Ayd Asraf

Corporate Senior IT Executive - Release Team, Aramex International


This conversation is closed.

Are "Bitcoins" the future of money?

It is clear that there is still a debate raging about the future of cash. Cash is one of the other traditional bastions of the old guard of financial servicing.

Yet with mobile wallets, ebanking, contactless everything and real-time transactions, does cash really have a future?

Some say ‘yes’, due to the unique attributes of cash, other says 'no' due to the recent disruptive invention that is called "Bitcoins".

For those whom are new to the term mentioned above, Bitcoin is a digital currency designed to be controlled through encryption rather than a centralized authority. Operating in exactly the same way as cash, Bitcoins are fully exchangeable as an anonymous form of currency in real-time across the internet and, shortly, at Point-of-Sale.

Seems tempting right? but cannot things go bad with all of this anonymity? knowing that Bitcoins has no refund feature and it's solely left to the consciousness of the second party to refund you your money, wouldn't that be a concern?

Let me know what you think about the future of money, Bitcoins or Cash? what do you think is good & bad about Bitcoins, as well as cash?

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    Jan 27 2014: Pardon me if this seems too religious but I believe that in the end of times currency will be wiped off the planet and replaced by intangible currencies such as bitcoin,litecoin,peercoin and the list goes on... apparently it's among the great signs the worlds coming to an end, in other words YES bitecoin and currencies of it's kind are going to be the way of the future.....
  • Jan 26 2014: For a commodity to be a good money, it needs several characteristics: fungible, dividable, limited, effort to acquire, etc. The one that bitcoin lacks is fundamental usefulness.

    It takes a lot of effort to hand carve toothpicks. If we started using hand-carved toothpicks as money, they would be fungible, dividable, limited, take significant effort to acquire, etc. The problem is, their is no fundamental usefulness. Any number of items would be better at removing gunk from your teeth, including machine produced toothpicks.

    How about tulip bulbs? That would be a good money, right?
    • Jan 26 2014: Cash has no fundamental usefullness...
      • Jan 26 2014: Really? Because my cash has printed right on it, "This note is legal tender for all debts public and private". That is backed up by law that says it HAS TO BE accepted as payment of taxes and debts... That is some serious fundamental value!

        What is it that bitcoin is required to be accepted for?
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    Jan 25 2014: I first learned about bitcoins on this forum, and I am very thankful for that. I've since integrated Bitcoins as a generic eCommerce payment method (alongside PayPal, etc.) into an eCommerce platform that I've developed. Of all the payment methods I had to implement as part of my eCommerce platform this was by far the easiest and quickest implementation.

    Last year I traded dollars for bitcoins far enough before the big run up that I've made a tidy profit. I saw this run up coming clear as day, and told my friends about it - but oddly enough none of them wanted to take advantage of the opportunity.

    I think either bitcoin or something very much like bitcoin *should* be the future of money, and I"m doing what I can in my small way to help that along. The two biggest strength's are it's anonymity, and the inability for the federal reserve to steal bitcoins from us and give it to the bankers, as it does with dollars.

    I think the biggest problem the average person has with bitcoin is that they don't trust it - either the currency fluctuation is too volatile, or they are worried about losing their bitcoin to an unscrupulous merchant who won't deliver, or they worry about losing their wallet. I think these are problems that can be resolved.

    I see a massive battle looming between the US government and Bitcoins - perhaps later this year. They'll try to control bitcoins under the guise of fighting terrorism. The NSA will try to hack it. The only thing they can do is outlaw bitcoins, similar to the way it used to be illegal to export strong encryption in the 1990's.
  • Jan 22 2014: Probably the biggest obstacle is the CPU to run the program to mine Bitcoins. When governments can print vast amounts of paper money that has immediate value bitcoins are a lot like using penny's or unrefined gold or silver to exchange for goods and services. Mining Bitcoins is too slow a process to be an efficient market currency replacement. It's a clever use of computing technology but it will stay in its niche in the tech sector.
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    Jan 21 2014: Bit coins are just electronic S&H Green Stamps. Same concept, different decade.
    • Timo X

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      Jan 23 2014: Not quite. S&H Green Stamps were more like conventional forms of currency, Bitcoins differ from this mainly because:

      1. S&H Green Stamps were issued by S&H and were always exchangeable for items in their catalogue. This is comparable to having a country adopting a specific currency and having a central bank issue it. In contrast, the issuing of new Bitcoins is decentralised, and there is no place where they are always valid.

      2. The supply of stamps was only limited by the resources required to make them, like a central bank they could always print more if need be. There is, however, only a limited amount of Bitcoins, as predetermined by a mathematical limit built in in the code.

      3. There was no record of who held which stamps, as there is no record of who holds which cash in a normal currency. But there is a public record of who holds which Bitcoins. That is, in fact, an important part of how Bitcoin works. You may have heard that Bitcoins are anonymous, and that's true, because the 'who' in this case is a simply a number behind which could hide any person or organisation. (Think of it as a Swiss bank account: anyone with the right set of numbers can get money from it.)

      Whether these innovations are truly for the better remains to be seen. The wild fluctuation against the USD is not a good sign in my opinion, because the value of a currency should be stable. But I think it is an interesting concept nonetheless.
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        Jan 23 2014: can you explain why do we ever need more money?
        • Timo X

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          Jan 23 2014: Well, more money leads to inflation, which is generally considered a good thing. Some reasons are listed here: http://en.wikipedia.org/wiki/Inflationism

          I do not find any of those reasons truly compelling, but current-day economic systems work under the supposition that there will be a certain amount of inflation. Bitcoins therefore represent a change, the effects of which are not entirely known. That is why Bitcoins are an interesting natural experiment.
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        Jan 23 2014: so to summarize:

        1, we can not adequately support the claim that inflation would be good
        2, even if we assume it is good, we still need to show that it is necessary

        if any of these fails, your statement about bitcoin can't be inflated loses weight. do we agree?
        • Timo X

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          Jan 23 2014: You misunderstood me if you think I said the value of Bitcoins cannot inflate, I did not mean to imply that at all. I said that there is a limit to the total amount of Bitcoins. One possible cause of inflation is an increase in the money supply, but there are plenty of other reasons why the value of Bitcoins may suffer inflation. Disuse is a good example, if nearly no one uses Bitcoins any more, the value will drop very fast. The change that I referred to in my earlier post is the change from an economic system with a central bank that aims to CREATE (a limited amount of) inflation, to a decentralised system that aims to AVOID it.* The effects of this change are not entirely known.

          * The real story gets more complicated still. New Bitcoins are actually made all the time through a process called 'mining' which is done by letting a computer solve a mathematical puzzle. The difficulty, and therefore the speed of discovery, is determined by a mathematical function established by the Bitcoin computer code. This function has diminishing marginal returns, and an an asymptotic limit. That means the discovery of new Bitcoins becomes slower and slower all the time, until the last Bitcoin which is nearly infinitely slow to mine. The amount of Bitcoins is already so great that the discovery of new Bitcoins is extremely slow, that is why, for practical purposes, you could say that the money supply is limited.
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        Jan 23 2014: i don't think that there is a misunderstanding as lack of understanding. you seemed to claim that the problem with bitcoin is that it can't be made more of. i replied that it is not only not necessary, but probably not even beneficial. so what is your point after all?

        let's turn the tables a little bit, i explain what i think. changing quantity actually hurts money. the best money is something that has a fixed quantity once and for all. gold is something that is very close to that, it can only be slowly and costly mined. the value of gold remained high for many thousands of years. empires came and went, gold remained.

        we live in the era of fiat money, which is by its nature allows easy manipulation by governments. governments routinely create new money for themselves to spend, effectively robbing us blind. being resistant to this influence is very valuable. bitcoin is, in my view, a terrible currency. but it does not stop it from spreading, because that much valuable its independent nature is.

        it is only a matter of time that governments start to tax, ban or hinder its spread. you all have been warned.
        • Timo X

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          Jan 23 2014: Calling it a lack of understanding is perhaps indeed more appropriate. I did not claim that it is a problem that there is a limit to the amount of Bitcoins. I only pointed out that this property is different from conventional currencies, and that this thus represents a change with unknown consequences. The very fact that the consequences are unknown to me means that I cannot judge those consequences to be good or bad.

          As for your argument about fixed quantities being superior, it is deeply flawed because it ignores the demand side of the economy. You say gold keeps its value, true enough: gold has been a valuable commodity for some time. But we can say the same of oil, milk, grain, and virtually any other commodity. What does any of that prove? And while gold may have a stable SUPPLY, it has the least practical applications and so the the least stable DEMAND, of all the commodities mentioned here. This means that the value of gold can fluctuate wildly, which it does (and not just against the USD).

          You also argue that governments financially burden their populations by printing money. True, but the money comes from somewhere: if it is not gained through printing, then direct taxes or lower spending. So having a fixed money supply doesn't solve your issue with the redistribution of economic goods, and it doesn't even solve your issue with inflation itself either. Because even if the total quantity of some currency is fixed, this does not imply that the MARKET demand and supply for this currency are fully correlated. That means the value of the currency can still fluctuate and that there can still be inflationary and deflationary periods.

          For example, if someone with a lot of Bitcoins suddenly decides to exchange them for USD, the value of Bitcoins against all currencies would plummet. This is because the market supply is suddenly much higher while the demand has remained the same. No attempt to fix the total money supply can protect against that.
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        Jan 23 2014: this is what you have said: " they could always print more if need be. There is, however, only a limited amount of Bitcoins". i can not see the "inability to print more if needed" as a good or even neutral thing. so i think i assumed with a good basis that you see this as a problem.

        my analysis of money is not flawed, and it has nothing with any sides of the economy. the value of money (in terms of products) adjusts. if we have half the amount, a unit of it worth twice as much. there is no right amount of money, any amount suffice. the only issue are practical, you don't want to exchange tons or micrograms of something. but with data, it does not matter at all.

        the assumption that governments has to collect money somehow, therefore it does not matter is flawed for two reasons: 1, the government can reduce its spending, and indeed it is desirable. 2, tax is much better than inflation, because it is visible, fair and less damaging.

        for your final example: if the entire world is using bitcoins, one player can't influence its value. also, it is highly unlikely that this person could benefit from such a transaction. it never happened with gold.
        • Timo X

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          Jan 24 2014: "so i think i assumed with a good basis that you see this as a problem."
          Regardless, the assumption was wrong, as I am pointing out to you now for the third, and final, time.

          "my analysis ... has nothing with any sides of the economy."
          That is precisely why it is flawed. There are both demand and supply factors to any market, including the money market.

          "the assumption that governments has to collect money somehow, therefore it does not matter"
          Again, you assume I mean something I did not say. You argued that governments effectively tax their citizens by printing money. I agreed that this is true, but pointed out that a fixed money supply will not change the tax burden. I didn't say that the way governments are financed doesn't matter, I said it doesn't matter to the amount of taxes people pay. Or, to put it in your words, we would still be robbed equally blind.

          "for your final example: if the entire world is using bitcoins, one player can't influence its value."
          If pigs could fly, we wouldn't need aeroplanes. The entire world is NOT using Bitcoins, and one person CAN influence the value of Bitcoins if he owns a large enough share or if the market is illiquid.

          "it never happened with gold."
          If the USA would sell all her gold reserves at once, the gold price would plummet. Whether the gold price was ever actually noticeably changed by one person or organisation, I do not know. I do know that is certainly within the realm of possibility, and I also know that it did happen to other commodities, e.g. cacao.
  • Jan 28 2014: This is my up-to-the-minute opinion on this topic. Just in today's news, there is a report that a manager (Charles Shrem) of a bitcoin exchange service called "BitInstant", was arrested for money laundering for drug trafficking in the net trading drug black marketplace "Silk Road" in the U. S. Apparently the U. S. government agencies have never granted the Bitcoin as a legitimate currency, so that the money laundering has been applied only to the U. S. currency used to "buy the bitcoin to be used as drug trafficking. The following is a source article from the Yahoo News:

    "If you’ve made a fortune in bitcoins over the past year and think you can shield the gain from the tax man, you may be in for a rude shock: Tax authorities around the world have been closely studying the virtual currency, which in some cases is much less anonymous and untraceable than it might seem.
    Even if you’re willing to pay your fair share of your bitcoin earnings, prepare for some headaches. Bitcoin’s popularity has run well ahead of tax law, mostly because nobody can seem to decide what exactly bitcoins should be: A currency, like a dollar or a euro? A financial instrument like a stock or a bond? Or illegal altogether?
    The Inland Revenue Authority of Singapore (IRAS) thinks it found a workable way to bring bitcoins in from the cold. In a response to the bitcoin brokerage Coin Republic, as reported by CoinDesk’s Jon Southurst, IRAS says it will treat bitcoins like a product—no different than an iPhone or an MP3 or a shrink-wrapped piece of software—which incurs taxes when it is sold for cash or used to pay for goods or services:
    The IRAS reminded Coin Republic that bitcoins do not fit the definition of ‘money’ or ‘currency’, so supplying them is seen as a good/service for taxation purposes rather than a currency exchange.
    The tax treatment is slightly different for individuals that buy bitcoins as part of a long-term investment, and later sell them at a higher price as a capital gain."
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      Jan 28 2014: Just cuz the law don't like it, don't mean it ain't right!

      And for revolutionaries-- of which there are a growing number-- why not TRY and escape tax regimes?


    • Jan 28 2014: It is simple enough to me what it should be thought of... A classic Ponzi.

      It fits the pattern perfectly.
  • Jan 26 2014: I am brazilian, my english is not good as yours. But i am sure that bitcoins are not the future of money. The bitcoins are finite: this is the problem about it. And so it can not be a reserv currency.
    • Jan 27 2014: Unfortunately, bitcoins are not limited, only the rate of growth of supply.

      Every so often, new seed numbers are released for computers to grind on. When certain hash values of the seed are found, bitcoins are awarded for the effort. This is called bitcoin mining.

      Via bitcoin mining, the supply of bitcoins is constantly, and forever will be, increasing.

      Price is set by the balance between people buying and people selling, with newly mined putting a little extra potential to the sell side, if the miners look to cash out.

      The real flaw of bitcoins remains that it is a classic Ponzi. Payouts are 100% paid from new people buying in. As soon as people stop buying in to the Ponzi, there will be no value of the bitcoins.

      This stands in stark contrast to legal tender currencies which can still be used to pay taxes and debt, even if no one wants to buy your legal tender.
      • Jan 28 2014: Where are you getting your facts? There will and and never will be more than 21,000,000 Bitcoins ever released through Bitcoin mining.
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        Jan 28 2014: amazing how many stupid things sensationalist magazines come up with. amazing that people actually buy these lies on face value. you just got an F on skepticism.
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      Jan 28 2014: and it is a problem because you say so or because of some actual reason?
  • Jan 26 2014: I can't believe that any government across the globe hasn't declared bitcoins illegal. I've been hearing about bitcoins for a couple years now and it seems that bitcoins have mainly been used for illegal purposes. Although i should have started "mining" them long ago, it still seems like a crazy idea.
    How can this possibly be used by more then a small percentage of the worlds population. I'm probably a cranky old man, but I believe sooner or later someone is gonna end up with the short end of the stick.
    • Jan 27 2014: It is a big Ponzi that has not yet gone bust. Give it time.
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    Jan 26 2014: It only offends everyone that is use to using and still using physical money, which is if everyone is honest they are using less of or actually handling less of the actual physical thing called cash. Come on? When was the last time you used a " Brick" ( a slang term for $10,000) anyone?

    I'm surprised no one here is actually talking about Net 2.0? The next possible evolution of the net globally. One group who is touting about the the next gen Net want to rename it the Meganet. Completely outside of ISP's making them the past. Just google it, they are serious.

    I was chatting to one of my clients yesterday who is a young trader and he thinks Bitcoins are a flash fashion and that if you had begun mining a year ago you are in the zone but if you start now you would be on shaky ground struggling to catch up. He's too young to remember the .COM flash of the late 90's.
    • Jan 26 2014: You assertion is false on its face. I conduct a large number of transactions without physical money. Internet purchases, bill payments, automatic billing on many of my monthly expenses.

      The argument against bitcoin is not based on being used to physical money.

      The argument against bitcoin is that it is a Ponzi.

      There is no fundamental usefulness of the bitcoins. People cashing out are 100% paid by people buying in.

      That is completely different from legal tender currencies where there is legal guarantee that the money will maintain usefulness and mechanisms in place to maintain supply and demand.
  • Jan 26 2014: That is not fundamental usefulness, that is granted by the state. If there was an apocalypse, your cash would be worth nothing, while machine-made toothpicks would stay useful. That is the difference. Of course, that is almost impossible, but it is an example to show that governments have finite durability, which means in the distant future, such a level COULD really be reached, by, something else. In which case bit-coins would be useful.
  • Jan 25 2014: "Are "Bitcoins" the future of money?"
    Bitcoins as a currency. Maybe If not Bitcoins there will be another alt-coin that takes it place.
    Bitcoin as a technology. Yes. The discovery of solving the double spending problem with decentralized virtual currencies was huge step forward. Thank you Satoshi
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    Jan 25 2014: Bitcoin is cool! And the concept of bitcoin has great potential to help people in the third world. I heard there was a nation in West Africa where the government currency was so volatile and inflated/deflated that no one wanted to use it. Instead, they started using cell phone minutes. People could transfer prepaid cell phone minutes from phone to phone as payment for goods and services. Bitcoin? That's even better!

    Bitcoin is NOT tied to any single government or any Central Bank. Market forces determine it's value. It works like cash. It's secure - but the major drawback is that it's electronic. But once you compare how many people have cell phones today w/5 years ago (2009) that may not be a problem. Compare that w/projections of how many people will have personal "Bitcoin smart phones" (-Bitcoin enabled devices; i.e. Bitcoin cell phones) in 2019, how much of an impediment is that really? There is a lot of potential there!

    I still haven't seen a good, detailed description of how Bitcoin actually works. All the articles I've read thus far tend to repeat one another. And apparently it has gotten much tougher to "mine" bitcoins. Anyone have good information on that?
    • Jan 25 2014: "Bitcoin is NOT tied to any single government or any Central Bank. Market forces determine it's value."

      You say these things like you think they are good. In reality, it simply makes bitcoin a Ponzi.

      "It works like cash."

      You can use them to pay your taxes? There are laws that guarantee your debtors HAVE to accept them as payment?

      Legal Tender is a very valuable legal promise that gives government and central bank backed currencies their true fundamental demand.

      If we all decided tomorrow that dollars are worthless, then there are entities with about $55 trillion in debt that would love to snap up all those dollars and use them to repay their debts, and other people, that owe a total of about $3 trillion a year in taxes that would trade you stuff to get those dollars.

      If we all decided tomorrow that bitcoins are worthless, then.... there is no fundamental demand that would ensure those bitcoins actually have value.
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        Jan 25 2014: Electronic MONEY! No carrying fees, charge fees, or other bank-based fees associated with transfer. It's like Pay Pal w/o having to deal w/the web site or email.

        I don't need Bitcoin to pay taxes. And where I want to spend them . . . they'll take them. Who needs laws to guarantee anything when you have an electronic currency that people will accept in payment for goods and services. And the "miners" do all the transaction processing. No banks. No credit card fees to process payments. International cash transfers in Bitcoin for FREE!

        There are advantages to having an international electronic currency that is regulated only by market forces. We don't need a government or Central Bank to tell us that gold, silver, or platinum have significant value. Bitcoin can work the same way. Get enough people using it to do commerce, and market forces will determine the value vs other government controlled currencies. That's the government issued money that's used to pay taxes.
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        Jan 25 2014: "You can use them to pay your taxes? There are laws that guarantee your debtors HAVE to accept them as payment?"

        [I think you meant to say creditor rather than debtor there, btw.]

        I have to pay taxes on the *profit* I made on bitcoins last year. What if I show up at the IRS and hand them loose change and dollar bills - do you think they'll take that?

        About having to accept cash: Try renting a car and paying for it with cash when you return your car.

        What if everyone wanted to get their cash out of the bank - a bank run. FDIC only provides a limited security here.

        Do you want your currency debased every year while the bankers get to keep the profits from that?
        • Jan 25 2014: Thanks for the correction, yes, I meant creditors.

          Try paying your taxes in cash? Well if the taxes are in America, and the cash is USA dollars, then they HAVE to accept the cash as payment. It is printed right on every USA bill... This note is legal tender for all debts public and private. It is the law!

          As for renting a car with cash, there is NO guarantee that legal tender can be used to buy anything. The law is limited to the ability to pay taxes and debts. The ability to buy stuff with dollars is a secondary consequence of the usefulness of dollars to pay taxes and debts. Since there are people that need to pay taxes and debts, you can be fairly sure that if you have dollars, people will trade you stuff to get the dollars. This means you can safely accept dollars in exchange for your stuff, trusting that others will trade you their stuff for dollars.

          Dollars have a fundamental usefulness guaranteed by law, and that is the source of their value and usefulness.

          There is no legal guarantee as to the usefulness of bitcoin. Bitcoin has value, if and only if people think it has value. That is it. There is no fundamental usefulness that guarantees the value.

          As for inflation, I'd rather have a nice predictable target of 2% per year, with a government and a central bank working its tail off to ensure that. Inflation is the tax on not doing something more productive with your savings than stuffing it in the mattress or putting it into a checking/savings account.

          Besides, most people have far more debt that money, so as long as their income keeps up with inflation (I know, a big if), then inflation actually helps rather than hurts them.

          I think 2% +/- 1% predictable is hella better than bitcoin going from 200 to 1500 to 500 to 900, in a matter of months.
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      Jan 25 2014: Rollin,

      I agree with your comments.

      To find a good, detailed description of how Bitcoin works, see the bitcoin wiki here: https://en.bitcoin.it/wiki/Main_Page
  • Jan 25 2014: Currently, the value of bitcoins is the untraceable nature. I do not think it will take long before countries are either blocking access or demanding records. Once that happens, what is the fundamental value of bitcoins?

    Can they be used to pay taxes and repay debts, as the legal tender fiat currencies can?

    Can they be worn to flaunt your wealth in the faces of others, the way gold and silver can?

    Can they be exchanged for commodities and a guaranteed exchange rate, the way the early monies could be?

    There is no fundamental demand that will exist once countries get good at tracking transactions.

    In my opinion, bitcoin is the ultimate Ponzi.
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      Jan 25 2014: My answers to your questions:

      Bitcoins will retain their anonymity even if countries demand records - not sure what records you're talking about though.

      I am in fact paying my taxes by converting bitcoins to dollars, so while the government won't accept payment in bitcoins, why does that matter if I can convert BTC to USD or any other currency?

      You can in fact wear physical bitcoin jewelry if you are the sort that likes to do that, and flaunt your wealth that way.

      Bitcoin can be exchanged for commodities - not sure what you mean by a guaranteed exchange rate though. Could explain what you meant by that?
      • Jan 25 2014: But there is no guarantee that people will want to buy your bitcoins for dollars, something that is necessary to do the conversion so that you can use them to pay your taxes.

        If everyone decides dollars are worthless, then can still be used to pay taxes and debts.

        if everyone decides bitcoins are worthless, they are worthless.
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          Jan 25 2014: I think you've boiled that down quite succintly: Dollars are good for debt and taxes, because those are functions of government. I would prefer to use bitcoins for everything else , and convert to dollars for government purposes.

          In terms of having a guarantee that people will want to buy bitcoins for dollars, I believe what you mean is you can't predict the exchange rate. When a currency becomes worthless, no governmental guarantee can save that currency, as we saw with the hyperinflation in Zimbabwe. Despite all their governmental efforts and assurances that their currency was to be used for the purposes you describe, it became worthless. They still don't have a currency.
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          Jan 25 2014: "if everyone decides bitcoins are worthless, they are worthless."

          Comment #2 - I so 100% agree with your last statement there. Where we differ in opinion, is that I believe the same principle applies to the dollar.
      • Jan 25 2014: "I so 100% agree with your last statement there. Where we differ in opinion, is that I believe the same principle applies to the dollar."

        The primary difference between Zimbabwe and the USA is how the currency is created. Zimbabwe borrowed money from foreign nations, IN loans denominated in the foreign currency. This meant they had to get foreign currency to repay their debts.

        When civil war disrupted the flow of exports and increased the need for imports, the foreign currency was not available to repay the foreign loans. The Zimbabwe government had little choice but to print up vast amounts of their currency and go shopping of foreign exchange markets for foreign currencies, destroying the value of those Zimbabwe money. Lots of supply, with no demand in the form of export to be bought with them.

        By contrast, USA debts are denominated in USA currency. Further, our money is not just printed up be the government. It is borrowed into existence, offset by equal amounts of debt. This helps ensure that the supply of money (plus near money) is proportional to the amount of money in existence.

        Because the debts and money are denominated in the same currency, they create a near balanced supply and demand.

        Sorry, but legal tender status with debts offsetting money is hella more stable than supply created via algorithm and demand based on nothing by hope and belief that someone in the future will pay as much or more for your data bits than you paid. This is easily evidenced by the insanely wild swings in bitcoin exchange rate.

        Legal tender currency has fundamental demand that ensures some level of value that is lacking from the pure Ponzi that is Bitcoin.
  • Jan 23 2014: We are having a lot of trouble here with the credit and debit card system for identity theft and other things. We also already have Paypal, etc. here. but these have not been popular as well. I am not sure how the "bitcoins" can circumvent all the pitfalls of the other cash media. Furthermore, if and when the "bitcoin" could completely work as good as cash, then the government will come in and to either outlaw or control them.(because the "cash" system is their monopolized product)
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      Jan 23 2014: "not sure how the "bitcoins" can circumvent all the pitfalls of the other cash media"

      this is called the nirvana fallacy. a solution does not have to solve each and every problem in order to be viable. after all, the current money system and its derivatives have all sorts of problems, yet we use them.
      • Jan 23 2014: But the question here is whether the Bitcoin will be the "FUTURE OF CASH". My comment was that at best it could only be as good as the bank debit (cash) card or the Paypal on the internet trade, they are having their problems recently, such as the restriction on processing charges or high interest charge, etc. As a matter of fact, even a few sovereign currencies could become extinct in the past, and probably will happen to the Argentinean currency in near future.
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          Jan 23 2014: if you only see from the aspect you listed. but the true strength of bitcoin is not in that. it is these: independence of governments, total lack of inflation. these are properties that so far only gold had, but gold is rather awkward and cumbersome in comparison.
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        Jan 24 2014: I was told that Bitcoin is formed by the 4-key concepts, including: Stigmergy, Cryptography, Peer to Peer (P2P) or Network, Open source software.

        In short, Bitcoins is " modern barter e-currency " & " silent trade by P2P ".
        (P2P: The Person's performance and credit are issued by the network members).

        Question: If some Countries do not have Peer to Peer system, what can they do?
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          Jan 24 2014: why they don't have? if because they don't have internet and computer penetration, i have no idea. they should first aspire for that i believe.
      • Jan 24 2014: Please notice my last sentence: the governments will not tolerate another currency, whether it is inflation proof or not (I rather doubt it could). Because if the Bitcoin becomes a major currency and as you said it would be inflation proof, then it could drive out the government issued currency In the so-called "good currency drives out the bad currency" phenomenon.
        Someone mentioned, as also claimed by the "inventor", that Bitcoin is backed by genuine gold coins, but if that is reality, then it will stimulate the demand for gold, then it will drive up the gold price, eventually devalues all the government issued currencies. So do you think that the governments will tolerate it without intervention? The world already have lot of credit market exchanges, still the "currency" market are currently in such turmoil as manifested by the worldwide financial crisis in the last two days. So, regardless of the fancy terminology, EVERYTHING ABOUT A CURRENCY STILL HAS TO FOLLOW THE "LAW OF THE MONETARY SYSTEM"!
        Here is a quote from BBC News today. This situation would occur everywhere, if a certain "foreign money" started to encroach on the sovereign currency of any nation:

        "Under the presidency of Cristina Fernandez de Kirchner, Argentina has introduced a number of restrictions on transactions with foreign currency.
        This week, it introduced new restrictions on online shopping as part of efforts to stop foreign currency reserves from falling any further.
        Anyone buying items through international websites must sign a declaration and produce it at a customs office, where the packages have to be collected.
        The government now limits tax-free purchases to two a year.
        Argentina's reserves of hard currency dropped by 30% last year, making support for the peso increasingly unaffordable.
        In 2002, millions of Argentines saw their incomes and living standards collapse amid a crisis that included a government default on international debts and 41% inflation."
    • Jan 23 2014: If bitcoins is serious about being a currency it should grow up and use gold to stabilize it's value. Currently it is so speculative the coins value is eradict. Financial Markets generally like sure things or predictability. If bitcoin can find a way to anchor its value to gold it would be worth the computations that create it.
      • Jan 24 2014: Gold stabilizes nothing. Gold is just another commodity.
        • Jan 25 2014: maybe if you are referring to a failed marriage.
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    Jan 22 2014: There's Megacoin.
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    Jan 22 2014: I think at the moment because it's not a currency, it can't be a case of cash or bitcoins.

    But I hope in the future it would become a currency, perhaps when it's less volatile. After NSA and increasing levels of surveillance, I think we need a currency that allows us to ensure our affairs are kept private. Plus there are already schemes like bitcoin - people move money around on a network, not physical currency.
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      Jan 22 2014: in what sense it is not a currency?
      • Jan 25 2014: Currency is the unit of exchange used within a county. This means it is what things are priced in, what sales are recorded as, what profits are reported in, what taxes are paid in, etc.

        Even the VERY few merchants that accept bitcoins price their products in the local currency.

        Bitcoin is a method of payment, not a currency.
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          Jan 25 2014: so according to your definition, used by an entire country is a necessity. by this definition, bitcoin is not currency. i would question the usefulness of this definition though. for example, if a money is used only in a region, it is not money anymore. this definition looks very much arbitrary.
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    Gord G

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    Jan 22 2014: The future of money is greed. The form it takes depends on the exchange rate between utility and ambition. ;-)
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    Jan 22 2014: A decrease in the tangibility of something is inversely proportional to its trustworthiness.
  • Jan 21 2014: It all depends.
    If the inventor of Bitcoins decides to cash in all at once, the governments of the world may simply make it illegal to use Bitcoins. One might claim that this would have no effect, but the Silk Road got shut down. If enough governments at one time want to destroy something, it gets destroyed.
    Likewise, governments will be very unwilling to accept taxation in terms of a privately-owned money over which they have no influence. It will amount to turning the government over to the control of Bitcoins' inventor.
    However, it is a very young technology and drawing a conclusion at this point would be as foolish as drawing a conclusion about precious vs. base coinage in 1500.
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    Jan 21 2014: I am in favor of it that Crypto-currency implementation shall be used. Its future depends on how much more people use it. Many people had tried to hack it but did not succeed. What is happening is happening for good. And whatever happens will be for the best.
  • Jan 21 2014: All I am going to say is hackers.
  • Jan 21 2014: When their value stops going up and down like a roller coaster, we'll talk.

    Though honestly, I don't really see the trouble with simply moving on to using purely digital forms of the paper money we already have today. That particular trend has already started--I don't think most money in circulation actually exists in the form of cash nowadays.
    • Jan 21 2014: You've hit upon something. Bitcoins are actually not money. They are an easily convertible commodity. Some vendors are allowing fixed-price Bitcoin barter, but that still doesn't make them money. There is no presumption of stability. No army backs it up.
      • Jan 21 2014: What's the difference between money and an easily convertible commodity?

        Armies don't back up currencies, after all. Their stability is a result of a combination of the market and regulation (how much exactly each contribute depends on who you ask). The bitcoin, being both unregulated and new to the market, is unstable.
        • Jan 21 2014: Ultimately, regulation depends upon armies. All regulation ultimately is at gunpoint. Don't believe me? Refuse to follow any and all regulations in your jurisdiction. Someone with a gun will come around to have a little chat.
      • Jan 21 2014: I'm quite aware that all regulation ultimately relies on force, or the implied threat of it, but there is more to currency then regulation.

        Like faith, for example. Force can achieve many things, but causing people to believe their slips of green paper are worth material goods is not one of them. That particular tidbit is a result of years of tradition, social norms, and market forces.
        • Jan 22 2014: Regulation is not both necessary and sufficient for money to be money, but it is NECESSARY. Otherwise, it is merely barter, not money. Second CURRENCY IS NOT MONEY, CURRENCY IS A SYMBOL OF MONEY. Learn this basic economic truth. If the US government, overnight, said "We will no longer use any amount of law enforcement, at all, to guarantee the value of the US dollar." The US dollar would collapse. The force of regulation and its enforcement are necessary for a money to exist and not merely be a medium of barter. Not sufficient, but necessary. Learn the difference between "necessary" and "necessary and sufficient".
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        Jan 21 2014: Ultimately, armies depend upon the concession of the people, as Gandhi, Martin Luther King, and Nelson Mandela understood.
        • Jan 22 2014: And all those other "revolutionaries" who were simply shot?
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        Jan 21 2014: define money then.
      • Timo X

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        Jan 22 2014: I've never encountered your particular definition of currency as 'a symbol of money' before. Can you explain why you believe the distinction between a) an easily convertible commodity, b) currency, and c) money is useful?
        • Jan 23 2014: Money is an abstract quantification of value. Currency is a physical symbol of that abstraction that has a widely agreed upon constant correspondence to the money value and acceptance. It is "current" in an old sense of the word. An easily convertible commodity can be sold for money very easily, but one still has to go through to conversion step in order to reach the widespread level of utility that money has.

          I can go to WalMart, the local liquor store, or a kid selling lemonade and use money (dollars) with all of them. I could use the currency of "cash" with all of them, as well. I would not need to use currency at all at WalMart or the liquor store--I could just make a debit transfer. I can't use Bitcoins at any of the three but would have to sell the Bitcoins for dollars.

          They are not interchangeable.
      • Timo X

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        Jan 23 2014: Although I doubt its correctness (digital money is not currency?), I will suspend this doubt until you've answered my original question: what is the usefulness of this distinction? Are there perhaps rules that apply to one, but not another category?

        "I ... would have to sell the Bitcoins for dollars. They are not interchangeable."
        Didn't you just say that they are interchangeable for Dollars?
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        Jan 23 2014: let us observe that you continue to spread misinformation, but did not even attempt to reply to my request for a definition.

        until further information, i assert that you have no idea what money is, how does that work, etc.