Bitcoin Bonanza: Cyprus Crisis Boosts Digital Dollars

I've mentioned bitcoin a few times in the past. Its really gaining market share fast now. Market history: bitcoincharts.com

I'd like to use this thread to introduce you all to bitcoin, and I'd be pleased to answer any questions you have about it.

Here's the "official" website: bitcoin.org. I quote "official" because bitcoin is decentralized, there is no "official".

What is Bitcoin? Two answers:

1. Bitcoin is decentralized networked computer program. Bitcoin is a new currency and money transfer technology.

2. A bitcoin is 100,000,000 of the atomic units of currency in the Bitcoin program's ledger. Following the definition of Bitcoin (a computer algorithm)... there will only ever be slightly fewer than 21 million bitcoins. To be exact, there will only ever be 2,099,999,997,690,000 atomic units created using the Bitcoin program.

How much is a bitcoin (currency) worth?

A bitcoin can today be exchanged for ~$72.00 USD on online exchanges such as mtgox.com. If bitcoins replaced today's global fiat, it could easily grow to over $1000 USD (using today's purchasing power, of course USD would be worthless then).

Whats the big deal? (Why does Dean Michael Gores like it so much?)

In short: It is extremely private and secure. Its very low cost to transfer. It removes the state's ability to steal purchasing power via creating fiat.

Private/Secure: You can put a billion dollars of purchasing power in your pocket, and: Walk through the Detroit ghetto, a TSA security checkpoint, the US-Mexican border, North Korea, and an IRS building, and: absolutely no one would know that you have a billion dollars in your pocket, nor would they have any way to know. You can then send a million dollars of purchasing power to your trading partner (it doesn't matter whether he lives in North Korea, China, US, or if he is penned up in the highest security prison... if you have one of his public keys, you can send it to him, and: absolutely no one would know who sent the coins or who received them (unless either of you disclose that you were the owner of the public keys used).

Low cost: Today the bitcoin network will accept a transaction without even being tipped for it. In the future people who verify transactions will probably require a tip.

Fiat: The primary source of the state's power is its ability to steal market purchasing power via creating more fiat. If you don't think that removing this power from the state via discontinuing the use of its monopoly money is good... then you are a statist.

Post 1

Friday, March 22, 2013 - 2:33pm

How does Bitcoin compare to USD and Gold?

Determination of legitimacy
USD: For the printed/minted currency, if it looks like what the government makes, then its accepted. For the electronic version, central banks keep track of who is owed what, but generally cash & coins must be periodically transferred to maintain balance.

Gold: Its weight, mint, visual, and chemical (tested by applying a chemical to filings) qualities can determine legitamacy.

Bitcoin: You can download your own copy of Bitcoin, and you can use it to verify the legitimacy of bitcoins. A legitimate bitcoin was either generated using the Bitcoin algorithm or was publicly proven to be given to a new entity.

Discussion:
Bitcoin really shines here, because the computer program can verify with 100% certainty whether a transfer is a valid or not.

Storage/Security
USD: You can put printed/minted currency in a safe, or you can put it in a bank. Generally bank transactions are tracked by the government.

Gold: Safe or safe deposit box, of if you are really trusting of corrupt bankers (foolish), you use an electronic exchange.

Bitcoin: Bitcoins are usually protected using public key cryptography, and digitally signing a send to a new entity proves that you owned and can transfer some bitcoins. You can generate as many private keys as you like (and send whatever amount of coins to them as you want), and hide them on password protected USB flash drives. Or you can keep them at online exchanges and bitcoin banks.

Discussion:
Bitcoin enables something incredibly awesome here. You can walk around with a million dollars worth of bitcoins on a little USB flash drive in your pocket, and nobody would know or even be able to know (unless you told them). Potentially there could be a flaw in the Bitcoin program, such as a bug that permits double spending. The authors of bitcoin took extreme care to prevent such a bug from existing. Someone could have a virus/keylogger etc on your device that could steal your bitcoins or mislead you.

Transferability/Mobility
USD: You can pass cash by hand, use traditional bank checks, use credit cards, or use a newer online payment system such as paypal or dwolla.

Gold: Gold has a very high value/weight/size ratio... so its pretty easy to physically move gold. Generally non-government gold banks have been raided by their protection rackets... so gold banks don't exist.

Bitcoin: As long as you are connected to the internet (and the Bitcoin network), you can digitally sign your bitcoins to anybody in the world who gives you a public key. People have also minted gold and silver coins that have bitcoin private keys hidden behind tamper evident seals.

Discussion: Bitcoin really shines here. Today people who validate bitcoin transactions (via the Bitcoin program) do will do it for free. In the future as Bitcoin becomes more popular, they may begin requiring to be tipped.

Durability
USD: Today the physical currency are just nominal amounts, and hence dollars are essentially indestructible so long as you're not careless.

Gold: Gold can be melted, scraped, etc, but its pretty durable.

Bitcoin: The program's money transfer network requires that you are connected to the global internet. If the internet goes down, transactions cannot occur. Private keys used to prove ownership can be backed up in multiple locations to prevent loss.

Discussion: As long as you are careful to backup your bitcoins, they are perfectly durable.

Divisibility
USD: Can be divisible down to cents.

Gold: The most commonly traded size today is 1 troy ounce (Worth about $1650 USD today), although it can be minted into a different size.

Bitcoin: There will only ever be 2,099,999,997,690,000 atomic units.

Discussion: No matter which currency, periodically balanced ledgers can make them practically infinitely divisible.

Uniformity
USD: Cash and coins are of uniform value, although as more money is being created by the Fed, smaller units will become more of a pain to count and hence loose trade value.

Gold: Coins can be minted into very uniform quality. Once in circulation, coins can get tarnished & scratched.

Bitcoin: Perfection

Rarity, future market acceptance
USD: As of March 20, 2013, the Fed has issued just a hair under 3 trillion USD. There is no limit to how many USD are created other than by the whims of the popular majority of US citizens. The monetary base has gone through periods of no inflation, to current times where it is increasing by more than 30% per year.

Gold: Gold is an atomic particle: "Au" on the periodic table of elements. Due to the nature of reality, some percentage of matter is gold. With current technology it is not economically feasible to create gold from other elements. Gold is hard to find, extract, and purify from the Earth, and hence the growth of its supply is limited.

Bitcoin: Bitcoins are created using the Bitcoin program. This algorithm creates new bitcoins at a rate that exponentially decays over time, and following the algorithm, there will only ever be 2,099,999,997,690,000 atomic units of bitcoins.

Discussion:
To fill the function of a store of wealth, USD is a joke. Gold has been historically very very good. Bitcoins (the currency) are perfectly rare, although their future market acceptance is not guaranteed.

Current market acceptance
USD: Most widely accepted & traded currency today

Gold: Primary used as a store of wealth

Bitcoin: The new contender. Today its mostly used by speculators and for international wealth transfer. Its also used in a few places like silk road (an increasingly popular illegal drug trade) and reddit.com (a popular news/forum).

Author's Summary
In my opinion, USD (and other fiats) are going to be printed out of market acceptence. They lack an algorithm like Bitcoin, where every individual user can verify the legitimacy and limit the expansion of the money supply. I think gold (and silver to a smaller extent) will continue to be used as a long term store of wealth. I think Bitcoin (and potential future currencies that use ideas of the Bitcoin algorithm as their foundation) will be the future of currency & money transfer.

Some governments may attempt to enforce the use of their fiat... with Bitcoin it sounds impossible to pull off. A government could definitely enforce larger businesses to use their fiat, but small companies and particularly non-US producers (where governments are less powerful and oppressive...) Bitcoin should really take off. If the US government tries to stop it, we'll probably see an even bigger brain drain from the US.

Post 2

Saturday, March 23, 2013 - 4:33am

I love itttt!! By the government recognizing "Houston we have a problem" it lends even more legitimacy to the bitcoin. Galt's gulch resides on the net. Next step will be for brokerages to allow funding of accounts for the stock market and to receive disbursements in kind! I think they know it is going to be impossible to trace. Currency traders are going to be drooling over the pip spread on the speculation of bitcoin values too. I smell a gold mine, thanks for sharing Dean!
(Edited by Jules Troy on 3/23, 4:34am)

Post 3

Monday, March 25, 2013 - 1:27am

http://www.cbc.ca/news/yourcommunity/2013/03/alberta-man-accepting-bitcoins-in-exchange-for-home.html?cmp=fbtl

:) I thought you might like this article Dean.

Post 4

Monday, March 25, 2013 - 5:52am

JT: "... in kind! I think they know it is going to be impossible to trace."

Pecunia non olet: money does not smell, i.e., cash leaves no traces. In fact, every paper note has a unique serial number, so those are traceable.

The saying is attributed to the emperor Vespasian who put a "tax" (user fee) on public restrooms. His son Titus complained that this was unfit, unseemly. Vespasian took out a coin, sniffed it, and said, "It does not smell" meaning that it does not matter where the money comes from if it benefits the state.

Post 5

Thursday, March 28, 2013 - 10:18am

Bitcoin Bonanza: Cyprus Crisis Boosts Digital Dollars

They won't make a sound no matter how many of them you try to toss in a bucket, and you can't pitch them in a fountain and wish for good luck. But make no mistake, bitcoins are getting big.
The online alternative currency, previously little more than a curiosity in financial markets since its 2009 inception, has zoomed in trading value since the Cyprus banking crisis erupted two weeks ago.

Post 6

Thursday, March 28, 2013 - 10:29am

Marc Faber: Not Even Gold Will Save You From What's Coming.

Marc Faber, who authors the Gloom Boom & Doom newsletter, is usually pretty bearish on stocks and bullish on gold.

Lately, though, gold doesn't seem like it can catch a bid.
"Despite the continued reverberations regarding the Cyprus bailout and its involvement of bank deposits, gold struggled to maintain the positive momentum created in the first two weeks of March and instead now looks very likely to move lower, towards $1580/oz," wrote Deutsche Bank commodities analyst

Rick Santelli: Paper Gold�Game, Set, Match!

(Note that Santelli is only talking about paper gold, not physical gold.) Sam

Rick Santelli today gave an EPIC RANT on the difference between physical gold and paper liabilities commonly traded on commodities exchanges.
I don�t even look at gold as gold anymore since they securitized it. If things went badly in the world that I used to observe as a gold bug; the gold would end up in the hands of the gold bugs. If things go badly now, they�re going to end up with checks from ETFs!
Sorry, it�s not the same! The reign of paper gold as the Ayn Rand endgame, to me, that�s over. Game, Set, Match!

Post 7

Thursday, March 28, 2013 - 3:37pm

How does bitcoin work?

Above in pieces I described how coins are transferred. Below is a more technical discussion.

To send bitcoins:
1. You must first have unspent bitcions associated with one of your public/private cryptographic key pairs.
2. The recipient generates a public/private key pair.
3. The recipient gives you their public key.
4. You use your private key to cryptographically sign your bitcoins over to the recipient's public key.
5. You push your sign over (called a "transaction") of the bitcoins to the Bitcoin peer to peer (p2p) network.
6. The network then relays the transaction, and you can never spend the bitcoins again, they can only be spent by the recipient.

To create (mine) bitcoins:
1. You must download the entire bitcoin transaction history.
1A. You also download new transactions, which may include tips to you the miner. You must verify that the transactions spend coins that haven't been spent yet. If you included doubly spent coins, other Bitcoin clients will not accept your block. You can chose whether or not you want to include each transaction, based on how much they tip you, or whatever you want.
2. You create a new "block", which is a collection of transactions you chose in 1A, a SHA256 hash of the previous block, the current date-time, your own transaction (called a "coinbase" transaction), and a "nonce" (a variable you change and try over and over again to try to find a "solution").
3. You set the nonce to a new number, compute the SHA256 hash of the new block.
3A. If the hash result is a small number (meeting the network's difficulty requirement), then you found a "solution", you send your new block out to the network, and your "coinbase" transaction gets some new bitcoins.
3B. If the hash result is too big of a number, then go back to step 3. If you receive new transactions, then go back to step 2. If you receive a new block, then go back to step 1.

Notes:
- SHA256 is a very complicated hash algorithm. It is a sequence of arithmetic & digit swapping operations. So far, no one has been able to figure out what the output value of SHA256 is given an input without actually performing the SHA256 algorithm.
- The difficulty requirement in 3A is adjusted by an algorithm particular to Bitcoin such that the entire network will find a solution about once every 10 minutes.
- The bitcoins awarded to the coinbase for finding a solution is reduced by an algorithm particular to Bitcoin such that every so often the reward is halved, eventually resulting in there only being about 21 million bitcoins. It started off at 50 bitcions. Currently (March 2013) the reward is 25 bitcoins.
- If a Bitcoin program receives multiple block chains, (for example say two people find solutions at the same time), network nodes will use the chain of blocks that had the most SHA256 hash work done, where blocks with smaller hash results are considered as more work than blocks with bigger hash results.

==================================

The linked article below discusses a new "mining" technology... a custom ASIC (like a custom CPU/processor) that is made specifically to find solutions to the SHA256 hash algorithm.

Engineering the Bitcoin Gold Rush: An Interview with Yifu Guo, Creator of the First ASIC-Based Miner

Post 8

Thursday, March 28, 2013 - 4:23pm

1. Anyone who wants to buy gold coins, can. They are available, in your choice from 5% to 25% over London spot. What other commodity can you buy with so little mark-up? Lumber? Orange juice? Unleaded Gasoline? Red Wheat?

I always recommend that you goto the American Numismatic Association dealer closest to you. You will not find Santa Claus, but they are bound by a Code of Conduct. Myself, I highly recommend Liberty Coin Service of Lansing. Once-upon-a-time something of a libertarian, the owner, Patrick Heller, holds an MBA from the University of Michigan, and was inducted into the Professional Numismatists Guild. Pat Heller was instrumental as a lobbyist to get the sales tax taken off gold and silver coins in Michigan. The best thing about Liberty Coin Service, should you choose to shop elsewhere, is their daily price list showing the mark-ups on gold and silver coins.

*U.S. 1 Oz Gold Eagle 4.7%
*U.S. 1/10 Oz Gold Eagle 14.5%
*Austria 1 Ducat 6.4%
*Austria 4 Ducat 11.0%
*British Sovereign 6.4%
*British Sovereign, BU 9.3%
*France 20 Franc 7.9%
*Germany 20 Mark 17.5%
*Swiss 20 Franc 8.1%
$20 Liberty BU 19.1%
$20 St Gaudens BU 20.1%
$20 Liberty Extremely Fine 16.8%
$10 Liberty Extremely Fine 18.8%
*U.S. 90% Silver Coin 8.6%
*U.S. 40% Silver Coin 3.%

2. GATAC, the Gold Anti-Trust Action Committee, claims that the central banks conspire to push the market price down while they accumulate. Also, they claim that central banks fraudulently list actual and leased assets on their books as assets. I lend gold to you: we both count it as "ours."

3. Gold does not have "do well." It is a store of wealth, i.e., savings. If gold "does well" as a dollar-denominated investment, then life must suck. You want gold to do poorly as it did during the 90s, in the middle of the longest stretch of market expansion in US history when we thought that the Reagan Revolution would continue through Clinton and Bush and the national debt would be paid down, etc, etc.

Regarding Bitcoins, allow me to point out that money is an abstraction. Gold (silver, copper) has no intrinsic value. Gold and silver as money followed thousands of years of promissory notes, and did so only as "tokens of honor." Following paper money in all of its forms and now electronic cards, Bitcoins only continues the abstraction up to wider conceptualizations of promise and authentication.

As for the government, pecunia non olet. In the early William Gibson cyberpunk novels, the underground economy used New Yen. Only a limited number existed; no more would be produced; they made good counters. In the real world, Kurds in Iraqi Kurdistan relied on an issue of currency from the final days of Saddam Hussein: no more would be made; so they worked as counters.

DMG: "- SHA256 is a very complicated hash algorithm. It is a sequence of arithmetic & digit swapping operations."

Cuneiform is a complicated set of reed impressions in tablets of clay. It began as an expanding set of tokens for keeping track of farm goods promised to the city temple. Think of creating a pivot table in Excel. SHA256 is complicated. Using it is not.

(Edited by Michael E. Marotta on 3/28, 4:36pm)

Post 9

Thursday, March 28, 2013 - 4:59pm

MEM, Your comparison to cuneiform is invalid. SHA256 is not data, it is a process, a "hash". I should have explained what a hash is.

A hash is simply an algorithm that converts input data into some transformed output data called the hash result. Different hash algorithms have different limits on input size. Different hash algorithms have different output characteristics. But a further definition of a hash algorithm, is that a given input will always produce the exact same output.

An example of a simple hash algorithm would be "The output should be the last 2 decimal digits of the input number."
123->23; 1->1; 57->57; 98473423->23. Note how trivial it would be to predict the output given an input in this simple hash algorithm.

Lets say I define a more complex hash algorithm, such as "1. Add every digit together. 2. If the result has two digits, stop. Otherwise go back to step 1." 123->6; 1->1; 57->12; 98473423->40.

Just one small part of the SHA256 looks like this:
{ temp1 = H + ((((E & 0xFFFFFFFF) >> 6) | (E << (32 - 6))) ^ (((E & 0xFFFFFFFF) >> 11) | (E << (32 - 11))) ^ (((E & 0xFFFFFFFF) >> 25) | (E << (32 - 25)))) + (G ^ (E & (F ^ G))) + 0xE49B69C1 + (w16 = ((((w14 & 0xFFFFFFFF) >> 17) | (w14 << (32 - 17))) ^ (((w14 & 0xFFFFFFFF) >> 19) | (w14 << (32 - 19))) ^ ((w14 & 0xFFFFFFFF) >> 10)) + w09 + ((((w01 & 0xFFFFFFFF) >> 7) | (w01 << (32 - 7))) ^ (((w01 & 0xFFFFFFFF) >> 18) | (w01 << (32 - 18))) ^ ((w01 & 0xFFFFFFFF) >> 3)) + w00); temp2 = ((((A & 0xFFFFFFFF) >> 2) | (A << (32 - 2))) ^ (((A & 0xFFFFFFFF) >> 13) | (A << (32 - 13))) ^ (((A & 0xFFFFFFFF) >> 22) | (A << (32 - 22)))) + ((A & B) | (C & (A | B))); D += temp1; H = temp1 + temp2; };

Anyways, basically requiring nodes to find a solution to the SHA256 where the output is small is kind of like requiring nodes to try to dig a big hole and fill it back in, where whoever digs the biggest hole gets the generated bitcoins, determines which transactions goes in the next block, and gets the transaction tips. But instead of digging holes, in bitcoin, you try to find a SHA256 solution.

=====

Never the less, I'm not trying to suggest that Bitcoin is better than gold in every way. They both have their own advantages.

If you want something that is rare by physical nature and historically proven to continue to have market value, go with gold.

If you want something that is rare by your own verification (following the Bitcoin algorithm) that can instantly be sent across the world and more easily concealed from thieves, and you either understand it or are willing to risk using the new technology, go with Bitcoin.

Might I suggest that as an investment, it might be worthwhile to put some fraction of your net worth into it, just in case it does become successful in the long term. If you don't want to take the risk, then maybe one day you will just end up using it as electronic money as it becomes more mainstream.

Currently for investing/savings, I like gold, silver, bitcoin, and personal education/skill acquisition. With government bailouts and the impending collapses due to fiat printing bubble bursts, I currently don't really like any other investment option. Potentially stocks in the Asian/Pacific would be reasonably worthwhile, so long as you can buy them through financially solvent brokers.
(Edited by Dean Michael Gores on 3/28, 5:02pm)

Post 10

Thursday, March 28, 2013 - 5:49pm

MEM, Your comparison to cuneiform is invalid. SHA256 is not data, it is a process, a "hash". I should have explained what a hash is.

SHA 1, 2, and 3... Yes, I "knew" but thanks for explaining it better. SHA is the System Hash Algorithm and several exist. SHA is a way to create a key identifier for data from the data. Suppose that you make all data appear as rows of 8.

"JOEROWLA
NDSWRITES
WELL..." becomes
4a 4f 45 52 4f 57 4c 41
4e 44 53 47 ...

The hash algorirth says "Take the number here and do this with it against the number there..." like add the third to the fifth and then multiply by the eighth and dvidide by the sixth, but throw away the remainder and just keep the whole number... And so on...

So,for large sets of large elements SHA1, SHA2, etc., produced redundant results. Some JOE ROWLANDS might be numerically equivalent to some JORS EORLAND.

The goal is to create a hash that produces one unique output for each input.

Code and data are the same thing. You put some number in memory and tell the computer, "go to this memory location and whatever is here, send it to the printer." Fine. But you could say, "goto this location whatever the number is, do that instruction.." So, code and data are the same to the computer.

B4 2C MOV AH,2C Get the clock
The computer does not care what B4 2C means. It could be just the decimal numbers 180 and 44.

I am completely supportive of Bitcoins. Allow me to suggest that if you launched a different discussion entirely about the epistemology of encryption, you might encourage some interesting and important questions and insights.

(Edited by Michael E. Marotta on 3/28, 5:52pm)

Post 11

Thursday, March 28, 2013 - 6:54pm

"Code and data are the same thing", yes, but a process is different than code/data. Performing SHA256 is a process. The code that describes what SHA256 is is data.

Similarly, your brain is a collection of neurons, who's connections and weights are data, but your thinking/consciousness is a process. Now I am throwing us off topic...

Anyways, Bitcoin is not just code/data. It is a process which can distribute a ledger and allows a non-centrallized system to agree on which transactions and which bitcoins are valid.
(Edited by Dean Michael Gores on 3/28, 6:54pm)

Post 12

Thursday, March 28, 2013 - 7:04pm

Michael,

Gold (silver, copper) has no intrinsic value.

But all three of these metals have intrinsic value (using the word as economists do, not as it is used in epistemology). Are you saying that none of these metals have any uses apart from being a medium of exchange or a store of value? That would mean that gold would never be used for anything arising out of its physical properties like its reflectivity, electrical conductivity, resistance to oxidation, malleability, etc.

Post 13

Thursday, March 28, 2013 - 7:11pm

Steve, Surely MEM means "intrinsic value" from the Objectivist philosophy, where value does not exist except from the perspective of a life form. Yes, gold has so far in history had value for humans, and it will continue to have value to humans in the foreseeable future. I don't like when people say something has "intrinsic value" either. Its like you are blanking out thought, just say "gold has value [to humans]", saying "intrinsic" makes in an invalid statement.

Post 14

Thursday, March 28, 2013 - 7:27pm

I am attempting to convince my wife to download and start mining. We have a hex core with 64gigs of ram and a screaming hot video card.(the card is most useful for running the algorithm.)

Post 15

Thursday, March 28, 2013 - 8:21pm

Dean,

Steve, Surely MEM means "intrinsic value" from the Objectivist philosophy, where value does not exist except from the perspective of a life form.

I might have thought so, but it is clear that his context in that paragraph is economic. And Economists, for hundreds of years have used used the phrase "intrinsic value" to differentiate a kind of exchange medium from one that has that would not be so valued in the absence of its use as an exchange medium (like printed currency). It is a statement about a use that arises out of physical properties and scarcity.

Remember that the word "intrinsic" is perfectly valid in a number of different contexts. And we can't simply demand that it cease to be used in other contexts just because there are ways in which it is sometimes improperly used in metaphysics/epistemololgy or in ethics.

In finance, for example, they use the phrase "intrinsic value" to refer to the value of a stock, some other financil instrument or a company as determined by fundamental analysis and not by market price. Some people who come from this background say that gold has no intrinsic value, because it doesn't generate a profit apart from what the market price might do, unlike a bond, or a dividend paying stock, or a call that is in the money, or a company that is earning a return on its investment.

I consider the use of "intrinsic value" when referring to gold to be shorthand for saying that there is a scarcity of this item that cannot be overcome relative to the demand for a substance that possesses these intrinsic properties that are in demand. The word "intrinsic" should be thought of as referring to the physical properties and the unstated assertion is that those properties will be valued in a market place.

Paper and ink have physical properties that are intrinsic to their substances, but the substances are not seen as naturally scarce, nor as being substances that have market value for those physical properties... not that come near what the value is as an exchange medium.

If you can be certain that an item will be valued, because of its particular physical properties, and that it will be scarce in a way that prevents flooding a market with a massive increase in supply, then there is no problem saying it has "intrinsic value." (That context carries the understanding that value means to a life form.)

The "intrinsic" is needed to separate it from "fiat."

Here is George Reisman, in Capital, pg. 504:

Unlike gold and silver, however, the paper and checkbook money of the government can be created virtually without limit ad without cost. While gold and silver are rare in nature and typically require laborious mining operations in their supply, the quantity of paper and checkbook money is not limited even by the supply of paper - additional zeros can be printed on the same paper. The cost of printing any piece of paper money, whether a dollar or a hundred dollar bill, is only fraction of a cent. The cost of crediting the Treasury's checking account with a billion dollars is not much greater. As a result, there is nothing intrinsic to paper or checkbook money that operates to preserve its value.

And Reisman is well aware of the fallacy of seeing univerals as somehow intrinsic to an item (such as saying that "tableness" is somehow intrinsic in each concrete table, and he is well aware of the ethical error of saying that a thing can be of value without a context containing one or more living valuers (see his chapter where he devastates the Environmentalists for assuming that any aspect of "nature" can be of value in the absence of humans - Snail darters and horned owls have no intrinsic value in that context.

Post 16

Thursday, March 28, 2013 - 10:52pm

Jules: cool. Good luck trying to generate some coins.

Not to try to dissuade you, but there are already so many people doing it, and now with the ASICs, I don't think you have much chance of finding a solution to a block on your own. I've not calculated the probability, but it might be something like that you might have a chance of generating one block for 25 bitcoins over the entire year.

Alternatively, you could join a "mining pool", where they will give you a portion of the block's base bitcoins and tips when the pool finds a solution.

I personally just use dwolla.com->mtgox.com to exchange USD for bitcoins and vice versa.

Post 17

Friday, March 29, 2013 - 4:31am

Yes if anything I would join a mining pool however we really do not need the money. Also my wife does a lot of resource intensive 3D graphics renders, and hashing pretty much would put this beast into overdrive. Also would it even be cost effective? The amount of extra electricity burned would probably be net zero. It will probably just be easier and cheaper to buy them. (It would be cool from a "hey I made a bitcoin!" Neeto novelty point of view but I was doing a bit of reading and people heat thier entire homes from the heat output. I do not think I want to risk frying a $6000.00 rendering beast for that.

Now from a hedging point of view, if someone(like us) buys them at current value of 74-76 usd and hypothetically speaking a bitcoin in 2 years time is worth 1500 USD and you simply purchase something with it at a vendor that accepts bitcoins is the government going to attempt to nail us for a huge capital gains? Will they even be able to trace it? If so I think I(we) will have to treat it like fuxored drug money because I hate bloody well supporting corrupt government that is ruining our countries anyway!

Post 18

Friday, March 29, 2013 - 6:56am

DMG: "Code and data are the same thing", yes, but a process is different than code/data. Performing SHA256 is a process. The code that describes what SHA256 is is data.

Thanks. Writing documentation, I always look to my subject matter experts.

Also, yes, I meant specifically the Objectivist intention that gold has no intrinsic value. I hold to that, even in the so-called "economic" sense that Steve offers. The error in economics is similar to the error in ethics and morality with the words "altruism" and "selfishness." When most people say "altruistic" they mean.... Maybe they do, but they are wrong. Socialism does not mean "sharing", either.

The following may reflect on a proper understanding of Bitcoins. Steve offered the Wall Street meaning of "intrinsic."

In finance, for example, they use the phrase "intrinsic value" to refer to the value of a stock, some other financil instrument or a company as determined by fundamental analysis and not by market price.

What is a fundamental analysis? By what standard? "Quants" are analysts and investors who engage today's equivalent of traditional technical investing. If you want to see how worthless "intrinsic value" is as a concept consider the wrongful conviction of Arthur Anderson. Once news of Enron came out, even ahead of the actual indictments, both Arthur Anderson "partners" (workers with ownership) and clients bailed out so fast that the company simply collapsed. Indictments became irrelevant: Arthur Anderson was dead. What about the "intrinsic" value of its many contracts with hugely important clients? What about the value of its real estate leases? What about... what about... what about...? All worthless. No reputation means no value.

Ayn Rand said many times that social problems have philosophical roots.

SW: "I consider the use of "intrinsic value" when referring to gold to be shorthand for saying that there is a scarcity of this item that cannot be overcome relative to the demand for a substance that possesses these intrinsic properties that are in demand. The word "intrinsic" should be thought of as referring to the physical properties and the unstated assertion is that those properties will be valued in a market place."

Regarding value, Ayn Rand asked "by whom and for what?" On the eve of the automotive age, when cars were required by law to have flagmen warning horse-drawn carriages, horses had "intrinsic value." Then, they did not... In fact, when Sir Isaac Newton ran the Mint, horses pulled the capstans of power. It was the free market firm, Watt & Boulton that applied steam to coining. Horses immediately lost their "intrinsic value" as engines. Gold is no different.

Difficult to mine? Scarce? Maybe right now... At one time the silver-to-gold in London was 12-to-1, because historically,that seemed to be the intrinsic distribution around the world. Since Greek times coins were minted to that standard 12 silvers to 1 gold. But, with the discovery of the Americas came a black swan and silver became a fiat currency, inflation money, where the megatons of silver coins were only promises for gold. So, what about the gold, etc., in the oceans? In the asteroids? Made from scratch by fusioning hydrogen atoms?

The only market value is market value. Stocks, bonds, fiduciaries, puts, calls, silver or gold, the market value of a thing is what someone else is willing to trade for it.

Long long ago, the late Bill Bradford of Liberty Magazine, when he ran Liberty Coin Service, asked me rhetorically: Is it worth what it cost you... worth what someone else will pay for it... worth what it will take to replace it...? To which I added, "... or worth what you would give up to keep it?"

The labor theory of value is another example of the error of intrinsicism in economics. Ayn Rand said many times that socal problems have philosophical roots. As a writer I take words seriously.

The "intrinsic" is needed to separate it from "fiat."

Collectors pay more in today's money for "worthless" fiat currency than the money was worth when it was issued. High-denomination Confederate money from late in the War is worth much less than low-denomination notes from the start of the War. Collectors pay for "worthless" Continentals and state moneys signed by the same men who signed the Declaration, Articles, and Constitution. Even ordinary Continental currency sells for much much more than it bought when it was issued.

The problem with so-called "free market conservatives" is that they know very little about the history of money. They just have Misean rationalism, which even Ayn Rand accepted some of. (That Mises, what a charmer!)

(Edited by Michael E. Marotta on 3/29, 7:11am)

Post 19

Friday, March 29, 2013 - 10:50am