Archive for the ‘bitcoin’ category: Page 78

Aug 27, 2013

On the ‘Evil’ of Hoarding

Posted by in categories: bitcoin, economics, ethics, finance, policy

Originally posted as Part III of a four-part introductory series on Bitcoin on May 21, 2013 in the American Daily Herald. See the Bitcoin blog for all four articles.

With gold prices back in the $1,300-$1,400/oz range it is sometimes difficult explaining to non-gold bugs why owning physical gold is still a good long term strategy. Some define buying gold as ‘an investment’, and others as ‘a hedge against inflation’. I tend to look at it as an insurance policy against hyper-inflation or just simply as sound honest money. However, when describing a strategy of accumulating money (in gold form) in some far-away vault, only to be used in some end-of-the-world scenario, it goes without saying that an image of a miserly old man replaces my likeness in the eyes of my conversation partner. Few people stuff dollar bills in their mattress any more, but hoarding of gold and silver when these were de-facto money was not unusual. Commodity money, which tends to increase in purchasing power over time, is predisposed to this ‘problem’. When you ‘love money’ so much that you hold on to too much of it or for too long a time, then you are hoarding.

Can ‘hoarding’ be defined?

Robert LeFevre once joked that while he was courting his soon-to-be-wife, he was impressed when she told him how much she loved money. Yet after they were married, it turned out that she really didn’t love money. In fact, she would try to find any excuse to get rid of it… in her shopping sprees, of course! Apparently money is no different than other goods and services; you trade one for the other. You trade the lesser valued good for the more valued good. When you make a purchase, you make a choice. You value your money less than the good you are buying. Similarly, when you refrain from purchasing an item, the indication is that your money is of more value than the foregone good. This is the basic premise in anticipation of a transaction, that both sides benefit – otherwise the transaction would not take place.

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Aug 27, 2013

The Benefit of Specialization – Bitcoin as an Invented Currency

Posted by in categories: bitcoin, economics, engineering, finance

Originally posted as Part II of a four-part introductory series on Bitcoin on May 7, 2013 in the American Daily Herald. See the Bitcoin blog for all four articles.

The emergence of money and its importance in enabling trade between people has been well researched and documented in the literature of the Austrian School of economics – Theory of Money and Credit by Ludwig von Mises and Man, Economy and State by Murray N. Rothbard being prime examples. The contribution of the Austrian greats to the understanding of money and its origin made clear exactly what money is (e.g. the most marketable commodity), the different types of media that are employed in exchange between people (e.g. commodity money, credit money, fiat money and money substitutes) and a theoretical explanation for their origin (the Regression Theorem). The Austrian School has also given arguably the most convincing analysis of the relationship between the money type in use, the manner by which it is controlled and the business cycle – emphasizing the importance of sound money. But except for a few sparse outliers, what the Austrian School has yet to do is fully recognize Bitcoin as a valid scholarly and academic topic. With this article, I hope to contribute to its recognition.

Money’s characteristics

Money enabled people in early stages of civilization to go from direct exchange, with difficulties such as the double-coincidence of wants, to indirect exchange. This improved mechanism paved the way for facilitating man’s specialization in his tasks, thereby enabling division of labor within society since each specialized laborer was able to trade his goods for others indirectly with the use of a medium of exchange. Money has taken many forms but there are certain characteristics all forms should have. Aristotle, for instance provided the following four:

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Aug 27, 2013

Bitcoin and its Value

Posted by in categories: bitcoin, business, economics, finance

Originally posted as Part I of a four-part introductory series on Bitcoin on May 1, 2013 in the American Daily Herald. See the Bitcoin blog for all four articles.

The last couple of months proved a very exciting time for Bitcoin and its new owners, with values increasing from $30 to $260 within a month only to come crashing down in days. It went from virtual anonymity to virtual ubiquity and back again — the only constant being that it’s virtual. The dust has now settled and the talking heads have changed topic, and Bitcoin is slowly regaining strength. But does this mean we can finally, in a quiet and rational way, contemplate what this Bitcoin really is and where it has room to fit into our lives? The answer to that is no, because the concept of Bitcoin is so strange, unintuitive and foreign, no matter when you discuss it and with whom, it will lead to very divisive arguments. So I say now is as good a time as any to dive in and discuss it.

So what is Bitcoin, anyway?

Bitcoin is a virtual currency. It is a string of 1s and 0s, much like a lot of what we interact with in this day and age. It’s something new. It’s unique. It’s controversial. The detractors say it’s only useful for terrorists or drug lords who want to move money around undetected, which no doubt they do. But much like the Internet is so much more than pornography, so is Bitcoin so much more than drug money. E-mail liberated the letter from the postage stamp, Skype liberated telephone calls from crippling AT&T long-distance rates, Facebook liberated photos from the dusty photo album sitting on your shelf unopened. You can think of Bitcoin as what will liberate financial transactions from the grip of the financial institutions and the state.

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Aug 7, 2013

New Protocol Layer being built on Bitcoin

Posted by in category: bitcoin

I recently announced a new protocol layer being built on top of bitcoin. You can read the details here: https://bitcointalk.org/index.php?topic=265488.0

I’m pleased that I have already raised over $200k worth of bitcoins from investors, including myself. Investments will continue to be accepted through the end of this month (August 2013).

Apr 19, 2013

Bitcoin’s Dystopian Future

Posted by in categories: bitcoin, cybercrime/malcode, economics, ethics, finance, futurism, information science, lifeboat, open source, policy

I have seen the future of Bitcoin, and it is bleak.

The Promise of Bitcoin

If you were to peek into my bedroom at night (please don’t), there’s a good chance you would see my wife sleeping soundly while I stare at the ceiling, running thought experiments about where Bitcoin is going. Like many other people, I have come to the conclusion that distributed currencies like Bitcoin are going to eventually be recognized as the most important technological innovation of the decade, if not the century. It seems clear to me that the rise of distributed currencies presents the biggest (and riskiest) investment opportunity I am likely to see in my lifetime; perhaps in a thousand lifetimes. It is critically important to understand where Bitcoin is going, and I am determined to do so.


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