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Bitcoin: What's wrong? What's right?


"...There is absolutely nothing keeping me from creating bytecoin, bitcent, bytedollar, bytecent and bitdollar, all absolutely identical in every way to bitcoin, except less famous. The hard part, designing a functional online currency, is already done for me. Just look up Beenz. Just look up Flooz. What would maintain Beenz and Flooz value, when someone else can make Fleenz and Boonz with nothing to distinguish them?

Fiat means "it shall be" in Latin. In regards to "fiat" currency, it means that a worthless piece of paper now becomes money, this paper is better than that paper, and you must accept this paper in return for goods and services because a government said "it shall be so". These protections must exist to support an intrinsically valueless currency because a limitless number of equally valid currencies could otherwise compete.

Certainly, the voluntary system of bitcoin is admirable because it doesn't contain this element of force. However, when the competitors come, and as it is becoming increasingly profitable to do so, they absolutely will, there is nothing to protect bitcoin, bytecoin or any other digital currency from a flood of competitors. If two identical systems can exist alongside one another, the "supply" of digital currency has doubled. If three can exist, then it has tripled. The barrier to entry is only the capital cost of creating a new and better advertised system, and the market cap of bitcoin is coming up on a billion dollars..."

read more: http://shadesofthomaspaine.blogexec.com/index.php/entry/bitc...

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I really need to rewrite this article

It's fun to cast your bread on the water, so to speak, and have it come back, reposted by someone else. Thanks "Homeland Security".

Anyhow, I realize "competitor" is a loaded word, and isn't helpful to my point. If two, three or fifty identical bitcoinesque currencies coexist and double supply, they would necessarily halve the value. There is only so much demand for currency, and if you increase supply, you do nothing to increase overall wealth. Ben Bernanke has proven this.

There seems to be confusion over my use of the word "fiat", too. I don't think Bitcoin is a fiat currency.

It has no organization to provide any decree, and no organization of thugs with guns to bash competitors. This is an ugly, but necessary, reality for unbacked currencies. This lack of thuggery leaves the unbacked bitcoin open to debasement from capable, corporate-sponsored, well-advertised competing currencies. There's no reason that Amazon couldn't create a decentralized currency, and organize it so they benefit slightly. Saying that the creator of a decentralized currency couldn't somehow benefit lacks imagination.

The free-marketers, to their credit, welcome competition. I too welcome competition in any market, but we can all agree that competition certainly isn't good for raising prices.

Digital currencies aren't inherently bad, but we have to be realistic about their capabilities and weaknesses. Unbacked, undefended currency of any kind is a risky place to be, and that is my point.

Author of Shades of Thomas Paine, a common sense blog with a Libertarian slant.


Also author of Stick it to the Man!


Thank you for your blog. You are climbing my list

of unimpeachable sources.

I had read somewhere that 'fiat' is related to the word 'faith', which is a key component of anything - paper, gold, silver, tobacco - being useful as money. The belief by the receiver of the money that it will have perceived value to someone else tomorrow or some other day.

Combined with the cryptography behind bitcoin which makes it uncounterfeitable, I have 'faith' in it to the same degree that others have 'faith' in bitcoin. I perceive it to have value because others perceive it to have value - just like gold, silver, or tobacco...

Chris Indeedski!

Daily Paul cured my abibliophobia.

More virtual currencies are a

More virtual currencies are a good thing and will lead to better stability in the long run.
Let the free market choose the winners and losers.

What does Michael think about Bitcoin?

Could someone please direct Michael to:

Did Michael enjoy his experience with Bitcoin?

and ask him to respond/comment :)

Just plain 'Happy'about the direction the world is taking! Especially if we live to reach LEV [Longevity Escape Velocity]

Problem with the argument

I see he is saying that competitors could spring up and do the same thing and thus devalue BitCoin... well so could a competitor to Facebook or Twitter... the code for those sites would be simple to even recreate from scratch... how many people would use the new copy though? People continue to use somehting because everyone else is using it. Just like EBay... as a programmer, I could easily recreate a website that does exactly what EBay does... maybe even better... but how many people would switch over?

I think if people are trading in BitCoins then any new competing currencies would have a hard time getting traction, as it is the name itself that is the value... just like the voluntary life-tracking system known as facebook.com

That's actually not the same

That's actually not the same what you're describing.

It's no problem for somebody to store his value half in Bitcoins and half in Bytecoins as it is no problem to store value half in gold and half in silver.

Facebook, Twitter or Ebay, to the contrary, can't be used only half. Either you use it or you don't. And if you use it, there's no incentive to use another identical system simultaneously.

Most Bitcoin Alternatives have FAILED in adoption vs Bitcoin

I had the same "fear" at the beginning of my research into bitcoin and when the alternative versions started showing up in 2011 I followed each with fascination.

Long story short: Most of them Failed, unless they offered a "difference" that made them useful in a way that is truly different from the original Bitcoin.

Though not really a simple tweak, or change of the original Bitcoin protocol, I do suggest you look at RIPPLE as one "alternative" that may really perform well in the future! :)

Otherwise, if the new "bytecoin, bitcent, bytedollar, bytecent and bitdollar" ARE EXACTLY the same as bitcoin, and different only in name, well then I believe it will simply be another Bitcoin client(with a different name) that will just work together with current Bitcoin user's official clients and no competition will exist! :)

But if a small change, any change is made to the protocol, and it is truly different from the official Bitcoin protocol, we already know what will happen to Bitcoin: Nothing.



Just plain 'Happy'about the direction the world is taking! Especially if we live to reach LEV [Longevity Escape Velocity]

Two things:

If "bytecoin" was identical to Bitcoin, why would anyone stop using Bitcoin? They wouldn't. Bytecoin would be DOA.

"Fiat," when used to describe money, is the GOVERNMENT saying "let it be." From the first line of the Wikipedia article on Fiat Money (http://en.wikipedia.org/wiki/Fiat_money), "Fiat money is money that derives its value from government regulation or law." This does not describe Bitcoin.

I don't think an exact copy of Bitcoin would be DOA

I made a short post above about this. Perhaps you would agree that if someone made an EXACT COPY then it would just be another implementation of the Bitcoin Protocol in a Client that has a different name... basically just because I call my Jelly Doughnut a Soft Surprise with Red Goodness Inside, it will still taste the same, right?

Just plain 'Happy'about the direction the world is taking! Especially if we live to reach LEV [Longevity Escape Velocity]

That's the point;

Bitcoin exists without Gov't fiat, so it is unprotected from identical competitors.

If Bytecoin were accepted at Walmart or Amazon, people would use it.

Author of Shades of Thomas Paine, a common sense blog with a Libertarian slant.


Also author of Stick it to the Man!


missing the point.

Why would Walmart or Amazon accept Bytecoin if no one used it? Notice that Wordpress and Reddit started accepting Bitcoin AFTER it was starting to become popular...

Fiat: perhaps you misunderstood, but fiat money derives its value FROM the government edict. Bitcoin and PMs do not. And what's this jargon about competitors? We don't need government shutting down competitors, identical or not! As far as their monetary properties are concerned, Gold and Silver are identical... so why is one valued so much more per oz? Maybe gov't should just protect you from that copycat, silver, and declare that it isn't of any value.

FRNs derive their status as

FRNs derive their status as *money* from government edict, they derive their *value* from their value of the recent past. If you keep backing up you will get to a point where FRNs derived their value based on gold or silver backing - commodities that have actual value. That is the gist of the regression theorem, and why determining the purchasing power of bitcoin is a seemingly impossible task. Fiat by government force or fiat by voluntary coalition, fiat is fiat because someone says it's so and not because of any real value.

Gold and silver are not identical. Gold is more scarce, has higher industrial use value, and higher subjective value in general.

Regression Theorem

Some say that Bitcoin doesn't necessarily violate the regression theorem: https://bitcointalk.org/?topic=583.0

Others say that Mises was wrong: http://mises.org/Community/forums/t/25411.aspx

I'm not sure which I believe yet, but after educating myself on the mechanics of Bitcoin and its amazing properties, I can say that I have no qualms about using it simply BECAUSE of those properties.

Would you buy a car that could never break down if it was made of dark matter and gamma-rays instead of steel?

But Amazon has plans to

But Amazon has plans to create their own currency!

If these amazon coins catch on, and why wouldn't they, then they could be used outside of Amazon's system much the way facebook login is now available everywhere.

Then it's a matter of do I want decentralized bitcoin, or centralized amazon coins? Each would have it's advantages. One of the most advantageous things a centralized currency like an amazon coin would have would be recoverability. You wouldn't have to worry about losing your wallet (A big deal for those less computer savvy).

I'm just saying, that to deny other currencies coming about would be like saying that since the FRN works today, it will work tomorrow.

Amazon Coins

Amazon Coins could catch on, and they probably will have a short life as a replacement for credit card rewards programs, but so long as Amazon controls the production of coins and sets their price, not only is the "currency" no better than a centrally controlled national currency, but there's also a single point of siezure where a government could attack if they felt Amazon Coins were siphoning off too many tax dollars for an exchange of goods that would've otherwise been taxed, if the transaction was made with USD.

Also, Bitcoiners welcome competing currencies. There are probably hundreds of them in existence already, and each has their own slight twist on the Bitcoin formula. Still, Bitcoin remains the champion, but someday, something might come along that is superior, and users will decide what they like better.

Isn't that the point of competing currencies?


I was thinking the same thing the other day when people were talking about bitcoin. I was like, so whats to keep the next guy from making up the next digital currency? Something with similar characteristics and uses the same foundation but has a slightly different name. In theory you could have a never ending competition of digital currencies because an infinite number of different currencies could be created.