that since the supply of currency is limited, as the size of the economy running on that currency increases, the value of each individual coin increases.  Thus if the economy is growing, your money is rising in value, which means it makes sense to save that money and spend it later . . . but if everyone chooses to do that, the entire system grinds to a halt since nobody is actually spending the currency. 

I wouldn't be terribly surprised if it has a moderate effect for some period of time, since being untraceable and untaxable is useful for certain purposes, but I wouldn't be surprised if the system crashes and burns at some further point in the future.  We'll just have to wait and see.

[thobal]

Seems that supply is controlled by messing with the algorithm that centrally generates the data sequences corresponding to the coins.  These are distributed to whoever solves a certain cryptographic problem relating to a given "batch" of coins first, so more computing power gives you a better chance of obtaining them this way.  These "handouts" are programmed to decrease over time such that no more than 21 million bitcoins will ever be generated. 

The problem with that is that since the supply of currency is limited, as the size of the economy running on that currency increases, the value of each individual coin increases.  Thus if the economy is growing, your money is rising in value, which means it makes sense to save that money and spend it later . . . but if everyone chooses to do that, the entire system grinds to a halt since nobody is actually spending the currency. 

I wouldn't be terribly surprised if it has a moderate effect for some period of time, since being untraceable and untaxable is useful for certain purposes, but I wouldn't be surprised if the system crashes and burns at some further point in the future.  We'll just have to wait and see.

I wouldnt be surprised if Moore's Law helps counteract the deflation, at least in the short run.

Also a question, is the 21 million limit a hard limit, or could it be increased?

[Leafsnail]

Yeah, but at some point outlaws want to use the money they gain for legitimate purposes. Like buying food. If they can not use these coins to do so, and they can not turn the coins to cash, why would the deal in them?

It would be like (for example) a drug dealer giving out his drugs for free because that made it harder to capture him by tracking his money flow.

I'm not saying it's likely, but it is possible that some outlaws would specialise in turning bitcoins back into real money (obviously at an inflated rate to cover their costs).  If these coins really are "untracable" and the outlaws could find a decent way to effectively launder the coins... well, it could be quite useful for them.  It'd prevent banks from noticing irregularities, possibly.

[Another]

The relevant comparison is limited-supply collectibles of no utilitarian use. Like canceled postmarks.

Sure most people would not assign them any value and most stores will not accept them as payment but they typically have some non-zero value to large-enough circle of people to be convertible into other valuables at relatively stable rates. If government-approved postal services included unbreakable electronic certificates into each postmark ever printed and it would be trivial for an average person to check it - canceled postmarks would be for most practical value-operating needs not worse and not better than Bitcoins or fiat paper cash of an economically stable but obscure country. Being totally electronic leads to certain small advantages and disadvantages.

Planning to dodge taxes by systematic usage of alternative money systems is risky and foolish. Having some kind of back-up payment system ready may be reasonable depending on your paranoia, pessimism and government overturning plans.

P.S. Short FAQ: 21 million is a hard limit that is programmed to be gradually reached in about 100 more years. Each coin is divisible into absurdly small parts (like 0.0000001) at no additional cost. Counterfeiting will definitely not be worth the electricity spent until at least widespread quantum computers.