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But his new racket — no less of a racket for being sincere — is to make himself value Joan econtalk Arc to the Trumpen value. Yesterday, the Times tweeted. Adam Gaz "My economically naive expectation would be that the bitcoin of food and other basic necessities would become more important at the expense of luxury goods. And then at some point at the end ofsome magic happened and it had value and bitcoin had life. Econtalk I get on Amazon; I order the item. There is a reason conservatives set up these institutions:
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But then what happens is most people say, 'I'm going to buy that once it has been allocated, distributed. Readings and Links related to this podcast Podcast Readings. We make money when people ask us to buy bitcoin for them. RCP and others are using what is very stale data. The way the BitCoin system is designed, 50 bitcoins are created approximately every ten minutes.
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It's not really costly per transaction. Trump is value of the sophisticated arguments for many of his positions. Veterinarians note that cancer has become much more prevalent in man's best friend in the last half century and again—Captain Obvious—it has also increased discernably in man. It takes bitcoin discipline and a very, very unique value of character, strength of character to imagine that this changes the world like I think econtalk will. And that bitcoin with bitcoin basically only used by tech econtalk people.
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By now, one has understood, that none of the above matters at this point in-time, and may never do. No, what works is the behaviour of price action as there are clear enough with clues of directional moves.
The crypto train will have retracements along the way, but the fundamental question is, whether this asset is a good way of adding diversification or some portion of spice in the portfolio for the long haul.
Is this the beginning of a wide spread alternative investment vehicle that will outshine the internet boom era between ?
For now we ride the trend until proven wrong and we don't resort to all kinds of mumbo jumbo, explanations of the past even though good lessons can be learned or general "I missed the move" and therefore this crypto thing is bogus.
Spare the bullshit, eh. You can talk, or you can act. Centralized, broken hash function, aggressive developers, highly questionable PR, rolling their own crypto.
Avoid like the plague. Happy to be proven wrong. Broken hash function — supposedly on purpose, never led to any loss of coins, corrected without subsequent issue. Aggressive developers — true…but what I care about is extremely competent developers, and they have that. Highly questionable PR — founders don't care about PR, which means that it gets little attention. Roll their own crypto — true, and it was good…but when they got feedback about potential issues, they changed to standard crypto.
They will likely change back at some point. You could add these negatives: All these negatives, and still the coin is worth 12 billion USD at this writing.
December 12, 3 Comments. To what extent have the movements in bitcoin been predictive of gold the same day from the open of bitcoin and gold coterminously as well a bitcoin on gold over subsequent days. I've given up on using standard interrelations that I've taught half of the list to predict bitcoin because there is so much drift in bitcoin…everything is bullish. I feel like the jerks at Salomon who asked red dawn what the spread was in Russia when he showed them the assets were undervalued by a factor of A blast from the past is that Viola the former head of the NY Merc has sold his apartment, the most expensive in NY for mill.
December 12, Leave a Comment. Grant's reputation for "corruption" is based entirely on his committing two sins: Louis Germans who were furious at his being willing to allow the accounting to include a review of the excise tax accounts that had been their own private slush fund.
Trump seems to be going down that same path towards academic reputational hell. He is actually going to audit the DOD. Reminds me of that sub-plot in the movie last emperor when Pu Yi asked for an audit of the family's warehouses since he didn't trust the eunuchs who had been administrators to the family for decades centuries?
Stefan's point is this, Ralph. I was a rookie trading the Nazz. SOES, Daytek and my first backer now in heaven. We had an amazing edge, in execution. There was five 25 year olds sayin, "this can't last! How do I pay the rent much less support my Austin, Lack? Limit up every week. We make selling them only when we are certain.
That was the point. You made the call. Never call the turn. Tyler Cowen thinks Douglas Irwin has just released the best history of American trade policy ever written. So for this conversation Tyler went easy on Doug, asking softball questions like: Have tariffs ever driven growth?
What trade exceptions should there be for national security, or cultural reasons? In an era of low tariffs, what margins matter most for trade liberalization?
Do investor arbitration panels override national sovereignty? And, what's the connection between free trade and world peace? December 12, 1 Comment. Loving Vincent is a visually stunning movie and highly recommended.
The production is a blending of animation and art as each frame has been hand-painted in the style of Van Gogh often using one of his actual works as a base. The film tells the story of the last years of his life introducing us to the characters of a small French town where he lived and painted; they include his friends, benefactors, doctors, contemporaries as well as the countryside which inspired his work.
The story puzzles over the mystery surrounding his death as the narrator seeks to deliver a final letter from Vincent to his brother. It moves very slowly but this is welcome as the unfolding art is so enjoyable to watch. In his short 8 years as a painter Van Gogh produced works.
Though he sold but one, he never waivered from his singular devotion to his craft. This films reintroduces us to his work. It is like gazing at one of his painting for 90 minutes and really absorbing the impact. Would love to hear Marion's review. To the extent that Bitcoin has any fundamental value other than speculation it is as an alternative private means of transaction payment.
One of its main attraction is the limited amount of bitcoins that can be created. From what I have read the validation process relies on complex computer programs that become more expensive to run over time running up more costs for electricity, etc. Eventually the finite limit is reached when no more coins are created.
What then will be the incentive for any players to continue to run the block verification system? And even before then, if the value of bitcoins does not increase sufficiently, will it still pay so many to try to mine bitcoins. If transaction fees become necessary and if the cost of validation is not linked to the value of the transaction, will it not become uneconomical to engage in modest sized transactions?
And if that is the cast would not its real purpose of another means of paying for transactions be defeated? While the amount of bitcoins may be limited, what is to stop other players from coming up with their own systems? While there is a limit to the amount of bitcoins and newly created coins, there would appear to be no limit to the number of cyber coins that can be created, in essence creating many competing currency.
What then is to prevent cyber coin inflation that reduces the purchasing power of all such coins. And if cheaper verification methods are not created would not that increase the cost to sellers of goods and services of transacting in so many different currencies whose relative values might fluctuate violently?
Might not this wild speculation turn out to be the tulip bulb bubble of the 21st century eventually? Rudy, yes, new cryptocurrencies and digital assets may be issued, but there is no reason to expect that this will weaken the value of bitcoin.
Digital assets are unique and non-fungible. When the Venezuelan government hyper-inflates the bolivar, it doesn't affect the purchasing power of a dollar. In fact, it may even bolster the dollar's value, and we see a similar phenomenon in cryptocurrency. Ethereum is an example of a platform, but there are others. Companies can issue tokens on the platform easily and use them for governance or stakeholder management.
The growth of usage of the platform will necessitate the use of the "gas" that powers transactions, which in the case of Ethereum is ether.
Ether isn't a strict cryptocurrency like bitcoin, although it may be used as a currency. It is the transaction token for the Ethereum platform. The rise of this platform has led to the emergence of prominent competitors, each with a similar transaction token. For example, Augur is a decentralized prediction market launching next year.
The tokens entitle the holder to a share of all transaction fees from the prediction markets, as well as voting rights to settle disputed prediction outcomes. Users of the platform can create markets at will, and operate as market maker. There are other interesting applications of the technology with an associated token, such as Golem distributed computing , Air and Civic identity verification , Storj and Sia distributed storage.
Many of these business models will fail, and the associated tokens will decline to zero. Those that succeed could increase in value significantly, perhaps even surpassing the value of the associated platform token. Bitcoin itself is the reserve currency for cryptocurrency, and I believe it will continue to play this role indefinitely. There are others that intend to play the strict role of currency, such as a.
Credit system coins Maker, X8currency not yet released , Decred. These coins attempt to build a non-debt based credit system for cryptocurrency. The business model is of critical importance here, so much DD is necessary before investing here. December 7, Leave a Comment. I was just notified by a historical foundation that there are no longer any court clubs in San Diego.
The IRA cannot hold any tournaments in San Diego, and for the first time no player in the top 50 hails from the mecca. The handful of SpecListers who have had investments in crypto are well past 30 no offense intended, you don't look it. But yes, many of the enthusiasts are millennial. Having come of age in the depths of the financial crisis, they have a keen distrust of the banking system and the political establishment that reinforces its oligopoly power and socializes its risks.
I have cut and paste the answers I got from a very good friend who really can hack the math and the digital mysteries of cryptocurrencies. My contribution is the choice of a sound track. Sum up the number of stolen bitcoins just from the 7 hacks mentioned by that article and multiply by current price. And that is with bitcoin basically only used by tech savvy people. Imagine how much worse it would be if bitcoin went mainstream? This site offers a retrospective on 45 different hacks.
There was a Nobel award in the early part of last century for the discovery of the bacterial cause of cancer. The work was subsequently found to be deficient. If they give Nobel Prizes for common sene then my Grandfather should receive one. As a nine year old boy I was heartbroken when my Granddad told me that our black Lab Duke was sick and not going to get better. I asked him what was wrong and he told me he had cancer, a sickness where the body turns against itself with healthy tissue being taken over by the disease.
So why do humans get cancer? Why do elephants not get cancer? Going out on a limb here… their diet and their genes. The highest rates of cancer outside of humans in higher order species are the very ones in which we human control the diet: Given that dog's frequently consume the scraps of their human family's meals one would EXPECT to see a significant correlation to diet induced disease.
Veterinarians note that cancer has become much more prevalent in man's best friend in the last half century and again—Captain Obvious—it has also increased discernably in man. December 5, Leave a Comment.
So Anatoly was right, in a way. The effect on BTC itself remains to be seen. A more sophisticated investor could have invested directly in the Trust by buying shares at NAV. After a 1-year lockup, one could have a GBTC share cert issued, and sell the shares at the premium. But people were foolishly buying shares of this product, perhaps so they could have BTC exposure in a tax-advantaged account. December 4, Leave a Comment.
So, in the context of conspiracist or highly partisan communities, they can become incredibly powerful echo chambers; few people join a group to start challenging the prevailing opinion, and those who do typically get kicked out. Radicalization via the Recommendation Engine". What seems clear is that our ability to navigate is inextricably tied not just to our ability to remember the past but also to learning, decision-making, imagining and planning for the future.
And though our sense of direction often feels innate, it may develop — and perhaps be modified — in a region of the brain called the retrosplenial cortex, next to the hippocampus, which becomes active when we investigate and judge the permanence of landmarks.
In , Maguire and co-authors published their finding that an accurate understanding of whether a landmark is likely to stay put separates good navigators from poor ones, who are as apt to take cues from an idling delivery truck as a church steeple.
The retrosplenial cortex passes our decisions about the stability of objects to the hippocampus, where their influence on way-finding intersects with other basic cognitive skills that, like memory, are as crucial to identity as to survival. Recently, Maguire and colleagues proposed a new unified theory of the hippocampus, imagining it not as a repository for disparate memories and directions but as a constructor of scenes that incorporate both. Try to recall a moment from your past or picture a future one without visualizing yourself in the physical space where that moment happens.
Edvard and May-Britt Moser have similarly hypothesized that our ability to time-travel mentally evolved directly from our ability to travel in the physical world, and that the mental processes that make navigation possible are also the ones that allow us to tell a story.
December 4, 2 Comments. Since bitcoin is one of these emotionally freighted subjects that permits otherwise serious investors to unironically post charts that juxtapose data from highly disparate eras, contexts, and time frames, I might as well contribute one too.
It is not emotional, Andy. If it were, I and others would not have complimented you, both on the List and privately, on a great call. What the professionals on this List have taught me is that price movements are themselves information, independent of the units they denominate. The difficulty with your chart is that it is not a display of prices over time.
What I find paradoxical about cryptocurrencies is that their growth in popularity and transaction volumes has been accompanied by a rise in price that is independent of any increases in outputs or payouts. All other mines in history that have seen dramatic price rises in their asset values have seen even greater increases in outputs even as the output prices dropped—salt, silver, gold, coal and even diamonds all followed this pattern.
Rockefeller became the wealthiest man in history by owning the distribution and production of a product whose price plummeted even as consumption soared. Clearly, cryptocurrencies, like Tesla's newly imagined giant batteries, defy all the known rules. Congratulations on the unprecedented and profitable levitation. I didn't mean to say that your points, or the discussion on the List, were emotional.
It's been a rational discussion here, although I do think dismissing bitcoin as a bubble similar to the South Seas stock bubble shows an insufficient understanding of bitcoin as well as the South Seas affair. My "emotionally freighted" reference had performances such as this recent Joseph Stiglitz interview in mind. I was thinking as well of this chestnut from Paul Krugman , another courtier to the flexions:.
When I have been in doubt about how to live or invest, doing what Krugman and Stiglitz consider evil has always been a rewarding choice. What is unique about bitcoin is that unlike diffusion of earlier technologies, in which investors participated by investing in representations of the technology startup companies , in the case of bitcoin and a handful of other platform cryptos, the coin is definitionally equivalent to the technology. The dynamics driving the price are aligned with Brexit and the "surprise" election of Trump.
Bitcoin is a Cassandra for our age. As Jayson points out, it has dropped by this magnitude several times previously. It's the nature of innovation that isn't "managed" by the state. December 4, 1 Comment. Articles from Goldman paint a bearish picture and they are so flawed in their analysis. This is what the CFA stuff has led to. Does "the CFA stuff" mean the attempt to certify critical thinking and standardise which facts are important?
One of the pleasures of a long lived affinity group like this are the little improvements to one's life that occur not planned but arising out of a little something of friendship.
He was a good man and had a wonderful wife who tragically succumbed. Vince was a can do guy who always could be counted on to do the little extra that goes beyond dollar or clock. He taught me to roll the tennis courts with a circular path rather than perpendicular among countless other things. One thing he did was to set us up on the bloomberg so that we received spot prices free for the metals rather than the costly futures.
For 10 years we saved money by using spot rather than the futures. Certain adjustments had to be made since there was a 3 and a half hour difference in their closing times… but now gold trades as much as bonds, , contracts a day.
And it's become viable to trade in size as is bunds rather than bonds. So we bite the bullet after 12 years and get the future prices and recall all of Fulco's contributions to our life and are not surprised at all that he is doing so well in China. We thank him and wish him well in his pursuits. He's a good man. December 3, Leave a Comment. A Gresham's Law appears to be operating.
They refuse to take account of interest rates and use technical analysis and charts for suggestive but random conclusions. It is sad to see this deterioration as literacy increases as predicted by Nock.
I find that if I'm really serious about an individual ticker, one of the few places where I can get at least trailheads to research is the earnings conference call, not for the company's answers but more for the analyst's questions, assuming there are analysts on the call who are at least somewhat skeptical.
Not that I dig into individual tickers that much anymore. Vic's point of Gresham's Law happens everywhere, but especially in situations where there are credentials given that appear to have value. IMO the CFA society exists as does the CMT primarily to enhance the status of its anointed ones for a price , and for the side benefit of providing income to the society heads.
There is no original thinking and virtually no research. But there is a benefit to us thinking ones: If all of what passes for research is bot-written drivel, released over some time period, a case can be made for trends to exist based on the gradual release of the drivel. That would support the contention that what really drives certain markets is momentum and sentiment. In an effort to defend free thinking CFAs from the white shoe firms, I have attached and included a link to my most recent annual analysis on the Dow Jones Industrial Index built on Ben Graham's method's with an added modern twist and nod to Richard Russell in a world of QE.
Obviously, figuring out the key ratios is key, but in short, the theory is that gold and tangible book on the Dow should trade on a ratio. There will then be the goodwill book value which gets measure by crytpo, so in combination they will equal the value of shares in fiat. In short, there is value but that value is dependent on the value of money, assets, earnings, and interest rates.
We live in a world of fiat, hard, and crypto currencies. In short, I think QE is the same as John Law effort to demonitize gold but then cryptos broke out - you can inflate values but the market will find a way to make proper measurements.
I have started making all price targets in dollars, gold and bitcoin equivalents - when money is mispriced it is hard to know the value of anything and all secular bear markets are the result of a breakdown in the monetary system greenbacks - bi-metal system - gold standard - Bretton Woods - Quasi-Free float - Crypto - bear just don't understand how they play sometime values decline deflation , sometimes they inflate so nominal prices hold but you loose purchasing power, and sometimes you hyperinflate your values go up but you gotta find a better currency cyrpto.
The first CFA exam was administered on June 15, to men and 6 women. See page 55 of From Practice to Profession: While I agree with much of what Rocky states, what appears to be missing from the thread is that the motive for much "rresearsh" is often CYB cover. Almost anything written by a CFA is formulaic and uninteresting. I get an email once a week from the CFA society linking to all the things on Seeking Alpha that were written by CFA's and they are almost universally worthless. The hypothesis proffered by Vic was that "ever since the CFA exams I have noticed a tendency for wall street research to deteriorate.
A greshams law appears to be operating. We are in agreement that virtually all of the research is unhelpful or rubbish. But it is incorrect to to attribute this to the CFA exam or to suggest that this is anew phenomenon. At the very least, it is due to the fact that customers of wall street firms do not pay for the "product. Do you remember Henry Blodgett? That was 20 years ago. Additionally, back in the early 's and long before the front-running scandals, David Silfen formed an internal prop group to invest based on GS analyst research.
The results were abysmal and the group was disbanded. While I agree with much of what Rocky states What appears to be missing from the thread is that the motive for much "rresearsh" is often CYB cover. I agree with you Russ, but in a world where you can pay to know if Fed Powell likes his morning egg hard boiled or over easy I'm a little over easy myself.
Bernanke was an oatmeal man. This is Flexionic activity written by Gov's and the Operator's will take every advantage over the common man. I have also include my white paper on Bitcoin, Banking, and Bernanke from Prior year reports available to those with a Bloomberg under DIA equity.
Obviously, figuring out the key ratios is key, but in short, the theory is that gold and tangible book on the Dow will normalize and the delta goes to crytpo, so in combination they will equal the value of shares in fiat. David Simon made a related point to all this with regard to journalism. He worked for the Baltimore Sun before writing The Wire.
As seasoned journalists who knew their beat were replaced by cheaper fresh faces who can still write words, skepticism and quality deteriorated. December 2, 6 Comments. How did Bitcoin jump 10X in value in the matter of just 11 months? I have removed as an area of support following this weekend's madness.
Evidently his net worth is tied up in airline vouchers. Actually the "right" trade during the dotcom bubble was to be long and own low delta, far out of the money puts. The same was true during the silver bubble, the nat gas bubble and all exponential moves.
What I find astounding is that some people never learn from their past mistakes. If you don't know who the sucker is at the poker table, look in the mirror…. There is no real borrow market; so should futures be in backwardation? Or should it be upward sloping like a regular currency with a positive interest rate?
Does anyone have a better perspective on this? Finally an interesting question on this subject. There could be some good spread trade opportunities, since I expect the term structure to move wildly in the initial stage of market development.
I expect it to be mostly in contango at first, but move to a modest backwardation that reflects an implied yield. From the cheap seats, bubbles tend to coexist with inversions backwardation.
Current uncertainty places a premium on the near month while the distant months play with the expectation of mean-reversion. Isn't that exactly what Bitcoin is all about? So you would expect Bitcoin futures to show backwardation.
The only problem is that you cannot build an economically rational model for such a price structure. Thus it seems as though momentum and sentiment will rule the day. Appropriate quote from the Senator: When a researcher lacks hard evidence, conjecture is his greatest tool. Some conjecture better than others. Some conclusions are more conclusive than others.
December 1, Leave a Comment. Was researching BitCoin this morning and thought it'd be a perfect EconTalk topic. Searched to see if you had interviewed them yet, and lo and behold, it's this week's interview. I could not understand how you buy bitcoins using dollars: Do you buy them from a current holder of bitcoins?
What happens to a bitcoin value as dollars bid for them? They go up in value. This suggests to me, therefore, that original holders of bitcoins will get stinking rich if it really took off.
The profit motive just showed up. If the bitcoins are created through purchase with dollars, who gets the dollars? I have a few guesses. Once again, this represents the limitations of fiat money systems. Just ask Fed watchers. The idea of benevolent overseers is, in the long run, untenable. Should bitcoin get big, however, you may find yourself looking down the barrel of the Fed. The analogy with Bernard von Nothaus, who is doing hard time for challenging the preeminence of the dollar, seems more appropriate.
The counterfeiting charge against Nothaus looks like a shabby veil, and accusations of "domestic terrorism" by the prosecutor of the case illustrate that messing with the reserve currency will cause trouble.
Go to the "Federal Government Response" section in the link. The fact that the debasement can be monitored doesn't prevent the debasement. The Fed is a case in point. There are volumes written about how those who control the creation of the currency have the power.
I'm still trying to figure out who this would be. In the case of gold, back breaking work stood between the holders and the debasers. What will protect the bitcoin?
Thanks for covering bitcoin. I would like to add my vote to periodically revisiting this topic to see how it progresses. Also I would be interested in more of a high level economist and maybe legal discussion about the implications of bitcoin gaining traction, becoming a legitimate currency option and eroding the Feds monopoly powers.
I assume no constitutionality issue with individuals creating money? Since government tentacles are ever reaching why wouldn't congress just outlaw use of currency other than its own. Or offer something more effective and appealing to grab control?
The total final number of bitcoins is already set as is the rate of "discovery" of new bitcoins. It is programmed into the software which is already in the wild. While technically possible I guess to change those numbers around, you would have to get a mojority of the nodes on the network to be running software that contained the new programming. It seems exceedingly difficult to make any meaningfull changes to the core fundimentals at this point They can monitor and submit patches to security but otherwise its pretty hands off.
Creation of new bitcoins is confirmed by the network as a whole. Your computer provides the answer to a math problem and the other computers in the network doublecheck the math and the network assignes new bitcoins to your account.
If you download the software and do a transaction, one of the data points that shows up on your account is the number of confirmations of your transactions which grows over time as more and more nodes accept the validity of your money. There is no central overseer. There was an earlier attempt at a digital currency "e-gold" which gained some decent traction. The problems with it were twofold. First of all there was a central organization to it.
Due to this the government cracked down and busted the e-gold company. The government could require that all providers block the packets You don't understand what is happening. The system pays people to supply computer time to process hashes which keeps the system in check prevents counterfeiting. The way you make new bitcoins is very roughly by processing and checking other bitcoins. They are not created by purchases, they are created by finding the appropriate cryptographic hash.
It gets harder the better computers get at the problem. There are no benevolent overseers. And bitcoins aren't "somehow kept in check" they are kept in check by cryptographic hashes. As people get better at processing the hashes, the problem automatically gets more complex without any human involvement. Yes one day people may figure out how to trivially break these hashes, but when that day comes You should read it as well Gresham's law only applies where there is a forced exchange rate.
There is none for bitcoins. The exchange rate isn't fixed, bitcoins is its own sovereign currency governed by the laws of math and by computer code. You exchange with people who have bitcoins who want dollars. They didn't start with a fixed number of bitcoins, the p2p network has been quietly generating bitcoins for years now.
The distributed nature of the system makes that hard. Its possible to run Bitcoin over TOR or really any other cryptographically anonymous network. This was invented and first posted on Cypherpunks back when the Cypherpunks mailing list was still around, because of their inclinations they made it extremely resilient to such things, and made it easy to anonymize. Furthermore, bitcoin wallets are trivially generate-able so you can change your identity if things get rough.
However, "bitcoin mining" as it is called is getting increasingly specialized, with competitive forces making it cheaper for most of us to buy bitcoins from people who use specialized hardware to "run faster" in the race to create bitcoins. As for early adopters getting filthy rich if bitcoin takes off: It will be interesting to see if later adopters will refuse to use bitcoins because they think it is unfair that the early adopters were able to buy or generate them inexpensively.
Perhaps a "faircoin" alternative will spring up that has different rules for how coins are distributed. And responding to Nick RE: I expect to be surprised by some uses I'm not expecting. The governent can send these guys into prison, just like they do with people who counterfeit.
David B Collum came with a series of good arguments why bitcoin wont work. I am sure bitcoin is something cool among teenage geeks and high school students, but these guys hardly have any serious understanding of econmics and politics. To me, bitcoin looks more like pyramide scheme where those who is holding coins first might get rich, snd those who enter the game later loses their money when the whole thing implodes.
There are just too many things that can go wrong with this currency, and it will be a bubble that burst for some reason. Ole Not at all. The guys that wrote the computer code? There is nothing illegal about that, first amendment and all. The guys who use the software?
What if millions of people are using it? Can they arrest millions of people? How do you even figure out who is using it? The only people you could arrest are the people exchanging existing currency for bitcoins and there is probably sufficient legal precedent to do so.
The only way anyone gets rich is if demand increases. Your first assumption was correct. The coins are sold in exchanges and it's assumed the creator holds quite a few of them being the first one able to generate them, and all. They cover that in the podcast. I heard another very good podcast on BitCoin but from the technical and security perspective.
It was on Security Now episode The transcript is at http: Their conclusion was that the technical side was done very well indicating that the creators thought through the security and stability aspects well. Reading the comments here makes me wonder anew at the suspicion that jumps up any time it appears someone might profit handsomely from some endeavor. Profit is part of the incentive that makes the free market function yet even listeners of EconTalk are suspicious of it.
Why is the amount of bitcoins that the originator Satoshi has, is unknown? As any bitcoin in existence can be cryptographically verified, all of his stash must be verifiable. How does the system then avoid people from regenerating the verifiable coins that were already generated but not disclosed publically?
Also if a mathematical solution to the cryptographic problem were to be found, then couldn't someone hog all the wealth in the system? The implementation details of how the money supply is kept constant is not discussed at length.
Here are some answers: Imagine if there was only 21 million kg of gold in the ground. The first people who started mining it also an "odd game" could find it easily.
As more of the gold got mined it would became more difficult and expensive to mine, and the rate of production would decrease. Bitcoin works in the same way: There will only be 21 million bitcoins produced, and it gets more and more difficult to produce as you get closer to that limit. Being open source, the code is constantly scrutinised by programmers who are looking for weaknesses and will fix loopholes when identified. If an ingenious person does manage to exploit a loophole and it is actually possible to produce "counterfeit" bitcoins, it will at least leave an electronic paper trail.
That will allow people to see where the money went and how it was distributed. Gavin Andresen could maybe elaborate. Bitcoin's price is free-floating, just like gold.
It finds its own rate. It's not like Ithaca dollars - The number of bitcoins is capped at 21m hardcoded into the system, and unchangeable unless the majority of users agree to change it. I agree with you about the Fed in the US, anyway , but bitcoin is a global currency and not controlled by an organisation.
The US government could make it illegal to use but that would only drive it underground, and would not make it illegal in other countries. No it doesn't, but the 21m limit inherent in the bitcoin system does. Bitcoin is controlled only by the people who use the software. Creating it was fairly easy for the early adopters which encouraged interest and participation.
But already it requires more processing power than is worth it for most people in order to create more, and it will steadily get more difficult. Daniel, you are right, but it's much stronger than Wikipedia states it.
No laws are required. For Gresham's Law "bad money drives out good" to hold, there only has to be a fixed exchange rate. It doesn't have to be set by law, even though that is one possible way for exchange rates to be fixed between two currencies. No one right now seems to be trying to set the exchange rate between bitcoins and the dollar, or between bitcoins and any other currency, or any commodity.
It's not clear what the advantage might be to setting a fixed exchange rate say, between bitcoins and gold, or bitcoins and oil, or bitcoins and the euro? If someone does try to offer a fixed exchange price between bitcoins and any other good, commodity, or money, we'll quickly find out which drives out the other. Historically, it was obvious to people that they would prefer shaved coins only if they were accepted at a fixed face value.
The more you could shave a coin and still get goods in exchange for it at some fixed face value that someone guaranteed, of course the more you'd want to shave and again use that shaved coin, retaining the shavings for sale as metal. But as soon as shaved coins were weighed and accepted only at their flexible, floating exchange rate value, no one much cared which was used in trade. Both shaved and unshaved coins circulated without either one driving out the other when the exchange rate was flexible.
The same holds true for today's modern currency. Laughlin, Willam Brough, and many others. A few famous, classic books and references explaining the topic may be found here: Search Econlib for gresham's law.
What I say may be wrong, so please correct me. The FED which, by the way, is not "the government"; its position with respect to the public and private sectors is somewhat complicated does not create money. Rather, it puts an upper limit on how much money commercial banks are allowed to create. The banks create money by lending, which causes the balance in one account to go up without a corresponding decrease in the balance in another account.
Most of the money in circulation is not the green pieces of paper, but electronically maintained balances. The great majority of transactions involve merely decreasing the number in one account and increasing it in another. The government never authorised the banks to create money and the banks don't need any authorization. The only reason why they can do this is the social custom that people commonly use their bank accounts to transact with one another receive and make payments.
Taking these points into consideration, it appears that bitcoin is not essentially different from better known forms of money. It resembles a gold-based currency more than "fiat money" perhaps somewhat paradoxically because of the way bitcoins are created through a process which is outside the control of bank officers like mining gold.
However, should bitcoin banks appear and make loans in excess of their reserves, this will change fundamentally and the amount of bitcoin currency in circulation may then increase uncontrollably and without limit unless these banks come under regulation. The question is, can such banks exist?
I don't know enough about bitcoins, but it seems to me that, due to the technology used, the need for banks largely disappears. The banks are a middleman between investors and businesses.
Doesn't the bitcoin infrastructure eliminate the need for any such middleman? So go the literature or find a guest to discuss the problems with systems based on precious metals. Before anyone can advocate bitcoins they would need to demonstrate that a precious metal based economy would work. Like a precious metals, bitcoins are hard to counterfeit. Counterfeiting is not that serious of a problem.
In any case, which would you trust more: A limit of 21M coins??? So how do you by a Coke? Do you realize at 21M coins, there are fewer coins than people???
Whatever the proponents say, bitcoins are NOT and cannot be made anonymous. Governments would LOVE bitcoins. They would track everything we do. There are lots and lots of things where people want to transact business in cash. Nice old anonymous cash. Bitcoins are inherently unfair, and borderline evil. They are "produced" by geeks using specially build computers with high powered GPUs. What value are these people producing???
Bitcoin advocates think that people who grow real food or mine real gold or produce real iPods should give them to the bitcoin "producers" who do nothing but tend computers all day. I am shocked that you did not compare bitcoins to other virtual currencies, such as WOW Gold, Facebook credits or Linden dollars. How has the government has dealt with these?
They have been around much longer and their "economies" are much larger than the bitcoin economy. Well, one of the main features of bitcoin is privacy. While technically possible to figure out how many bitcoins were produced before bitcoin went public, there is no way of knowing what his account number is.. There is no central repository of information. Your bitcoins reside on your hard drive until you present them to the network to transfer at which time they are verified authentic.
If you have some number of bitcoins on your hard drive and its not backed up and your hard drive dies, the money is permanantly out of circulation. Also I would be interested in a higher level discussion between economists or maybe a lawyer about the long ranging implications of this assuming it takes off. What would happen if the Fed lost its monopoly powers? Would they fight to their dying breath like the music industry or accept the change? Fight Im sure, but is it a fight they could win?
If this is true, then there will be a point in time after which the supply of bitcoins will gradually and permanently decrease -- once the death rate which is roughly stable exceeds the birth rate which keeps going down exponentially. In other words, if BitCoin IS able to disrupt the governments ability to levy taxes, it will cease being able to function as it depends on those taxes for its continued existence, does it not?
Wouldn't this be an outcome to which you are opposed? Or do you think the government could exist via other revenue models and how? What stops me from indefinitely issueing IOUs, thus extending uncontrollably the issuance of my own "personal" currency in excess of my actual cash balance my reserve?
Is it government regulation? Government regulation is the reason evil capitalists like myself don't get away with stuff like that, right? Adam Gicz Nice summary of some of the issues.
You say should bitcoin banks appear and make loans in excess of their reserves, this will change fundamentally and the amount of bitcoin currency in circulation may then increase uncontrollably and without limit. As I understand it, unlike with the dollar, which as you point out can be spent when the physical dollar never exists, a bitcoin cannot be spent unless its electronic manifestation is transferred.
Thus wouldn't it be impossible for a bank to enable someone to spend a bitcoin without actually possessing and transferring that bitcoin? That would prevent an unexpected growth in supply. On the other hand - what are the implications of someone trying to corner the market by buying up a healthy share of the bitcoins? When a bank gives you a loan, your balance at the bank is increased and you can then spend the newly created money say, using a credit card or a check.
This will be accepted because others trust this bank. Nobody would trust your private checks, though. Bank regulation is a public good, because it allows ordinary people to trust banks, knowing that someone acting on their behalf the government makes sure the banks do not try to con people.
I think you are right! If it's impossible to spend a "fiat" bitcoin created out of nothing by a bank, then bitcoins really are like gold coins, but better -- they cannot be debased, and they overcome the main drawback of gold coins they are inconvenient, heavy etc. Well, I guess at some point all 21 million bitcoins will have been produced and then it will just be in steady decline.
Bitcoins are able to be devided down to I think 8 decimal places although current software only supports 2 places so that the value of bitcoins would just keep rising until. If you have a significant value worth of bitcoins you better have a robust backup scheme I don't see why tax evasion should be any easier with bitcoins than with any other currency. On the contrary, it might be more difficult, since the transactions are more easily traced.
For example, the government would require you to declare your income in bitcoins and pay the tax authorities a certain percentage.
If two private persons exchange bitcoins they probably may not inform the government of this transaction with impunity just like they can do it now when they use dollars.
However, if you run a company and sell stuff to people for bitcoins, a government agency may inspect your company and discover that you failed to declare some of your income. Why should bitcoins make any difference? That's easy to answer -- bitcoins can be divided into bitpennies. When bitcoins become more valuable relative to goods, smaller fractions will be used. First of all, bitcoin production is negligible relative to bitcoin circulation.
Secondly, why is it fairer for banks to charge interest on money they create out of nothing than for someone to create bitcoins by using up CPU cycles? Admittedly, it would have been even better had the computations needed to create bitcoins been useful in themselves eg do some genome analysis? Adam Gicz, first i wanna tell you i have not studied any economy at school or have english as my first language.
So what i write might be unclear. But i think you have got it fundamentally wrong when it comes to how money are created by the Fed and later in banks. Lets follow 10 dollar of those newly printed money. The bank gets the 10 dollar, and lends out 9 dollar to you, Adam Gigcz. The Istore puts the 9 dollar in its own account in the same bank. From those 9 dollars, the bank lends me 8,10 dollar and i buy some music at the Istore too.
Istore puts those 8,10 dollar in the same account, and has got 17,10 dollar combined from our buys. So the 10 dollar bill has simply mulltiplied into more bank money. And it will continue to do as the money get lent out repeatedly. Similary, someone might start a bitcoin bank, and as it appears that the whole currency is completely unregulated, there is risk of fraud and too much leverage. You see, to have a bank business you need the ability to force the lenders to pay you back.
In civil society, it means that banks can use the police and justice system if you decline to pay your rent. When the mafia lend you money, they come after you with a gun if you dont pay the money back. So it appears that the bitcoin economy will be an economy without any banks at all.
Since how are a bitcoin bank who runs it business without support of the government be able to force the borrowers to pay the money back?
If you have loan in bitcoins and declines to pay them back, what leverage can the bank use? They cant use the police the government doesnt apporve of them. Responding to NormD's "bitcoins are borderline evil" because lazy geeks tending computers don't deserve to get rich creating money:.
Most transactions will involve people trading old bitcoins, so most of the economic value being generated won't go to the people generating new coins-- it will go to the people trading with each other. And you can find out what bitcoin address they were sent to I think the biggest problem and worst sell on the part of the interviewer is the aspect of growth rate in the supply of bit-coins. This idea for a 4 year half-life on currency generation rate is arbitrary and ignorant.
Bit-coin might work if the system can remain truly distributed and in ,the future, currency growth rate can be decided intelligently by the cloud. However, if it operates as it was described here then it is no different from the dollar based system aside from being so small and simple that can be grasped easily and won't be used. A predictable growth rate may be helpful during early volatile periods but that would need to change eventually.
I would love it if Russ or somebody could let me know how correct they think I am with the following: The growth of the total population historically was very slow, nearly stable from an individual's perspective. Kuznets gave it at 0. The growth of the economy in terms of wealth and ability to produce more wealth was nearly identical to growth in labor.
The rate at which gold was slowly injected into the money supply was close enough to the economic growth and also directly related to population that it worked well as a currency.
Around both with increase population growth and then in the 19th century with huge increases in technology based productivity gains, gold supply became too unrelated to economic growth for it to continue to work as currency.
Deflation and inflexibility forced gold to be abandoned. The GDP in particular has been a reasonable indicator of actual growth. Although, it includes spurious exchange, it also fails to capture other transactions like unpaid work and so on balance has worked okay. It does have big problems though. It relies on central organizations and therefore is politically malleable and constrained by unrelated government and state properties. Furthermore the increase in money is moved through financial organizations and therefore trickles down through society rather than going to prospectors or cryptogram solvers.
Also, recently the system has been destructively exploited by the financial sectors. Even before huge wealth was being acquired by financial institutions by doing fundamentally worthless and even destructive activities. The question is where was that wealth coming from or being reallocated from? Then, and especially now, that wealth clearly was coming from all of us and not from looser single entities.
Not just by bailouts in the US. Financial activity including loans to individuals but especially through financial instrument trading back and forth in that sector with itself was counted toward economic growth.
This has caused our central banks assessment of actual economic growth to be increasingly wrong. Which lead at least to misallocation of capital and probably huge effective inflation.
It was as if actually worse than the financial institutions and traders were shaving a bit of gold off of every coin in circulation. And then using it to buy empty houses and consumption. The problem is that currency needs to correspond to real wealth and grow and move proportionally with it. From a growth perspective we especially want to move money towards activity where more future wealth will be generated.
If the decisions involving monetary supply were distributed in such as way that the growth of money was more efficient and accurate and unaffected by governmental interests and constraints then something like Bit-coin would be a huge improvement. At least it can inject new money throughout the whole system.
Is there anyway to use that distributed form to more accurately gauge growth and wealth? If bitcoins are used in fractional reserve banking, there will be created bank money out of bitcoins as well. Commercial banking requires the ability to use force if a loan isnt repaid according to agreement. So if the bitcoin currency doesnt have support from the legal system, it will be alomost impossible to demand a repayment of a loan.
Unless the bank has its own armed forces! My guess is that without a banking system bitcoin will be a poor competitor to the existing fiat currencies. Because if you cant make bitcoin-loans, you are forced to use the dollar if you want to borrow some money to get an education, to buy a house or start your own business.
Lauren, point taken but I don't see why anyone would offer a fixed exchange rate between Bitcoins and another currency and I think they would be unwise to try. That is because other currencies are constantly debased by printing or debt creation, so you would expect the bitcoin exchange rate to change accordingly ie increase in value against other currencies. Adam I think you are right in all you say This has advantages and disadvantages: Some advantages are that there are no middleman transaction fees, and that the transfer of money is irrevocable ie no bounced checks or chargebacks by scamming customers.
A disadvantage is that the transfer is irrevocable eg you cannot have the payment reversed if you are cheated by someone. Where a "bank" might be useful is to hold money for people who do not want to be responsible for keeping their "wallet" file safe on their own computers.
The bank gets the 10 dollar, and lends out 9 dollar to you Similary, someone might start a bitcoin bank Yes I think you're right about that. An unregulated bitcoin bank that lends out deposits would have no requirement for a reserve. I think that anyone depositing bitcoins with such a bank would be taking a risk similar to lending money to a startup company or to a friend who's going to break the casino at las Vegas.
What this does is it generates interest in bitcoin, encourages early-adopter with incentives gradually tailing off as bitcoin grows and distributes ownership of bitcoins.
It is a much better way than, say, the founder generating all the money for himself and then trying to get people to accept it as payment from him. C an you suggest a better way? Did you miss the whole point of bitcoins being limited in number compared to dollars that are created and debased on a political whim?
Bitcoins are theoretically dividable up to 8 digits. So while there are fewer theoretical Bitcoins than people, there are far far far far more actual units of currency than that. Currently however the software only divides them up into hundredths, and since they are roughly about 80 cents a single hundredth of a bitcoin is a bit less than a cent.
If people accept bitcoin IOU's as if they were bitcoins yes, but they wouldn't use the bitcoin P2P network for those payments. I think you miss the point that a banks main advantage is economy of scale as far as infestructure around screening prospective borrowers and having contract lawyers on retainer. You are free to do all this yourself if you want. We put our money there because they pay a small percentage and have free checking. The need for a checkbook may go away I guess, but theres still a role for banks.
As a counter point There still could be an insurance scheme to protect depositors, but ultimately instead of printing money to cover bad investments, someone would have to take the loss Nicely, it wouldnt be taxpayers. At least the reasoning wasn't sold well. And I did say that it seemed plausible to have the fixed initial increase, but eventually there would have to be a flexible growth or Bitcoin will have the same problems that a gold standard has.
And really, 21 million bitcoins as a limit? That would require the use of tiny fractions of a unit if more than a few thousand people were to use it. Inflation by nominal decrease rather than increase. The dollar is inflated in a semi-public way by an elite group of involved and well connected participants. Bitcoin just doesn't call it a reserve bank and the insider connections are different. Most users would not scan code anymore then they read the economic reasoning involved in treasury interest rate hikes.
It is more distributed, which is good, until it needs server farms and centralization Steve Having enough of something for it to be used as a currency, as well as being able to divide it up into reasonably small amounts is an issue if it is made of "stuff" but it's not a problem for electronic currencies. The smallest bitcoin transaction is 0. So it does scale pretty well. You're right that most people would not scan the code. But enough people do and will if bitcoin becomes popular that if there is anything suspect you can be sure there will be a huge reaction and advisory for people not to use the changed version of the software.
It's quite possible that unforeseen problems will crop up in future. After all, 20 years ago computer viruses and email spam were virtually unknown. But I think that this is a really interesting concept with great potential that has been thought out very well. Although it has been viewed suspiciously by some people I have not heard a convincing technical or economic argument against it. Bear in mind that it's not the right tool for every purpose but I think it has its place. I'd be very interested to hear more economics discussion and analysis of it.
Yes, the mysterious founder issue is weird. But he gave bitcoin a kick start and there is enough interest and expertise for it to continue even without his participation. You can read the design paper at www. The biggest problem I foresee is that the anonymity to bitcoin does lend itself to illegal transactions, tax evasion and money-laundering. And because of that I think it is likely that most governments will outlaw bitcoin. That won't stop it being used but it will drive it underground so that it is ONLY used for illegal activities.
I think the rest of what you say is correct, but this first step is not. However, if they participate in the Federal Reserve system, they are obliged to maintain a certain percentage of their total balances with the FED. This puts a limit on how much money they can create by lending. The FED is a restraining factor, not the printer of money. The monetary system is like a cart us, the public pulled by powerful horses the banks.
If left alone, the horses tend to pull the cart too fast give too many loans for the safety and comfort of the passengers, so the passengers arrange for a coachman the FED to hold back the horses. Of course, in a sense they are right: They are just horses. But if a passenger also cries out: I think reason why the bitcoin currency is different from traditional currencies both gold and paper money in that the latter are sufficiently inconvenient to handle, so that banks are able to offer an attractive alternative.
You don't want your salary in cash green bills , right? It's much more convenient if your employer can just increase the balance in your bank account.
You don't want to keep an iron safe filled with green paper in your house, right? In exchange for this convenience, we agree to use certain numbers account balances maintained by banks as currency, the means of exchange. How did Byzantines battle Maronites in Amioun in ? Truth is that most of the tension in coastal N. Insightful book by my favorite twitter enemy davidgraeber pic. They just had a naissance y ago. Basically if one puts BS on twitter a public forum , you can expect debunking.
Twitter is not just a place for motivational marmelades. He makes intellktchuals feel irrelevant. We shoud subject people in humanities to IQ tests. They are primarily in love with Orthodoxy. Remember that the New Testament was written in the bad Greek of Syria. With the advantage that you can wear jeans in GrecoSyrian churches. SamuelGWalters Holy mackerel, look what I found by accident. Just came up during my calculations. Attention is refined by ignoring things that are irrelevant.
The Makridakis Competitions address out of sample performance. So they prostitute themselves to Gulf Arabs to pay bills. Eventually a bubble bursts. Megan asymmetricinfo has too much mental clarity for Bloomberg Views. Thank you in advance. No, the 2 variables are NOT comparable statistically. Your lawnmower is not trying to kill you.
DrCirillo and I aim to put an end to this in our book. CutTheKnotMath A slight variation. Two Chickens in Boxes https: Jwz and Zwj are different roots. Iza baddak tshuf kif ligha, t-talla3 3al Malte. Bi Malta 3emlo ligha lawa7don. Donc rente de situation. Announcement by my Calabrez teachers: Optimized systems, in a narrow sense, do not fail gracefully. Barbar-Ru dog outside wolf. We need her out of the UN. Yemen has killed NO Saudi Civilians.
I thought I wrote the article. That solution is sooooooooo simple. In other words, about practically everything. Here are three former presidents saying the same thing with no fuss to follow. Unlike futures, options have natural sellers: Yarimatahari RBReich note nntaleb call for decentralization as a tool against corporate lobbyists https: In other words, what charlatans do.
Antifragility and the development of urban water infrastructure: John How India Economic Times reported this tweet: Cernovich Schiff was source of the fake CNN story and they have the guy on the very next day. The entire concept is very concave supply it costs more and more to extract. The number of producers shrinks with time. You are not upset to hear that someone you know has been owning bitcoin since You respond with two elementary fallacies.
Will you respond next with four even more elementary fallacies? Both Zero-carbers and High-carbers miss this, as well as the difference between acute and chronic. This is not BC. This is AD. He has a lot to teach the repressive autocratic pseudo-left. GeertNoels We have only one planet. Even a risk with a very low probability becomes unacceptable when it affects all of us Ergo, we should build down CO2 emissions, even regardless of what climate-models tell us.
A brilliant way to kick off the morning… https: And yes, Aramaic is the West. Look what is happening to the people you have uncovered https: Northern Europeans were not representative of Western civilization. There were between Arab tribes. Banu Ghassan was one of them. Can you generalize to Arabs?