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Bitcoin Isn’t the Way of the Future

Introduced in 2009 by developer Satoshi Nakamoto, Bitcoin is a peer-to-peer payment network based on an open source protocol and a digital currency that is used in the network. The decentralized digital currency enables instant payments to anyone, anywhere in the world.

Bitcoin’s success has the potential to disrupt a lot of ideas about money. According to Stephen Mihm, “Anyone who thinks that Bitcoin will triumph has to believe that it will succeed where earlier generations of private currencies failed — that Bitcoin will, improbably, manage to overthrow more than century’s worth of accumulated state power, jealously guarded and ruthlessly enforced. That’s a preposterous fantasy — and a dangerous one, if you’re an investor. Indeed, people who believe that governments of the world will let a stateless cryptocurrency usurp their hard-won monetary prerogatives aren’t forecasting the future. They’re living in the past,” the University of Georgia professor wrote in an article on Bloomberg News.

The Bitcoin is called a cryptocurrency because it uses public-key cryptography. This means that when paying with bitcoin, there will be no exchange of digital notes or tokens between the buyer and the seller. Instead, the buyer requests an update to a public transaction log, called the blockchain. This master list of all transactions shows who owns what bitcoins currently and also in the past, and is maintained by a decentralized network that verifies and time stamps the payments. The Bitcoins are sent easily through the Internet, without needing to trust any third party. The Bitcoin was designed around the idea of using cryptography to control the creation and transfer of money, rather than relying on central authorities.

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The Bitcoin is one of the first successful implementations of a distributed crypto-currency, described in part in 1998 by Wei Dai on the cypherpunks mailing list. The Bitcoin has been a subject of scrutiny due to ties with illicit activity. During 2013 the FBI shut down the Silk Road online black market and confiscated US$28.5 million worth of bitcoin. And The People’s Bank of China announced on 5 December 2013, that it was prohibiting Chinese financial institutions from using bitcoins.

Steve Horwitz, an economist at the St. Lawrence University who studies private monetary systems, reported to The Verge that “It’s something economists had never had to think about until this was developed, and we’re just beginning to think through all the implications of it.”

The dollar is backed by the Treasury, or it has some intrinsic value, the same way gold can be made into jewelry. If a currency has no central authority and no intrinsic value, people can not trust that it will retain value over time.

It’s difficult to foresee what will happen to the Bitcoin because it is not like any currency ever created. Instead of a central authority, it is governed by a computer protocol. Instead of serving one country or a group of countries, it serves the whole world. And because its source code is public, anyone can launch their own version of Bitcoin at any time.

Image Credit: www.bloomberg.com

Bitcoin Isn't the Way of the Future by

  • Fellow Traveler

    Regarding Bitcoins and gold, it’s important to keep in mind that neither has “intrinsic” value.

    Rather, both are valued by men for their unique properties.

    Gold is:
    – Divisible.
    – Fungible.
    – Value dense. (Scarce.)
    – Recognizable.
    – Durable.
    – Zero counter-party risk.
    – Stable in supply, yet minable.
    – Liquid.
    – International.
    – Non-manipulatable. (Non-centralized.)

    By comparison:
    – Diamonds, while valuable, are NOT divisible, nor are they fungible.
    – Water, while valuable and divisible, is not value-dense enough to compete with gold as a form of money, on the free market.
    – Food, while valuable, is not durable.
    – Dollars, while liquid, do not represent zero-counter-party-risk (rather, they are debt-based.)
    – Dollars, while recognizable, are not stable in supply (inflation is a worry).
    – Dollars are also not minable. (Production is available only to a monopoly cartel, versus gold, which anyone can produce.)
    – Food, which anyone can produce, is not liquid, especially in comparison to dollars or gold.
    – Dollars, while you can hold them in your pocket, a board of bankers still has the power to reach into your pocket and manipulate its value. (This is not the case with gold.)

    Soon it becomes very clear that gold was never “declared” to be a form of money by any “authorities” but rather, became money due to natural market forces.

    If gold became money strictly due to natural market forces (as a result of its unique properties) then clearly the only reason it has been supplanted by dollars is due to artificial restraints imposed on the market by government force. (Such as legal tender “laws”, tax “laws”, money laundering “laws”, etc.)

    Such forces must be constantly active, otherwise, natural market forces would immediately resolve back to gold again as they have for thousands of years.

    Now let’s consider Bitcoin’s unique properties:
    – Divisible.
    – Fungible.
    – Value dense.
    – Recognizable.
    – Durable.
    – Zero counter-party risk.
    – Stable in supply, yet minable.
    – Liquid.
    – International.
    – Non-manipulatable. (Non-centralized.)

    AS WELL AS:
    – Non-confiscatable.
    – Accounts cannot be frozen.
    – Anonymity is possible.
    – Electronically transferrable.

    As you can see, Bitcoin’s unique properties are similar to those of gold, although it adds new properties due to its ethereal nature.

    Those new properties (non-confiscatable, non-freezable, pseudonymous, transferrable electronically) all serve to route-around the artificial forces that are currently being used to supplant gold with the dollar. After all, the various immoral, legal-tender legislation in place today uses the force of a gun to impose fiat money onto an economy that would otherwise resolve to gold by natural forces. That artificial force depends on the government’s collusion with banks and their collective monopoly on the ability to issue, store, freeze, confiscate, track, and transfer dollars.

  • Milly Bitcoin

    Bitcoin is merely a choice among many alternatives. To say it is supposed to replace all other currencies and then claim it will fail because it will not do that is just a hyperbolic straw man argument. It is like saying Honda will fail because it will not replace BMW.

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Jaan Posted by on January 1, 2014. Filed under Home,Legal News,World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

 

 

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