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Bitcoin
jmone:
As the bitcoin pool is finite, it gets rid of Monetary Policy and spin offs like Quantitative easing (QE). It could be argued that Bitcoin is a neither Fiat or Representative Money as it fails to satisfy all the defn.
http://en.wikipedia.org/wiki/Fiat_money
http://en.wikipedia.org/wiki/Representative_money
It does have "real value" as there is a real cost (compute time) to "mine" each bitcoin but most of the bitcoins in circulation now trade above their original "cost" of production. The real value is in it's ability to be exchanged for good, services, and other currencies. One of it's current weaknesses is the response by Government and the legislation they may bring in terms of exchange within their jurisdictions. Look at the impact today on China's Exchange changes and the impact of it's "value" - http://www.smh.com.au/business/markets/currencies/bitcoin-price-crashes-by-nearly-50-per-cent-in-china-20131219-2zls5.html
Imagine if MC introduced a distributed computing effort mining bitcoins with our spare CPU/GPU cycles... we could pay for our Licences but pay for it in our power bills!
jmone:
--- Quote from: KingSparta on December 19, 2013, 08:59:07 pm ---never heard of it.
--- End quote ---
http://en.wikipedia.org/wiki/Bitcoin
Basically a finite decentralised currency
mwillems:
--- Quote from: Matt on December 19, 2013, 08:36:15 pm ---So what problem is Bitcoin solving?
--- End quote ---
I think the main real "problem" bitcoin is solving is the desire to be able to purchase things remotely without leaving a paper trail. And while there are many legitimate reasons to seek anonymous transactions, bitcoins are used heavily in illegal transactions, which is how the U.S. government scooped up about two percent(!) of all extant bitcoins earlier this year (by virtue of criminal forfeiture in drug trafficking busts) see, e.g. http://www.wired.co.uk/news/archive/2013-12/19/fbi-wallet .
Also, for what it's worth, I think the "non-inflationary" character of bitcoin is a little oversold as Bitcoin has no enforced monopoly on digital currency; bitcoin only has value because of artificial scarcity, and because it can be used in ways "normal" currency can't. Someone else could readily setup a similar digital currency tomorrow (finite or not), which would effectively debase the value of bitcoin, provided it served a similar function (facilitated anonymous transactions, etc.). Fiat currency has one major thing going for it: a somewhat controlled rate of inflation; Bitcoin could be hyper-inflated out of existence at any time by a competing virtual currency, or (more likely) simply regulated out of useful existence by governments.
And speaking of regulation, there are developing tax issues: here's a pretty interesting (IMO) recent report from the U.S. Government Accountability Office on tax liability for virtual currency: http://www.gao.gov/assets/660/654620.pdf
JimH:
I think the idea that the government can regulate everything and enforce its laws is becoming a little dated. Think of media piracy or Edward Snowden, for example. The digital domain has made a lot of things possible that were unthinkable 20 years ago. I'm not saying that's a good thing. I just think we've entered an era that is a lot more chaotic. It borders on anarchy.
mwillems:
--- Quote from: JimH on December 20, 2013, 07:41:17 am ---I think the idea that the government can regulate everything and enforce its laws is becoming a little dated. Think of media piracy or Edward Snowden, for example. The digital domain has made a lot of things possible that were unthinkable 20 years ago. I'm not saying that's a good thing. I just think we've entered an era that is a lot more chaotic. It borders on anarchy.
--- End quote ---
I think you're right, we're entering a very different era, especially when it comes to the digital actions of individuals.
I think the government might have an easier time regulating bitcoin than piracy because federal and state governments have much more regulatory visibility and control over commerce than they do over individuals and their internet connections (for now). I think the U.S. government is more interested in taxing bitcoin at the moment than eradicating it, but if that changed, all the government would need to do to take a big bite out of bitcoin would be to place the restrictions on businesses and financial institutions that make it illegal to accept bitcoins. With music piracy, there are many more actors, who are much more anonymous. It's much, much easier for the government to make life hard for a few commercial actors than for a large number of individuals. Commercial enterprises have "hooks" by which the government can grab them: business licenses, and in the case of larger companies, public disclosures of assets, etc. They're a lot easier to reach. And, if such regulation were put in place, a currency that businesses couldn't legally accept would not be worth much.
But we're not there yet (and may never get there), and I think that's probably for the best; I'm dispositionally in favor of innovation, even in something as prosaic as currency. So far most of the U.S. actors who might be in a position to regulate it seem to find it more interesting than threatening: http://www.forbes.com/sites/kashmirhill/2013/11/07/federal-reserve-economist-on-bitcoin-small-phenomenon-but-growing/ . Although there have been some troubling developments recently: http://www.forbes.com/sites/kashmirhill/2013/08/12/every-important-person-in-bitcoin-just-got-subpoenaed-by-new-yorks-financial-regulator/
I think the bigger real risk is market panics in response to milder government intervention: because the value of Bitcoins is consensus based, when governments try to get involved, the markets panic and bitcoin values plunge (check out the article jmone posted above).
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