A Real Virtual Currency? Emerges: Could BitCoins Threaten

[Greg Bernhardt]

I’ve talked fairly often on this blog about the trade of virtual goods and virtual currencies in virtual worlds such as Second Life or Facebook. *While novel,*neither of*these elements are legally what they claim to be. *With respect to virtual … http://virtualnavigator.wordpress.com/2011/06/15/a-real-virtual-currency-emerges-could-bitcoins-threaten-real-currencies/" http://stats.wordpress.com/b.gif?host=virtualnavigator.wordpress.com&blog=11498882&post=604&subd=virtualnavigator&ref=&feed=1

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[Dale]

Interesting. I wonder why they did the "mining" thing rather than controlling the supply centrally.

 

[Greg Bernhardt]

Interesting. I wonder why they did the "mining" thing rather than controlling the supply centrally.

There is another thread about BitCoins with more info here
https://www.physicsforums.com/showthread.php?t=504649

 

[Prairie]

I guess this was likely developed as an alternative to the current monetary markets, but I could see it going the way of other cyber ideas. I have no doubt that at some point in the future a similar system could be used to step into the shoes of the current monetary system. The only reason I say that is that there's both volume and value which could be manipulated, just like current markets. I do like the low admin fees though. Interesting stuff.

 

[Greg Bernhardt]

Already being targeted by hackers
http://www.symantec.com/connect/blogs/all-your-bitcoins-are-ours

 

[bcrowell]

IMO it's a Ponzi scheme. They claim that it has the benefit of being a stable currency, i.e., they want to appeal to libertarian types who are suspicious of "fiat currency." But there is no reason to think that it will remain stable in value. The supply of bitcoins is going to converge to a predesignated number, but value depends on both supply and demand. At some point demand will go to zero, and so will value.

 

[marcus]

I agree with various expressions of mistrust but I want to explore another scenario.

Suppose the use of this alternative cash takes off.
Then there would be a strong motive for some of the leading financial institutions to MAKE A MARKET in BitCoins.

You could even have FUTURES traders who buy and sell BitCoin futures. In effect they would be betting on what they think the exchange rate is going to be 6 months from now or a year from now.
Some people would acquire expertise about future supply and demand.

All that would be required is for a large visible institution to act as "moneychanger" regularly buying and selling BitCoin for Dollars in large volume. This would establish a market price for BitCoins, like the free floating exchange rate for some foreign currency.

It seems to me that the only reason say Goldman would not take up that business and make a market in BitCoin is that they would fear Government would step in and regulate----just like any other currency exchange---and require transparency.

But I think if this alternative currency did take off and become widespread then probably the Government WOULD step in and make rules and require transparency, like what governs the stock of a publicly traded corporation and stuff like that.

I don't know enough about this kind of stuff to have much if anything to say. I think ultimately it has to go to the level of international law. Because it is in SOMEBODY'S interest to promote an alternative currency like BitCoin, and if the US Government tries to outlaw it (because of obvious dangers and even criminal activity) then I imagine the implementation would tend to go OFFSHORE to some other country. Like Swiss bank accounts, or the Bahamas.

So ultimately anyone national government is not going to be able to control it, if the thing takes off.

It is interesting. Is there some reason why something like this wouldn't take off and get big? Couldn't a bunch of nations get together and outlaw it---just to keep life simple?
We are only slightly evolved monkeys, how much more complexity can we put up with?

 

[Prairie]

IMO it's a Ponzi scheme. They claim that it has the benefit of being a stable currency, i.e., they want to appeal to libertarian types who are suspicious of "fiat currency." But there is no reason to think that it will remain stable in value. The supply of bitcoins is going to converge to a predesignated number, but value depends on both supply and demand. At some point demand will go to zero, and so will value.

Actually, I think the volume of currency is suppose increase by its reducibility. The more volume that's needed then the smaller the denominations become ie) 0.001 bitcoins today could become equivalent to one hundred 0.0001 bitcoins in the future. Instead of printing more money you increase volume by reducing a bitcoin denomination. Entirely aside from the fluctuations in value. At least that's the way I read it.

Edit: Just thought of something. Modern currencies have a tendency of losing buying power over time. The value of a penny has pretty much been outpaced by the cost of maintaining the currency. And if you hold on to a dollar now, it won't buy you the amount of products you could have bought with it three years ago. However, I think bitcoins work in the opposite effect? As the need for more bitcoins grows and the market denomination decreases, what you hold onto today will almost certainly come with more buying power in the future. So if 0.001 bitcoins bought you one milkshake today, and in the future it would cost 0.0001 bitcoins to buy a milkshake, then you could actually buy 100 milkshakes if you had held on to the 0.001 bitcoins. Is that right?