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Online, Bitcoins bitcoin satisfy the goods and services denninger. First, it needs to be a medium of denninger so you and I can transact in bitcoin goods and karl. Now here's the problem for Karl Please login or register. This is because IP addresses do not equate to individuals — although the state will try to have you believe that they do.
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Karl also points out that early bitcoin adopters are rewarded the most like a pyramid scheme. I prefer instead to effort toward political recognition of the duties that come with the privilege that is bestowed on a sovereign currency issuer in the hope of solving the underlying problem rather than sniveling in the corner trying to evade it. This simple characteristic makes it relatively immune to complete destruction due to entropy. This also does not factor in the cost of needing to replace bills, as the U. Before this adoption farmers were frequently dispossessed of their lands by the Lord of the realm, who came through demanding payment of taxes in grain. If you cashed it, that is.
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This would apply to anyone making any kind of transaction that uses bitcoin as a way bitcoin "anonymously" exchange fiat money via bitcoin. If in fact Mt. It's not "gaming" anyone. So Denninger don't see this as karl different. If you lose your key, you burn denninger dollar bills, you toss your metric tons of gold into the Karl Trench.
Karl denninger bitcoin
If you lose your money, it's not coming back. If you lose your key, you burn your dollar bills, you toss your metric tons of gold into the Marianas Trench. It's a trade off: I think the Bitcoin community can do a better job educating people about this danger, explaining as something necessary to ensure that no one but you has control of your account.
It's completely possible to surrender this control to an online wallet service with reasonable certainty that your funds are safe, but I don't think the Bitcoin services community is ready security-wise for anything but early adopters.
Time and experience will solve this problem. He also seems to trust government to withdraw currency when the economy is booming. Only law could compel the government to withdraw.
There's insufficient incentive to withdraw, therefore there's no law. This is a very badly written article; the author is all over the place and making a great many errors in logic.
It's difficult to boil it down to its most fundamental arguments with all the gibberish and flowery language in the way. Let's break it down:. But before I get to that, I want to first demolish the argument for using it that is going around in various circles and media these days -- the idea that it is stateless that is, without a State Sponsor and this is somehow good, in that it allows the user to evade the tentacles of the State.
The very thing that makes Bitcoin work, the irrefutable knowledge that a coin is "good" predicated on digital cryptography, is the noose that will go around your neck at the most-inappropriate time. Those who are using Bitcoin as a means to try to foil currency controls or state prohibitions on certain transactions are asking for a criminal indictment not only for the original evasion act itself but also the possibility of a money-laundering indictment on top of it, and the proof necessary to hang you in a court of law is inherently present in the design of the currency system!
This argument is flawed. It rests on the assumption that bitcoin must be eventually converted into fiat currency. This is not true. Let's take the author's own example: Joe wants to buy a bag of pot, so he sends his dealer the appropriate amount of bitcoin.
The author wants you to believe that this is an inherently public transaction--and, in a way, it is. Let's assume that Joe buys bitcoin on Mt. Gox, and his dealer, upon receipt of said bitcoin, immediately sells it on the same exchange. Obviously, there's a pretty clear record of the transaction there.
This would apply to anyone making any kind of transaction that uses bitcoin as a way to "anonymously" exchange fiat money via bitcoin. However, what would that transaction look like in a pure bitcoin economy? Joe wouldn't have purchased his bitcoin on an exchange, he would have been paid in bitcoin for something else; say, the fine wooden cabinets he builds in his shop. He built one for Tom, who paid him bitcoin from his bitcoin earnings resulting from Tom's delicious hamburger shop.
Joe uses the bitcoin from Tom to buy pot from Dee, his dealer. Dee uses Joe's bitcoins to buy groceries from Bill's grocery store, and Bill pays his employee, Vladamir, some bitcoin for his work. Vladamir uses his bitcoin to buy a truck from Mitch, who uses the bitcoin to buy a ferret from Al's Animal Farm for his wife.
Al, rich from his recent ferret sale, swings by Joe's shop and buys a fine wooden cabinet. Assuming all of these individuals used their own wallets, there is no way to track any of this. Of course, there is a blockchain record--but that's useless to any entity attempting to verify criminal behavior between Joe and Dee.
Even if said entity were to gain access to both Joe and Dee's bitcoin wallets, there would be no way to verify that the transaction that took place was illegal--any more than if it had taken place with fiat cash. In fact, bitcoin would be safer for Dee. Let's say that Joe and Dee meet in the park for their transaction. Joe transfers the appropriate amount of bitcoin to Dee's wallet using his mobile phone. Dee gives him a bag of pot.
The two part ways--but Joe, unfortunately, is picked up by the cops on the way out. He tells the cops he bought the pot from Dee, who is then apprehended as well--but Dee has nothing--no cash, no pot--nothing. Let's say the cops know about bitcoin and ask her for her wallet info. She can always claim to know nothing about the wallet address to which Joe sent bitcoin. There is nothing that inherently ties her to it.
In an economy that runs exclusively on or even heavily on or, for that matter, even not-so-heavily on bitcoin, anonymity is not only possible, but strengthened as more and more individuals accept it as a currency.
Here the fundamental problem of wide acceptance comes into view. This is the problem that the proponents of the system are most-able to address through various promotional activities.
Unfortunately it also leads to deception -- either by omission or commission -- of the flaw just discussed. To the extent that the popularity of the currency is driven by a desire to "escape" state control promotion of that currency on those grounds when in fact you are more likely to get caught and irrefutably so! Always be watching for people who use words like "irrefutably" to describe their own arguments.
I'm not sure why the author included these sentences; they contribute nothing to the article, do not further his argument, and seems to do little more than stroke his own ego as he assures himself that his logic is beyond question obviously, it is not.
Cryptocurrencies have a secondary problem in that because they are not self-validating there is a time delay between your proposed transaction using a given token and when you can know that the token is valid.
Bitcoin typically takes a few minutes about 10 to gain reasonable certainty that a given token is good, but quite a bit longer an hour or so to know with reasonable certainty that it is good. That is, it is computationally reasonable to believe after 10 minutes or so that the chain integrity you are relying on is good.
It approaches computational impracticality after about an hour that the chain is invalid. Virtually all currencies are subject to this limitation.
I would argue that bitcoin is actually superior to many others in many ways. Let's use a currency that the author has advocated: I receive a gold coin for a good or service. I can test it through a variety of means--some of which the author has suggested. Those things can be quickly and easily confirmed--much like bitcoin's first confirmation a confirmation which can be hastened by the inclusion of a small transaction fee.
However, the coin could still be a clever forgery. I guess I could measure the coin's weight and displacement through a fine measuring apparatus, but that might take a little longer The same could be said for any fiat currency. A great deal of effort and money is put into preventing and detecting counterfeit currency, but it obviously doesn't prevent a great many entities from attempting to use such false currency and often succeeding!
This is not a problem where ordering of a good or service and fulfillment is separated by a reasonable amount of time, but for "point of transaction" situations it is a very serious problem.
If you wish to fill up your tank with gasoline, for example, few people are going to be willing to wait for 10 minutes, say much less an hour, before being permitted to pump the gas -- or drive off with it. This makes such a currency severely handicapped for general transaction use in an economy, and that in turn damages goods and service preference -- the ability to use it to exchange one good or service for another. When I purchase gasoline, I might do so with a credit card.
We use that term so frequently, it's quite easy for the term to lose all meaning. Let's consider it, though: Think about what that means, and you'll see why this "time" argument doesn't hold water. What's worse is that as the volume of transactions and the widespread acceptance rises so does the value of someone tampering with the block chain and as such the amount of time you must wait to be reasonably secure against that risk goes up rather than down. This is true for all currencies.
This is hardly an effective argument against bitcoin. Then there is what I consider to be Bitcoin's fatal flaw -- the inherent design and de-coupling of the currency from the obligation of sovereigns. Yes, obligation -- not privilege. I'm honestly not really sure where the author is going with this one. That doesn't really make sense for a variety of reasons.
The government of my home country, anyway is defined by its obligations to the people. It is intended to be representative of the desires of the people. Bitcoins are basically cryptographic "solutions. As each coin is "mined" the next solution becomes more difficult. The scale of difficulty was set up in such a fashion that it is computationally infeasable using known technology and that expected to be able to be developed in the foreseeable future to reach the maximum number of coins that can be in circulation.
Since each cryptographic solution is finite and singular, and each one gets progressively harder to discern, those who first initiated Bitcoin were rewarded with a large number of easily-mined coins for a very cheap "investment" while the computational difficulty of "extracting" each additional one goes up.
The '49ers who strolled into California, took land from American Indians, and picked up chunks of gold from muddy rivers were unfairly rewarded! Those poor folks today have to dig huge mines using expensive equipment!
Gold is a pyramid scheme, I tell ya! That means that if you were one of the early adopters you get paid through the difficulty of those who attempt to mine coins later! That is, your value increases because the later person's expenditure of energy increases rather than through your own expenditure of energy. If that sounds kind of like a pyramid scheme, it's because it is very similar to to how the "early adopters" in all pyramid schemes get a return -- your later and ever-increasing effort for each subsequent unit of return accrues far more to the early adopter than it does to you!
The author does not understand the true definition of a pyramid scheme. I'll refrain from addressing that here, unless someone questions it further. Their initial investment in bitcoin functioned as an opportunity cost. They could have done something else with their time and money. They invested in a high-risk, high-return venture--if bitcoin had completely failed as a currency and it still might , then they would will have wasted their opportunity, time, and money.
If the currency proves viable and tenacious, however, they stand to make a good return--as they should. It was a risk, as many investments are. All investors take risks, but when they invest wisely, they earn a return for their intelligent investment. If bitcoin proves to be a wise investment, have they not earned a return? Bitcoin exhibits irreversible entropy. A coin that is "lost", that is, which the current possessor loses control over either by physically losing their wallet or the key to it, can never be recovered.
That cryptographic sequence is effectively and permanently abandoned since there is no way for the entity who currently has possession of it to pass it on to someone else.
This is often touted as a feature in that it inevitably is deflationary, but whether that's good or bad remains to be seen. It certainly is something that those who tout the currency think is good for the value of what they hold, but the irreversible loss of value can also easily lead people to abandon the use of the currency in which case its utility value to express goods and service preference is damaged, quite-possibly to the point of revulsion. The author goes on about this for a while.
It is true essentially that bitcoin possesses irreversible entropy everything does, after all. However, bitcoin is also, essentially, infinitely divisible currently, the divisibility is limited to X decimal places, but this could be altered in the future. This simple characteristic makes it relatively immune to complete destruction due to entropy. This is not true, incidentally, for something like a gold coin.
The coin can be lost or stolen but unless it's lost over the side of a boat at irretrievable depth it can be recovered and the person who recovers it can spend it.
Actually, gold does have essentially irreversible entropy, just as bitcoin--the author just brought it up himself. Oddly, the author seems to believe that only gold in the shape of a coin is valuable as currency. Gold bars that sink to the bottom of the Mariana Trench are essentially lost forever maybe not, but it's unlikely that anyone will be retrieving them any time soon.
Gold fillings that are buried with the deceased are lost forever barring grave-robbers or Nazis or the like. Gold that has been used in integrated circuits and buried in landfills or irradiated is lost forever or, until such a time as a cost-benefit analysis reveals that their recovery might be worthwhile.
Likewise, bitcoin might prove just as "recoverable. It suffered a severe head crash, and I lost all the data. I didn't care at the time, 'cause they were pretty much worthless, but now it might be worth the cost of recovering 'em Entropy in and of itself is not a reason to reject a currency--if it were, we might as well reject the entire universe. That is, in order for time preference to be neutrally expressed, less the natural deflationary tendency from productivity improvement, the government entity issuing currency gets the benefit of seigniorage when the economy is expanding.
But -- during times of economic contraction they also get the duty to withdraw currency or credit so as to maintain the same balance, as otherwise the consequence is inflation -- that is, a generalized rise in the price level and the destruction of the common person's purchasing power. This argument is nonsensical. The government has the responsibility to withdraw currency to stave off the effects of inflation?
They're the ones that created the inflation in the first place. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use which includes any site where advertising is displayed. Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time.
To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day.
All submissions become the property of The Market Ticker. So screams the headline: Total nonfarm payroll employment increased by , in January, and the unemployment rate was unchanged at 4. Bureau of Labor Statistics reported today. Employment continued to trend up in construction, food services and drinking places, health care, and manufacturing.
This is normal, I remind you, since January is when all the seasonal workers from this holiday called "Christmas" are let go, and of course instead of reporting actual numbers the Bureau of Lies and Scams applies their "seasonal adjustments" so as to make it all sound better. At least the latter, when you hand over your money, is both voluntary and pleasurable.
On a month basis that's added 1. This also showed up in the employment: This usually drops in January as well due to seasonal firing. So where were the drivers in the "job gains" last mointh? Parasites, all of them, and you're billed for it.
What's better, you cheer it on in the name of a "good economy" even though their "employment" is extracted from you by force. What better way to do something than to screw someone and get thanked for it. No change of note.