Bitcoin Revisited and the feasibility of Digital Currency.

I was mining for information and ran across the whole Bitcoin controversy. Of course I joined a pool and started mining, just to check bandwidth usage for an hour. I junked 45mb of data during that amount of time.

Then I did a chronological search about the history of Bitcoin (aka BTC), and for those of you who haven't heard of it, or were like me, just interested in what it was, here's a few links:

Title: Money Laundering in Digital Currencies Publication Date: June 3, 2008 Document ID: 2008-R0709-003 Archived on: January 1, 2011. This document may contain dated information. It remains available to provide access to historical materials. Cover image for Money Laundering in Digital Currencies. This assessment describes digital currencies and the digital currency system and how they are used to launder and move funds.

Digital money laundering? In 2008? Didn't Bitcoin come out in 2009? WTF?
Link.

Then in June of 2010, the topic of legality. Link.

and in January of 2011, the topic of hard asset backup. Link.

so from March, 2011 from one of my favorite sites, HTG, an explanation:

Bitcoin is an open-source project created in 2009 by Satoshi Nakamoto that acts as a virtual currency. You can trade real cash for these units and spend them in places online in exchange for actual goods and services. It is actually already anchored to real currency, so people are already trading for Bitcoins and accepting them as payment. The Electronic Frontier Foundation accepts Bitcoin donations, and there are even escrow services related to Bitcoin transactions. What really makes it different is that it’s based on a really smart form of cryptography to make it secure and it’s not based on a central authority or state treasury. These two dominating characteristics are very important when considering a currency whose basis is the internet.

To account for inflation, there’s something built into the client called “mining.” In the old days of gold-backed US dollars, miners would find gold and get money for it, and that was what allowed for inflation of the currency. Here, the client generates 50 Bitcoins for nodes that complete blocks first. There is a fixed number of Bitcoins that will ever be produced: 21 million. Every 4 years, half of the remaining value of Bitcoins will be introduced into the system. Of course, like gold mining, creating Bitcoins isn’t a real long-term way to get rich. It’s more of a reward during the early stages to do the work required to make the system go.

It's a commodity. Hmmm.

One of the largest points of Bitcoin is that it doesn’t rely on a central issuer. It is not a fiat currency. This mitigates the problem of a central bank causing instability in the currency. Perhaps more importantly, because Bitcoin is a virtual, internet-based currency, there are no political ties to the currency. Consider the problems that Paypal users in India have. Then there’s the problem of legality. Many online gambling sites would trade money for in-game points that could be cashed out, similar to casino chips. Bitcoin (arguably) circumvents legal issues because there’s no single entity that runs it. Everything is handled by the peer-to-peer network, and the important points are all set in stone already.

No, it's a currency. Hmmm.

Bold mine. I wanted to bold that for the whole Digital Currency issue coming up. Full link Here.

Then several ATS threads that are worth the read: (Listed in chronological order

May, 2011.
June, 2011.
Mid-June, 2011.
and
July, 2011.

Those threads brought me up to date, sort of.

Here I find that the Bitcoin is trading as a commodity for around 10 bucks a piece. Call it a ten dollar bill. It won't buy you and your significant other a dinner and a movie, but is still has somewhat of a value. I thought about the mining aspects, and to hit a block of fifty you could snag an easy 500 USD.

So then I looked to see how many retailers accept Bitcoin. Holy Mackerel! Here's the list.

It was then that I realized there are already many different forms of Digital Currency. It's masked in different ways. Bitcoin is exclusive in that there will only ever be 21 million of them, and in my research tonight I found that someday a Bitcoin, once they are all mined, could be worth 10 million each. There are like 5 million in circulation right now, and they are at 10 bucks each. Meh.

However, my point is this: With the meltdown of all the current fiat currencies going on around the world, why isn't the cousin of the Bitcoin, (which hasn't been invented, and the Bitcoin is the brain child of a single individual) a feasible option for fiat currency in a digital form? I know it sounds like a one world currency, but I'm not talking about something like the Amero. I'm talking about something that hasn't been created yet that could be used as a worldwide currency and not linked to a centralized bank or a physical location.

Economic terms to be considered in your replies: Inflation, devaluation, greed, FRN's, and sustainability.

Any thoughts?

Originally posted by Druid42
Any thoughts?

If you can figure out who Satoshi Nakamoto is, you might figure out the reason behind the creation of bitcoin. Good luck with that.

I got burned at the top around 30.

I got burned at around 20.

I'll probably get burnt at 10.

I'm going to dollar cost average into this thing though. I think it has a lot of merit, but running into problems that it didn't have to face previously. There will obviously be bumps along the way.

Hopefully we start to move back up soon.

I'll add this, too:

Proposed failure scenarios for Bitcoin include a declining user base, the discovery of a flaw in the code, the advent of a computing power sufficient to bruteforce the cryptography used, or a global governmental crackdown on the software and exchanges. Succession to another similar crypto-currency system is also possible, if a new one were created and considered more legitimate or advantageous than Bitcoin in its current form (e.g., more scalable or user-friendly). It may not be possible to "ban all crypto-cash like Bitcoin."

(from the Bitcoin WIKI)

Originally posted by Jazzyguy

Originally posted by Druid42
Any thoughts?

If you can figure out who Satoshi Nakamoto is, you might figure out the reason behind the creation of bitcoin. Good luck with that.

Bitcoin was created by a person or persons going by the name Satoshi Nakamoto. Nakamoto self-published a white paper on Bitcoin in 2008 on the cryptography mailing list[39] and then in 2009 founded the open source project called Bitcoin. The real identity of "Satoshi Nakamoto" is unknown. In his P2P Foundation profile[40] he said he is from Japan.

Originally posted by Druid42
Here I find that the Bitcoin is trading as a commodity for around 10 bucks a piece.

Just had a look at the trading price, and here's a screen capture (compressed so it fits into this thread) of the last 6 months...
[atsimg]http://files.abovetopsecret.com/images/member/099b329941de.jpg[/atsimg]

From nothing, it got wildly popular until a hacking scandal, at which point it got dumped.
Will it come back?

Really, its not the point, so it is said. Currency speculators arent the reason that you're supposed to use bitcoin.
In theory, once you get some bitcoin, you never trade them back out, but just keep using them to buy and sell stuff, not giving a damn about what other currencies around the world are doing.

I did have a good look a bitcoin a while back without getting right into the code and was impressed. It has a high level of security and redundancy and the open source licence gives it a lot of strength in code integrity. It has been in use for a while and is demonstrating its battle hardiness. The latest breach was through the implementation by of the currency traders with the back end still holding strong.

The main problem I had with it is how new currency is introduced. I understand now that this is because bitcoin is still in its test drive state to prove its potential. There are two main branches I can see for bitcoin with its next version. Bitcoin is established as a new global currency with the UN directing the supply of new currency units to match demand and balance inflation with deflation. Or else many different bodies establish a bit coin trading system and manage their own economies.

Some other issues to be aware of include:
- As an open source licence there is no developer liability if things go to hell.
- Updates can take a long time to define and develop if keeping the open source licence.
- Not aware of the procedures required to install updates for a distributed system such as this.
- The encryption proticals may need an upgrade in the future to keep pace with hacking resources.

What is great is that it fully automates the online banking and transaction system in a small, tight strong package. There still may be some growing pains to go as it grow in popularity and increased resources are directed towards attacking it, but too still be standing after all this time is a good sign.

Originally posted by kwakakev
The main problem I had with it is how new currency is introduced. I understand now that this is because bitcoin is still in its test drive state to prove its potential. There are two main branches I can see for bitcoin with its next version. Bitcoin is established as a new global currency with the UN directing the supply of new currency units to match demand and balance inflation with deflation. Or else many different bodies establish a bit coin trading system and manage their own economies.

Some other issues to be aware of include:
- As an open source licence there is no developer liability if things go to hell.
- Updates can take a long time to define and develop if keeping the open source licence.
- Not aware of the procedures required to install updates for a distributed system such as this.
- The encryption proticals may need an upgrade in the future to keep pace with hacking resources.

Maybe i misread you, but i see many false assumptions here.

The way the currency is introduced is vital to bitcoin, since to date this is the only way one can introduce the currency, without relying on some authority to introduce it. In my point of view it is also the perfect method for introducing the currency, since it guarantees that there will be no trickery. The rules are clear to everyone, and no-one can manipulate the value of btc by releasing/withdrawing new btc from existence.

There are no bodies that can implement a next version of bitcoin. Or actually there are as many such bodies as users.

Updates take exactly the amount of time it takes for someone to release a new version of the bitcoin client and for the community to start using that version. Anyone can release a new version. The procedure is as follows: start using a new version of the client. When 51% are using the new/100%compatible client, the bitcoin version has effectively updated. Those who use the old client in that situation are considered a split and will be ignored. This also means that if the users of bitcoin do not want to update the version, there is nothing in the world that can force the update to happen. The beauty of pure democracy.

This means that there may be very easily started an own official bitcoin for every country, if countries so desire. All it takes is to create a slightly modified bitcoin client, and the users of that client will start an own chain, creating the new bitcoin currency.

Bitcoin is the framework, or theory used by the currency abbreviated BTC. It is also the name of the first client programme created to send/receive transactions in this first bitcoin currency.

This really is an exceptional masterpiece of programming and economics theory merged in a beautiful and immensely complex package. Reading the whole wikipedia page about Bitcoin is absolutely essential to get a clue of what it is and how it works. To dig any deeper into the technical side of it, the whitepaper released by satoshi nakamoto is a must read.

reply to post by varikonniemi

The way the currency is introduced is vital to bitcoin

There has been some changes to the information since I last checked. This mining process to help encrypt the information sounds interesting.

start using a new version of the client. When 51% are using the new/100%compatible client, the bitcoin version has effectively updated. Those who use the old client in that situation are considered a split and will be ignored.

Lets say the public private pair used to encrypt the client get cracked. This is a common encryption technique so will affect many things but bitcoin still has to deal with it. It looks like a merchant section is underdevelopment so this will help manage updates to the servers, but all the different clients will still have to be included during the transition. It is manageable and the records will be safe, but still a disruption as it would be for many systems.

If a short cut is found through the database mining then it is game over, but it appears fairly solid and will continue to grow in strength as the economy grows. It is interesting in how they have used game theory to help establish the different parts of the economy as it grows.

As for what the world and countries are going to do with the economy is still a bit early. They may take all, some or none of bitcoin. With the investment and commitment going into it it does look like it has a future.

Originally posted by Jazzyguy

Originally posted by Druid42
Any thoughts?

If you can figure out who Satoshi Nakamoto is, you might figure out the reason behind the creation of bitcoin. Good luck with that.

HMMmmm he/they are certainly an interesting charater. joeduncko.com...

We also know the bankers really want to go to a completely digital currency.

The Obamacare tax code change regarding 1099's for all vendors was a GIANT shove in that direction. If credit cards are used there is no IRS paperwork filing necessary. If checks or cash is used then you had heaps of paperwork to fill out.

They REALLY want a digital/cashless society so they can track every move you make and better yet turn OFF your access to cash as they wish. Complete control of Money and YOU!

It looks like the Royal Canadian Mint is serious about introducing a digitial currency for small transactions even offering 50,000 CDs for apps to facilitate the transfer of bitcoin from cell phones and PDAs. The big plus, of course, besides not having to carry cash is no financial middleman of intermediary to charge 3% or more for a guaranteed transaction (ie Paypal). Credit and debit cards do not charge the user but they do cost the merchant to transact and often times those fees are passed on to the final price. So from that standpoint I welcome it. But the downside is if your account can be accessed or shut down by a government entity without due process of law.