Bitcoin.

[acropolis]

Looks like there's going to be a fire sale of bitcoins:

Bitcoin Charts / Markets / thUSD

Nearly all the bids are at $0.02 and $0.01, not much confidence there. Hope you didn't sink too much money into this silly thing. If you have any understanding of money markets I suggest doing it the legit way and trading on the Forex.

 

[MacFall]

You don't have the whole story on that. Mt. Gox froze the price on their site at an unrealistically short rate to prevent people from buying through their site after their database was hacked, for the security of their users, rather than simply closing down. Nobody is buying that low - that's the point. The average price is still over $10 right now, and has been throughout this whole "crisis". Mt. Gox did a rather noble thing (by the standards of the cynical) in intentionally closing down their particular market and allowing their competitors to absorb some of their usual custom while they work out their security issues. That is because the people who run Mt. Gox care about, and have confidence in, the long-term success of bitcoin.

Some people aped them on the price. That was very, very stupid of them. But the market at large is smarter than those people.

EDIT: I just had someone offer me $17.45 apiece for 3 BTC, and made a purchase with .8 BTC with a value even better than that. Bitcoin is doing fine. Most of us were expecting a correction down from $30; those who weren't know better now.

 

[acropolis]

Entire markets getting hacked doesn't bode well for a currency. In any case that's the market depth for tradehill, not Mt. Gox.

I've been following bitcoin out of curiosity, since it seems reasonable for a digital currency to exist, but at this point and given what has happened I can't see this particular currency lasting long-term. There are too many ways for it to fail. There isn't any legal precedent for digital currency, and when nations begin to legally deal with it, they may end up ruining the system by attacking businesses that accept bitcoin (among other methods). Given the utility for purchases made on the Silk Road and for money laundering in general, I would be surprised if gov'ts didn't end up taking action to hobble the bitcoin market. Bitcoins are only preferable to normal money if they have some utility that normal money doesn't, so if that utility is attacked successfully then the market is dead. Though it may collapse on it's own due to non-gov't events like hacked markets.

Personally I'll be sticking with established, secure money markets for the foreseeable future. In addition to the shaky future of the bitcoin market, I don't like the idea of an uninsured money account that I could lose simply by having a hardrive die on me, or a house fire that destroys my computer, or my wallet-hosting servers getting hacked. There's just too much risk to do anything beyond mine bitcoins using other people's electricity, as I'm currently doing . It's been good for beer money, but the serious trading is still on the Forex.

edit: I read more about the hacking of Mt. Gox and it turns out they were using unsalted MD5 hashes to store user account information for something like a year. That's a horribly insecure for a market that handles such a relatively massive amount of trading volume. I'm staying well away from this nonsense until (if) it becomes more established and secure.

edit2: and then there's the possibility of botnets rapidly mining, leading to devaluation.

 

[MacFall]

Mt. Gox isn't the entire market; it's just the (formerly) most popular exchange. What happened is good, because their market share is now broken up between several of their competitors.

Bitcoin DOES have significant advantages: privacy, long-term non-devaluation, and eventually it will be more convenient to exchange than precious metals. Which is the only reason why the government would attack it in the first place; they wouldn't bother if people didn't want it. The government attacks everything that threatens its power, so of course it will go after bitcoin. It will be about as successful in driving bitcoin out existence as it has been at ending the marijuana trade.

Devaluation is not a serious long-term issue because there will never be more than 21,000,000 bitcoins ever mined. And as the article you linked to mentioned, botnet mining is only profitable so long as bitcoin remains at a high price (around $25 USD/BTC considering electricity costs and opportunity costs for more profitable uses of botnets), so the problem is more or less self-contained - UNLESS governments or other malicious agencies do it with the express purpose of undermining bitcoin. The network is looking into how to address that problem, but I don't see it as a problem. I won't be too angry if I can sell my bitcoin at $10 USD/BTC and buy them back for a nickel each, nor will most users.

Especially since blockchains generated by governments or botnets or anything else the bitcoin community sees as a threat can be excluded - at which time the remaining blockchains will become even more valuable, absorbing the previous value of the defunct blockchains. So then all the BTC we bought for a nickel is suddenly worth $10 again, and everyone holding BTC makes almost a 100% profit at the expense of the spammers/government. Thanks!

Finally, I agree with you that older and more established markets are a good idea - but there's nothing wrong with diversifying. It's not either/or. I have less than 1/5 of my savings in bitcoin. But that's because bitcoin is a currency, and that means I spend it as well as saving with it. With my BTC savings, I'm not really gambling anything. If bitcoin doesn't outlive the US dollar, I've still made a small profit considering the price at which I purchased them originally and the goods I have already received in spending them. If it does, then that profit will be enormous.

 

[acropolis]

Rarity doesn't necessarily protect against devaluation, since ultimately bitcoins are only worth whatever people are willing to pay for them. If people decide bitcoins aren't useful enough to bother with versus other forms of currency, then they'll devalue and may never recover. It sounds like you're fine with waiting it out, but don't think you're safe from lost just because there are only so many bitcoincs possible. If no one is buying and no one accepts them as payment then you'll be out of luck.

Unless bitcoins become widely accepted in exchange for goods and services I really don't see it working out over the long term. If you can't buy groceries and pay your rent with them, then the majority of people aren't going to bother.

 

[MacFall]

I already buy food with them, and I actually know a landlord who will accept bitcoin. I'm pretty sure he isn't the only one.

Sure, there isn't an entirely parallel counter-economy built around them yet, but the number of merchants accepting them is steadily increasing. Or rather, not steadily, since the rate of new merchants is also increasing. Those numbers, by the way, are not reflected in the "market depth" charts, which only measure speculation, and speculation is just the tip of the iceberg of the bitcoin counter-economy.

Like I said, I don't think anyone should go all-out on bitcoin. But it IS useful even if you don't consider it a reliable investment or hedge, and one needn't buy bitcoin in large amounts. You can buy as little as a penny's worth. Less, actually, if you buy with non-US currencies that divide smaller.

 

[Flashlight]

I was surprised as to the lack of anything Bitcoin at Porcfest this year. Only a single table in Agora valley doing anything with it.

 

[MacFall]

I was wondering about that. I meant to ask when I called in to Free Talk Live on Wednesday but I forgot.

Too bad. I figured the agorists would be all over it.

 

[acropolis]

Looks like bitcoin prices are still up, ha! It'll be interesting to see how it works out over time. I'm still guessing there will come a large of permanent devaluation, but it may take more time for that to happen. I get the impression after reading through some bitcoin-related forums that many people are involved for ideological reasons and are utterly devoted to the concept of bitcoin, so there may be a sizable group of people willing to continue buying bitcoins despite the kind of trouble (a major market getting hacked) that would send normal traders running.

 

[MacFall]

Well, that's why I'm in. I loathe central banks with all my heart, and I am willing to invest a part of my fortune, even at a high risk, for something that stands the barest of chances at disempowering them.

 

[MacFall]

So. Almost two years later, I just wanted to bump this thread and say,

I TOLD YOU SO! :-D

I started buying in at $8, the current price is $75, and it's still rising as Cypriot millionaires bail out of the Euro and put at least some of their holdings in bitcoin. You can now buy literally anything with bitcoin through services in competition with PayPal, and many merchants (notably: Wordpress, Mega, several VPNs, the world's largest online poker site, and recently OkCupid) now accept it directly. Also, you can buy Reddit Gold with it.

As I see it now, in the worst-case scenario it fills its niche as a PayPal alternative, and the value still has quite a ways to go. In the best case, it becomes a mainstream currency, and suddenly a bunch of small-time entrepreneurs, libertarian nerds and cryptoanarchists will be among the richest people in the world. Either way, I'm making out like two teenagers at a drive-in movie.

So now that I'm done gloating, if anyone has any questions I'll be happy to answer them for you. To preempt the obvious: as with all investments, it's a risk. Don't put in any more than you'd be willing to lose. But Bitcoin is actually much more stable, despite its volatility, than some of the most successful stocks, and some very smart people are investing in it.

Also, I'd be happy to send a little bit (pun intended) to people just to help get them started.

 

[Sketcher]

Let's say the dollar collapses and out of the chaos, many people lose their Internet access, and even their electric power. Without a physical layer as a way to access them, what can Bitcoins do to help you?

 

[MacFall]

The whole point is to use bitcoin to build alternative markets that would be resilient against a dollar collapse. And it's already happening, quickly.

But besides that, economic collapse doesn't make goods disappear; it only prevents them from moving efficiently. Power stations will still exist. Cable lines and satellites will still exist. If the people who run them can't use dollars to feed their families they'll use something else. And if we already have something else that is being used—something that is kept safe from government manipulation by basic mathematical laws—then that's what they'll use.

I mean, that question could be asked about anything. What good will your Google stock do you in an economic collapse? What good will your car do you in a fuel crisis? What good will your well-stocked bunker do you if that's where the nuke hits? Everyone always acts as if the worst-case scenario that defeats all our preparations won't happen, even though it is possible that it will.

In theory, the bitcoin network could still work during a (temporary) collapse of infrastructure. As long as people have generators for power to keep smartphones charged, it is possible to exchange bitcoins by scanning QR codes, and to sync the blockchain piecemeal. And if the collapse isn't going to be temporary, then what good is anything? A pre-Information Age economy simply couldn't support current populations. So we're talking about numbers at least in the hundreds of millions dead by starvation in the first few months. Chances are pretty good we'd both be among them, despite whatever preparations we've made.

But of what use is such speculation? It's like trying to think up all the ways in which you might die today. I think that bitcoin will catch on (or rather, continue to do so), and by the time things get really bad for the dollar, bitcoin will be wide open as a haven. It's already happening in Cyprus, and it's beginning to pick up momentum in Spain too.

 

[ks777]

Wow, congrats Mac!

 

[Sketcher]

The plants may still exist, but do power companies and ISPs take bitcoins as payment? They would need to be in on it prior to such a collapse where people would turn to dollar alternatives. This is presuming that there would be no major infrastructure collapse which would result in cut power/cable lines.

It took my hometown getting hit by a tornado for me to really get the concept. Our Internet service took weeks to return after the tornado, and power took days. TCP/IP guarantees delivery, but if the physical layer isn't there to provide access, it isn't much help to you. Therefore, depending on the Internet or anything on it is not something I would recommend to anyone.

 

[MacFall]

The plants may still exist, but do power companies and ISPs take bitcoins as payment?

Not yet, but they have no reason to be. They will. Every fiat money in history has gone the same way, where eventually it is less costly to accept the scary alternative than to continue using the dying mainstream money. Power and telecom companies may be shielded from taxation and other direct forms of expropriation, but eventually inflation hurts everyone deeply. And inflation is inevitable with a fiat money on a fractional reserve system.

It took my hometown getting hit by a tornado for me to really get the concept. Our Internet service took weeks to return after the tornado, and power took days. TCP/IP guarantees delivery, but if the physical layer isn't there to provide access, it isn't much help to you. Therefore, depending on the Internet or anything on it is not something I would recommend to anyone.

I'd agree. Nobody should be dependent on the Internet. Or electricity. Or gasoline. Or modern medicine. Or farms and grocery stores. Or water that doesn't have to be boiled before drinking it. Or having a planet that is free of enormous chunks of space rock impacting its surface at high speed.

But we all are.

So do we take advantage of what we have, while we have it, and try to use it to prevent catastrophes; or do we all make bugout shelters in the mountains and hope that everyone else didn't have the same idea?

What we need are a power system and communications network that are less centralized and therefore less prone to large-scale failures. There are ideas in the works for that, and bitcoin has opened up some doors that traditional exchange methods did not permit. You don't have to be completely on board but to oppose such a wonderful opportunity because something might go wrong really makes no sense.

 

[Sketcher]

You don't have to be completely on board but to oppose such a wonderful opportunity because something might go wrong really makes no sense.

"Oppose" doesn't quite fit with what I'm trying to convey here. I'm not saying that nobody should ever put them in their (diverse) portfolio. But think about this: The power company and the ISP you use controls your access to your Bitcoins. If you don't have Internet access and power to take advantage of it, you can't trade the digital currency. Likewise with those who you would trade them to. If the power companies and ISPs do not take Bitcoins as payment yet, they will likely cut off the services before they find themselves forced to take them. Which leaves people who were depending on Bitcoins out in the cold. That's a bad proposition if you ask me. Furthermore, first you were saying that Bitcoins are an inflation-proof currency, and a good alternative to the dollar when it goes south, next you're saying that "something might go wrong" - well, which is it? It seems like you're using the near-certainty of a dollar collapse to show how great Bitcoins are, then when I bring up a logical consequence of a dollar collapse which would render them useless, you're saying "something might go wrong" but it's still worth it. Level with me here - are you in any way being paid or pursuing the promise of being paid by promoting Bitcoins to us or anyone else?

 

[MacFall]

But think about this: The power company and the ISP you use controls your access to your Bitcoins.

No they don't, as I explained above.

Furthermore, first you were saying that Bitcoins are an inflation-proof currency, and a good alternative to the dollar when it goes south, next you're saying that "something might go wrong" - well, which is it? It seems like you're using the near-certainty of a dollar collapse to show how great Bitcoins are, then when I bring up a logical consequence of a dollar collapse which would render them useless, you're saying "something might go wrong" but it's still worth it.

Nothing you have proposed is a logical consequence of a dollar collapse. You are far too intellectually dependent on the government. The dollar is a horrible facsimile of a market-based medium of exchange, and the sooner we are rid of it, the better. The idea that society must collapse with the government's money is pure FUD.

Level with me here - are you in any way being paid or pursuing the promise of being paid by promoting Bitcoins to us or anyone else?

Wow, that's just so absurd I'm not even sure how to respond to that except to ask an equally absurd question. Are Ben Bernanke and Paul Krugman paying you (along with, of course, the entire mainstream media) to spread fear and disinformation about alternatives to their system?

The more people who use bitcoin, the more resilient it is. Wider distributions bear heavier loads. Networks survive attacks that towers do not. I promote bitcoin because I want it to succeed. Because it is a great idea. I honestly don't understand what must be going through your head for you to accuse me of astroturfing. I suspect it's because you fear what you do not understand, and that's quite normal. But how about you make an effort to understand it before you start criticizing it? It might help to alleviate some of that fear, you know.

If not, well, you can have your gloomy little world where the only choices are catastrophe or the status quo. But it's going to get lonely there.

 

[Paulie079]

Blind post: A Facebook friend has posted some articles about Bitcoin, and it's impressive how much it has climbed recently, but if you want to invest in something, you're likely going to benefit more in the longrun from investing in mutual funds rather than any type of currency. This is especially true if you don't have money to throw around and experiment with.

I think one important thing to consider is risk management. Obviously there's a chance to lose money no matter where you invest, but your chances of making generous gains are a lot better over the longrun with mutual funds than with any type of currency, or silver or gold.

 

[Jupiter Drops]

I theorized with my art teacher that one day, all of our physical currency will be replaced by digital ones. Looks like Bitcoin's making its way in slowly.