Eugen,
> > > Currencies are consensual belief systems.
> >
> >
> > No they are not.
> >
> > Example:
> >
> > In the USA, I *must* pay taxes in USD,
> > not Bitcoins, regardless of my level
> > of belief or consent in either.
>
> Obviously, the belief propagation cascade hasn't
> reached the ISR yet. I'm sure if you're producing
> sufficient income stream in BCs the government won't
> be long in demanding a piece of the pie.
I only took issue with the word "consensual".
Belief/faith is an implicit part of any currency
whenever there is a difference between its
local intrinsic value and its gamed network value.
> Meanwhile, you can convert the currencies with those
> who share your belief, and render upon Caesar what is
> his (or so he thinks).
Sure.
That fails to address my point though. Some currencies
are fully consensual (eg: most scrip, gift certificates,
Bitcoin). They're not the only form of payment accepted
in places where they're used.
Others don't ask for consent at all, really (e.g: compulsory
use of USD for US taxes, most oil contracts, etc.).
Use of USD can be enforced by jail cells, federal marshals,
and so on.
Therefore, currencies are not necessarily consensual
belief systems at all, unless you're willing to adopt
a novel and conversation-specific definition of the term
"consent".
> > > Bitcoin will remain useful as long as there are
> > > no effective attacks against the cryptosystem and/or
> > > the infrastructure, and people continue
> > > to believe in it.
> >
> > The idea of Bitcoin is grand; however, it seems deeply
> > flawed on many levels.
>
> That's okay, the currency systems it competes with also have
> many flaws.
Yes they do have flaws.
However, that does not mean you can't also find
the flaws in Bitcoin disturbing. This is particularly
true when they end up being so similar to the flaws of the
system it's designed to replace (eg: centralized production,
poor coupling to the real economy, etc.)
If you dislike the flaws of a currency like USD, these same flaws
don't become ok when it's a Bitcoin. They remain problematic.
You cannot compete with Exxon or the Fed when it comes to
blocks/$ economics. If Bitcoin takes off, it will have a
de-facto central mining oligopoly made up out of the same
scoundrels who rule our lives today.
It's worth thinking through alternatives that do not have
these flaws if your motivation is to rid yourself of them.
Hence, I don't understand why you'd say "that's okay...."
> > For these reasons, it doesn't bother me at all that Bitcoin
> > is a "fiat" currency per-se, but it *does* bother me that
> All currencies today are fiat currencies.
>
That's mostly true.
You might argue that gold is mined in such small quantities
relative to the global supply, it approaches a non-fiat
medium of exchange: substantial quantities of gold (relative
to the demand for it) cannot be produced. The same can be
said of water rights in many areas of the world.
> > it is not a proxy for something with intrinsic local value
> > to someone somewhere.
>
> I presume by intrinsic values you mean something pretty low in
> Maslow's hierarchy of needs (water, food, clothing, energy,
> shelter, etc.). Any currency systems are just a more or less
> convenient accounting systems, or proxies for things people
> value.
No, I mean anything at all that people want for the value
it brings to them directly. From water to plastic gnomes
and beyond.
Some auditing is more trustworthy than others,
and some insurance is better than others.
Both are subject to fraud as well, but even
after all that, we have an existence proof
in the form of every market in the world
that such a system can be made to work.
Not perfectly, but pretty well. One nice
feature is that they're not particularly
"brittle".
> > Essentially, we are asking people to barter things the
> > make or do that have intrinsic local value for something
> > that has none at all -- without the force of law twisting
>
> Right, just like regular fiat money.
No.
A vendor in the USA simply MUST take USD as a form of payment.
The same cannot be said for Bitcoin or plastic gnomes.
I might choose to take payment in plastic gnomes or Bitcoins,
but nobody will cart me off to a courthouse if I don't.
> > their arm to do so (as the US government does when I pay
> > my taxes in USD).
>
> Money doesn't need a particular blessing. The only reason
> alternative currencies are springing up is because the
> entity in charge of its stewardship is doing such a piss-poor
> job of it.
Clearly.
That does not mean Bitcoin or other currencies cannot
have any appeal for some people some of the time.
Of course it does.
Not having the force of law puts an extra burden on
alternative currencies like Bitcoin to really know how
to bring something substantially better to the table.
Their flaws matter more.
>
> > Further, Bitcoin is encouraging the production of useless items
> > (ie: key block solutions) merely because of the mathematically
>
> Pigmented dead tree is remarkably useless.
Saying "both USD and Bitcoin have 0 intrinsic value" sounds
like an apples-to-apples comparison, but it's actually not.
Currencies like the USD have "dealer's push".
If Bitcoin is content with being a fringe currency,
then nothing really matters very much at all.
It will have its uses, and that will be that.
If Bitcoin wants to do something world-changing
(like they seem to), the coin mining aspect of
the system is a loser. Bitcoin has to be considerably
better than the USD, not just a little better,
to achieve its real potential.
> > easy with which they can be verified, and the apparent difficulty
> > of faking them.
>
> Right, and unlike just firing up the printing press (or directly
> tweaking bits, actually) nobody can shortcut the process without
> doing actual work (which is environmentally pretty benign, unlike,
> say, cyanide ore leeching).
I did not argue against the desirability of verification, nor
did I claim USD production had any meaningful audit controls.
I am saying that there are other ways to do the verification,
and the manner in which Bitcoin has done things has the
net effect of centralizing currency mining over time.
> > To do that robustly in the context of a computational arms race,
> > Bitcoin makes these blocks harder to solve as things go along,
> > thereby effectively *centralizing* the process of mining coins.
>
> How are millions of invidual graphics accelerators spread around
> the world centralized? No government can match that resource base,
> particularly as energy required to run them won't ever ROI.
No.
Processors are bought in currencies like the USD.
Processors take electricity to run.
Electricity is bought in currencies like the USD.
The difficulty of solving Bitcoin blocks scales to compensate
for how quickly people are claiming them as their prize.
In the early days, anybody could be a Bitcoin miner for profit.
Now, you need to know what you're doing in terms of the hardware
you select, and be lucky enough to live in a place with fairly
cheap electricity.
Bitcoin mining is *already* a cash negative hobby for the
majority of miners due to cost of the additional electricity
they end up consuming, and the price they must pay / kWh.
Now ask yourself how much Exxon has to pay for energy?
Approximately nothing.
How much effort is required for the Fed to just conjure up
the money needed to buy electricity and/or processors?
They can do that in a heartbeat.
> > It all comes down to blocks/$ efficiency, so if you can't compete
> > with Exxon access to cheap energy, or the Fed for cheap USD to buy
> > energy/computers, then you can't economically mine coins in the
> > long run.
>
> Nobody can economically mine coins on the long run, unless the
> invidual value will jump sky high and continue rising monotonously
> to match rising difficulty.
At least one person must be able to mine for profit at all times.
If you are in a unique position in terms of access to cheap energy
or cheap USD (eg: if you *are* the Fed), then you will always be
in that ever-constricting winner's circle.
This is what I mean by Bitcoin mining tends towards
central production in the long run.
> And I have no beef that the government might choose to mint
> cash of their own. That's the idea of decentral mint: everybody
> can do it.
Bitcoin is tring to decentralize currency production,
but for that to be a meaningful achievement the level
of decentralization must be meaningful. Otherwise,
it's centralized production for all real purposes.
Producing a few coins at a loss when the bulk of the
currency supply can be cranked out at a profit by a
central producer is not a victory. It's a cruel joke.
Yes, Bitcoin enables decentralized production of currency,
but only in a way that has no no long-term economic meaning.
> > This argument leads to a very sobering conclusion:
> > centralized mining is implicit in the trust model Bitcoin uses.
> > Ouch.
>
> Doesn't compute.
Think about it more.
Otherwise, rush out and start mining coins. ;)
No wait, please think about it more!!!
> > Why would I want a purely faith-based "color" in this
> > barter Petri net anyway, if I could just as well get
> > one with some intrinsic value? I'd prefer to trade in
>
> There is no such thing as an intrinsic, observer-independent
> time-invariable value. Apart from atoms, and Joules.
That's not at issue.
This whole thing been about comparitive value per end user.
I'm takling about barter. Remember?
> > proxies for something with easily convertible worth
> > outside the system during both the bootstrapping
> > phase and afterwards.
>
> Bits are bits. Atoms are atoms. They're not interconvertible,
> other than using bits as accounting systems for atoms (or Joules).
Some people have different production costs,
and some assign different intrinsic values
to items in the system.
The essence of barter is exchange.
Different barter networks exist, and some have items
that "bridge" what are otherwise fairly disconnected worlds.
> > What Bitcoin mining looks like to me is a computer-science-only
> > solution to a verification problem that has some extremely
> > robust solutions outside of the world of computer science:
> > multiple independent audits.
> >
> > While it's true that someone might pay off N auditors
>
> I presume you mean abstract auditors? Not actual humans?
> Because humans are quite useless for the niche that fine-grained
> realtime digicash transactions occupy.
Humans audit the creation of proxy tokens
(the digital manifestation of the underlying item).
We do this all the time in real-world
(c.f.: commodity markets).
Algorithms validate the real-time transactions
and prevent double spending.
Mining and transactions are *already*
decoupled in Bitcoin. That's good.
I'm not saying every part of Bitcoin is ill-conceived;
I'm saying the mining part of the system stinks.
I'm also describing a conceptual framework for
understanding money and barter that makes it clear
why it stinks, and points the way to fixing it
in a later system.
> > (thereby creating fraudulent receipts for barter),
> > lawsuits and insurance have already solved this problem
> > fairly well in the real world of commodities markets,
>
> Just code up a client implementing your solution, and let
> it compete against BC, then. May the better system win.
My purpose in posting was to analyze the Bitcoin system
and elicit a meaningful conversation about Bitcoin,
barter, and currency. I'm not here to "defeat" Bitcoin.
If someone takes the trouble to analyze the good & bad
in a new kind of automobile, would your response be
"go and start a car company"? Probably not, because
it would sound glibly dismissive of that person's
analysis.
The reason is that starting a car company is a lot of work.
You can sensibly look at the pros & cons of a model
without implying you're going to create your own factory
tomorrow and go into competition.
Well, programs like Bitcoin are a lot of work too.
For that reason, your challenge has a different
conversational tone than what I'd been hoping for
on this list. It's not inherently wrong, I just
don't want any part of it.
> > and in a way that does not count on some hashing cipher
> > never being broken. Decentralized webs of trust could
> > make a system like this extremely resilient to fraud.
>
> Web of trust can be pretty easily gamed.
Yes. However, they can also be quite robust.
It depends on how they are engineered and used.
Most crypto hashes can defeated as well if you've
got a quantum computer. Check the news, and you'll
see that limited commercial production is on the way.
What do government have?
Well, I don't know, and you don't either.
There are no perfect answers, only tradeoffs.
I'm hoping to have a discussion about those tradeoffs.
> > Note that if the "colors" in a barter Petri net are proxies
> > for commodities, then you really *do* have a robust way of
> > auto-scaling currency supply to market size, and a decentralized
>
> I realize that limitation of total volume is built-in. However,
> BC is fractionable down to 8 decimal values, or so, and of course
> there *will* be alternative currencies, should the current one
> saturate into unusability.
Divisibility is besides the point here.
Sure, you can divide coins.
That's the easy part.
> As to auto-scaling, there is no way to measure the economy size without
> introducing a yet another, easily gameable metric (vide GDP, inflation,
> and such).
Not true.
Commodity reserves are audited all the time.
Credit / reputation within a trust network
is another form of currency which can be
built and/or destroyed.
> > system of currency production (ie: audited receipts for commodities)
> > that encourages the production of things with intrinsic worth
> > according to their actual market value.
>
> I don't see how a currency need to have an encouragement for production
> built-in. I presume future digital currencies will have a circulation
> velocity accelerator built-in, to discourage hoarding.
There are limits to what any system can do in terms of hoarding.
If a proxy for a commodity is used as a currency, and nobody
(or only a few) can create meaningful new supplies of it economically,
then the nasty effects of hoarding & the evil you can do in terms
of economic gaming are maximized (cf: Hunt Brothers, Enron, etc).
For that reason, I think if we were somehow able to come up
with the "best possible way" to do everything, we'd still
have hoarding in cases where it was possible to manipulate
supply without destroying too much of the demand.
The case that comes to mind is oil contracts / futures.
A sustained embargo on oil supply causes more than a
decrease in demand, it causes actual demand destruction
by allowing producers of surrogate commodities to move in.
> > Bitcoin has none of this.
>
> BC is just an ad hoc solution to address particularly glaring
> deficiences of centralist fiats that are being run by crooks.
> As is, it's damn good for that.
It has some good qualities.
It seems like it could have more.
> > Bitcoin's choice of trust model for mining seems to make it not
> > very different from the USD fiat currency we have today:
> > controlled by energy/finance oligarchs, inherently worthless,
> > and divorced at point of injection into the system from
> > meaningful market signals.
>
> I think you're exactly describing the USD fiat there. BC is
> decentral, also inherently worthless (duh, you can't produce
> Joules by rearranging bits), and is immune to manipulative
> injection to socialize the losses.
Making the very charitable assumption that we have perfectly
equal access to the most efficient hardware platform for
Bitcoin mining (cf: quantum computers), the longhand version
of the economic challenge is:
(energy needed to do the computation) *
(miner-specific cost of the compute platform) *
(miner-specific cost of a unit of energy) *
(miner-specific cost of $1 USD)
-------------------------------------------------- < Bitcoin value
(problem difficulty)
Let's leave aside the advantage a big/centralized
player has when it comes to buying bulk compute power.
I'm willing to pretend that's a level playing field.
A person can produce joules for almost nothing by owning Exxon.
Neither of us are in that position. Their joules are drastically
cheaper than they are for us. A structural advantage like this
allows them to squeeze nearly everybody else out of the game.
Their economics remain favorable, ours don't. Therefore,
we drop out or participate at meaningless "hobby" levels.
The same goes for the Fed.
They can produce USD for almost 0 cost.
We cannot.
-Jon
