Will Legitimacy Spoil Bitcoin? 490
New submitter F9rDT3ZE writes "Salon writer Andrew Leonard examines the U.S. Treasury's Financial Crimes Enforcement Network's (FinCEN) first 'guidance' regarding 'de-centralized virtual currencies,' noting that Bitcoin's supporters call it a 'currency of resistance,' while others suggest that 'the more popular Bitcoin gets, whether as a symbol of resistance or a perceived safe haven in financially troubled times, the more government attention it will inevitably draw, and the more inexorably it will be sucked into existing regulatory structures.'"
bitcoin's value is for it's utopian idealization (Score:2, Interesting)
there are malcontents in every era of man
where they have a legitimate gripe that resonates across the masses, you get revolutions. where they have loony complaints that leaves people rolling their eyes, you get cranks
bitcoin is the crank's currency. cranks don't do legitimacy
so bitcoin will lose its lustre with those who launched it onto slashdot's front page for the past few years
look out for the rise of the new utopian idealization project:
"bytecoin", or "bitdollar"
or heck, just go with "crankmoney"
Re:Transactional Currency, not Safe Haven Storage (Score:1, Interesting)
That said, I'm keeping mine in AUD and happy with the way it's been going.
Re:What is their to spoil? (Score:5, Interesting)
In what sense has U.S. currency been devalued? Its real purchasing power has remained quite strong over the past few decades; there hasn't been a significant erosion of real purchasing power (i.e. high inflation) since the late-70s/early-80s period of inflation.
bitcoin alternatives will emerge (Score:4, Interesting)
I think that a bunch of alternatives to bitcoin will eventually emerge so if government regulates one virtual currency there are going to be other safe havens.
Re:That's the price you pay (Score:5, Interesting)
The idea of Bitcoin, I think, is to give up on the idea of asking the state nicely not to control something, and make something that the state, whether it wants to or not, can't control.
Bitcoin Legitimacy (Score:5, Interesting)
That actually addresses the question in TFS: Will legitimacy spoil bitcoin?
First, you have to achieve legitimacy. In the USA, the power of currency, essentially, belongs to the federal government. If they perceive a threat (or simply a challenge) to that power, what do you think they will do? Hint: It's going to be directly related to the term "legitimate."
The thing about the assumption that the state "cannot" control something, is that it is almost always entirely wrong. This discovery is almost always accompanied by wailing and gnashing of teeth.
There is only one condition under which the state cannot control: When the state itself has been dismantled. And there is absolutely no sign of such a thing, even well out on the horizon.
Consequently, the answer to the question in TFS is: No. What's going to "spoil" bitcoin are actions of the state. Guaranteed. It won't be legitimacy, because that's permanently and irrevocably out of reach.
Re:Transactional Currency, not Safe Haven Storage (Score:4, Interesting)
BTCs may have fewer risks than actual currencies, because while they are subject to competitive market forces; there is actually a cost to produce a BTC. There is guaranteed to be a finite amount of BTC that can ever be produced, as long as the Bitcoin network continues to function, and has not been subverted technologically. You can be relatively sure BTC will be a viable exchange medium into the future, absent governments banning it entirely.
While I appreciate, that these are a couple of risks -- it could very well be that coins and cash currencies also have risks, even greater market risks than BTC -- resulting in BTC being a safer long-term storage, and currencies such as USD being a better idea for consumers for short-term exchange. They have a different set of risks: With USD, for example, the US treasury can print a large amount of money at any time; they can declare certain bills worthless; if money is in the bank, there is a chance that it could be seized without the knowledge of the account holder (until one day, when you really need that money and coincidentally some creditor or ID thief took it today...); there is a risk of identity theft (traditional currencies placed with a bank could be stolen -- because when you have physical dollars, they are easily stolen by physical thieves or fraudsters, and social engineering and insecure secrets such as SSN digits could be used against a bank to coerce them to make unauthorized transfers).
The government may devalue the currency, through poor management. Your bank may change their policies, e.g. they may quietly start charging inactive account fees on your savings account.
With BTC, your wallet kind of is your bank account as well, and you are not so reliant on a specific third party providing you a service -- to maintain the account terms, deposit interest rates, no maintenance fees, etc.
Furthermore, your bank can make an accounting error, or an employeen can conduct a fraud in which the result is that money you did not spend is removed from your account. With BTC, you are assured this can't happen, without someone compromising cryptographic secrets that you can secure.
With BTC, while the possibility of theft through malware exists, you don't need a bank, and you have control over how you secure the cryptographic secrets required to transfer your Bitcoins, without requiring a specific third party to act -- if you are sufficiently paranoid, you can divide bitcoins into as many accounts as you like, and very effectively eliminate the possibility of large theft; even "legal" theft, without you're knowing about it until the check bounces -- when some creditor decided to levy your bank account.
Not even close. They are designed to be hard to make, to only be made at a pre-determined rate, and for new supplies to eventually run out. Bit-coins are designed to be limited in supply.
Indeed.. under the current design, the eventual amount of bitcoins available is guaranteed to be finite.
There are really only two forseeable long-term outcomes with regards to the value of bitcoins.... (1) They tend to become worth zero or less over time relative to their worth at previous times [either because of a flaw in the underlying crypto algorithms compromises the protocol, or, a significantly large number of people stop using the bitcoins, in sufficient number that Bitcoins become unusable as as an asset for trade/exchange, and therefore consumer demand for bitcoins eventually shrinks to a smaller amount at a given market clearing price] -- if there is a plentiful supply of people who have bitcoins (for example, through mining), and a very small amount of demanded product available for purchase that require Bitcoins to purchase, the demanded quantity for bitcoins will decrease, and they will eventually become worthless --- However, as long as there are demands for products that vendors will accept bitcoins for (ESPECIALLY services in demand for which v
Re:Bitcoin Legitimacy (Score:2, Interesting)
How long would it take the NSA to destroy the bitcoin by devaluing it? Give you a hint, they build silicon to do whatever the hell it is they want to do. No problem hoarding bitcoins and then devaluing the currency in one huge move.
Re:Transactional Currency, not Safe Haven Storage (Score:4, Interesting)
Actually, they're designed to be relatively easy to make. It's an ingredient of the snake-oil part of bitcoin.
People needed to use CPU cycles to "mine" them, thus they feel like they've accomplished something. They feel like they've contributed. They have earned something of value. It's a very nice, exciting, warm and fuzzy feeling. Having gotten something from nothing, they go from being skeptics, to converts.
There is a semi-legitimate social (not technological) reason for this. If I say I wanted to start an online currency, but I'm starting with all the cash, nobody is going to buy from me. On the other hand, if I say that other-people-not-me are the originating parties, people don't assume it's a thinly veiled money grab.
(To be perfectly clear, I do not believe Bit Coin to be a thinly veiled money grab. I do believe it to be ephemeral. I just can't figure out if it's unthinking zealotry, a complex scam, or an inevitable part of our zeitgeist - a word I swore I would never use.)
Re:That's the price you pay (Score:5, Interesting)
No matter what you trade, if it has value, the state will look to control it's function.
So far, the main entanglements seem to occur because people what their bitcoins to be exchangeable with other currencies, particularly USD. Whether or not you think they are a terrible idea, the (copious) regulations that (sometimes, if you aren't big and important enough) cover bank-like institutions that deal in transactions large enough to be of money laundering concern aren't exactly new or surprising.
It would be a bit more novel if they were to go after bitcoin-only transactions floating around in the aether; but if the bitcoin system is going to link to conventional currencies, it isn't a huge surprise that regulations from conventional currencies will start to apply at those links. Not wholly unlike connecting a VOIP system to the local POTS. There are some ghastly hellholes where the VOIP simply isn't legal at all(though fewer of those can back it up); but a lot more where you can do whatever you damn well please so long as it's VOIP only; but once you start interconnecting with the POTS system, you get all the exciting legacy regulations associated with the incumbent copper for the last 50 years.
Re:Transactional Currency, not Safe Haven Storage (Score:5, Interesting)
Dollars *are* backed by debt. And that debt seemed to be ever increasing, at least up until 2007-ish when the housing market finally imploded.
The Fed doesn't really control or constrain the supply of money, though many economists still believe that they do. It's the double entry book-keeping rules of the banking industry that predominantly create and control the supply of money. A new loan creates both a future obligation and current spending power that didn't exist before. Sure the bank has to find a small amount of money to meet their deposit insurance, liquidity and capital requirements, but that's tiny in comparison to the value of new loans.
Since the level of debt is now such a huge factor in the economy, small accelerations and decelerations in the growth of debt have an enormous impact on the economy. And when everyone recently slammed on the debt brakes [typepad.com] the economy practically died.
Re:Transactional Currency, not Safe Haven Storage (Score:5, Interesting)
Re:Bitcoin Legitimacy (Score:5, Interesting)
How long would it take the NSA to destroy the bitcoin by devaluing it?
Why would the NSA/CIA/ETC want to destroy a way for them to fund whatever they want wherever they want with a system they can game to be invisible to oversight? Hell, they probably funded the invention of bitcoin.