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  • guest

    First thing’s first: Bitcoin is not a commodity, and therefore fails the Regression Theorem.

    Second, here’s a thought experiment:

    1) Bitcoin limit is 21 billion

    2) Citcoin (a made-up digital currency, for argument’s sake) limit is the same, but each is worth 1,000 Bitcoins. Boom: inflation.

    4) Ditcoin limit is the same, but each is worth 1,000 Citcoin, etc., etc. Basically, unlimited inflation.

    5) Someone’s going to blame the free market for the booms and busts created by the various digital currencies and wonder why, oh why, can’t government (or a global central planner – probably ostensibly “private”) just ban the private use of bitcoins, and we’ll go ahead and snitch on our neighbor if we catch them using it.

    Third, if Bitcoin is so distributed that it cannot be confiscated, shut down, etc., then it is also so distributed that it would be one person’s word against another’s whether one person is in fact using the Bitcoin system or some phishing algorithm designed to take bitcoins from people and use them to take real wealth from others who think bitcoins are real money.

    That e-Gold thing (haven’t looked into it) seems like paper gold, to me, and, yeah, if you don’t physically have your gold, then you don’t really have it:

    Manipulation of the Gold Price

  • WoodsFan

    Tom, I found this PAC in its early stages that promotes nullification. Maybe you could get involved and really get them going:

  • Mike

    The thing really holding me back is not that I don’t have a good understanding of bit coin, because I could dedicate myself to a couple days of research if need be. Rather… say I started using bit coin on a regular basis to buy things like deodorant, DVDs, pair of slippers, Xbox, etc… from online merchants. What’s keeping the IRS or any government agency from getting on my case for tax evasion? You know if it were to come to the point where I started using a substantial amount of my earnings that I get from my paycheck to buy things with bitcoin.

  • Will Hobson

    I have the same concerns about digital currencies. The pro’s that they bring to the table are impressive but I still don’t think they are the long term solutions just yet for two reasons:

    1) what’s to stop an onslaught of competing digital currencies from flooding the market and reducing the value of your currency of choice?

    2) what is the intrinsic value of these digital currencies and what is keeping them from sudden and rapid periods of devaluation?

  • guest

    #5 should be “why can’t government control the digital currency, exclusively” – something like that.

    I had a brain fart. Sorry.

  • guest

    Ultimately, the argument for Bitcoin boils down to the belief that there’s “not enough money”, and that an accounting unit is a valid substitute.

  • Tom Woods

    I have never heard anyone make such an argument for Bitcoin.

  • JFF

    I agree whole-heartedly with your points; it’s not a currency just no different than Paypal to facilitate exchanges at present. Further, I’m incredibly concerned with so many people who know better to put their faith in technology in such a way. I’m in no way a Luddite, but really? Once someone cracks the encryption, which I would bet real money someone is working on, it’s game over. And no encryption is beyond hacking. It’s the same with cloud computing; if it’s not on a hard drive that you physically can touch it’s not yours and can be blocked from you at any point.

    To me, I can’t see it as any other fiat money. Your point about the “limit” is dead on; who determines that limit? Can’t the central Bitcoin authority just change the limit by tweaking the algorithm (or hack it)? People are focusing on all of the conveniences and superficial benefits and not thinking about why certain things are money in the first place; stability and security (and not necessarily from state intrusion and tracking).

    It’s OK, I’ve been wrong before, just not often.

  • Gabriel Sukenik

    There are already alternative digital currencies besides Bitcoin (Litecoin, Namecoin, Freicoin, etc). However, nobody can just “decide” the value of these currencies, the market determines the exchange rate via supply and demand. Your Citcoin/Ditcoin example would only occur if the market decides that 1 Citcoin = 1,000 Bitcoins (which at today’s rate is over $45,000).

    Bitcoin is in fact a commodity, but it is a digital commodity rather than a physical commodity. There are certain unique properties of Bitcoin that people value when using Bitcoin as a form of savings or to transact (perfectly divisible, instant global transfers, zero counter-party risk, etc). One could argue that Bitcoin does not fail the regression theorem, because prior to Bitcoin’s use as a money, the processing power of the combined network is certainly valuable and was utilized by many others for non-monetary purposes.

    Bitcoins cannot be faked by another algorithm because if someone tried to spend them as actual Bitcoins, they would be rejected by the Bitcoin network.

  • Gabriel Sukenik

    1) There already has been an onslaught of digital currencies that followed Bitcoin. They all compete with each other, but Bitcoin retains its value because it was the first to market, and many companies have built services and networks around Bitcoin and not other digital currencies. It is very possible another digital currencies will eventually be more valuable than Bitcoin, but there will be an exchange rate between these currencies and people will have the opportunity to swap one for another.

    2) There is no such thing as “intrinsic” value, only subjective value. Actors in the marketplace will gauge their subjective values and eventually determine a price. Bitcoin has already experienced rapid losses in price, much like any other market can, but there are certain properties of Bitcoin that many people seem to agree are “valuable”. These properties include instant global transactions with zero cost, zero counter-party risk, perfectly divisible, pseudonymous, censorship resistant, etc.

  • Anonymous

    It can and will be hacked. When it is hacked, your bitcoins will be worthless or cease to exist. Besides, you can bet that if bitcoins gains traction, governments around the world will get involved. If you can’t hold it in your hand, you don’t own it.

  • Gabriel Sukenik

    -In the event that SHA 256 encryption is broken, Bitcoin or any other digital currency can upgrade to another encryption standard. Digital private currency is a concept that is here to stay, regardless of whether Bitcoin ultimately succeeds or not with its current form of encryption.

    -the Bitcoin limit is built into the open-sourced software. Because there is no central Bitcoin authority, no individual can tweak the algorithm to increase the 21million limit. In order to “hack” the Bitcoin algorithm, you would need more than 50% of the network’s total computing power. And the Bitcoin network is currently the world’s largest decentralized computing network, by an order of magnitude. There are way more valuable networks to hack than Bitcoin in the event someone had this computing power available to them.

    -glad I caught you on one of your “off” moments, quite a rare find, I wonder if its worth a whole Bitcoin :)

  • Gabriel Sukenik

    But I do hold my Bitcoins in my hand!

  • Anonymous

    But when it’s hacked, what will your bitcoins be worth then? zip, zero , nothing. It’s just another fiat currency that will end up worth zero just like every other fiat in human history.

  • guest

    In those words, neither have I; But if the main purpose of Bitcoin is to be able to make transactions unharassed by governments, then the issue is about availability.

    We can’t substitute the availability of an accounting unit for the subjective value that made the commodity a money in the first place; When a commodity money is confiscated, the solution is to use a different commodity as the money.

    (Easier said than done, but if we want to avoid making the same mistakes, then we have to think like this.)

  • Gabriel Sukenik

    Even if SHA 256 encryption is broken and hacked, another digital currency can upgrade to a stronger form of encryption. Whether or not Bitcoin and 256 SHA encryption lasts, the concept of digital private currencies is here to stay. Also, check up on your definition of fiat. It doesn’t mean “something that isn’t physical”, it means “by government force”. Last I checked, I haven’t been forced by any government or anyone else to use Bitcoin.

    And those physical Bitcoins? You can verify the bytes exist with the public address that is printed on the coin.

  • Anonymous

    If a person creates the system, another person can (and will) hack the system. No encryption is unbreakable. So when the time comes, whatever you have in Bitcoin goes bye bye and you’re officially broke. So what will you then use to buy into the next version of digital currency when you have nothing left from Bitcoin?

    And do you honestly believe that Governments around the world will allow you to use something other than their currency without taxing you? Either Bitcoin fires up the taxes or the Governments (especially the US govt) will shut them down.

    Again, on the physical Bitcoins… when the system is hacked what makes you believe that public address will still exist? What’s to stop a government from shutting down access from an entire Country? We’ve seen that happen in the ME several times.

    Bitcoin is a fad just like those that came before it.

  • Robertv


  • Anonymous

    OK, I’ll stipulate all the skeptical arguments about bitcoin.
    I share a lot of those concerns, although not all.
    How about this:
    Dip your toes in. Buy $100 worth of bitcoins. Try them out. Did your hash oil arrive? :)
    Just a joke there. But seriously, don’t invest your life savings, fer cryin’ out loud. Just front a small trial amount and see how it works.
    I haven’t used bitcoin myself, but if I decide to try, that’s EXACTLY how I would go about it.
    In the end, those who can best critique the program are those who have actually USED it.
    And, for the record, I use the “cloud” for convenience and backup, but if it’s REALLY private and important, I also have hard drives in remote locations with that stuff.

  • guest

    One could argue that Bitcoin does not fail the regression theorem, because prior to Bitcoin’s use as a money, the processing power of the combined network is certainly valuable and was utilized by many others for non-monetary purposes.

    That’s basically just an appeal to the Labor Theory of Value; the belief being that the bitcoins get their value from the labor that goes into creating them.

    The bitcoins themselves would have to have value apart from being a medium of exchange, for them to pass the Regression Theorem. Money must begin as a commodity. Digital information isn’t a commodity.

    Storage devices could be a commodity money, but not the information on it.

    You said that bitcoins cannot be faked by another algorithm, but that misses my point; which is that someone might give you fake bitcoins for use on a different algorithm – you think they’re bitcoins, and they are accepted by the other algorithm.

  • guest

    What he means is that if you can’t hold the thing of actual value in your hand, then you don’t own it.

    Bitcoins have no utility of their own, and so holding even a physical storage device that contains the digital information that are bitcoins still doesn’t put anything of actual value in your hands.

    And that’s the problem with the fiat money we’re currently using, is that it is not the thing of value, itself. Gold and silver make a good medium of exchange because they are valuable as a commodity.

  • Rothbardian

    On the subject of Bitcoins I have seen many claim that it has no ‘intrinsic value’. Its quite annoying, since like you said, there is no such thing as intrinsic value. This needs to be repeatedly pointed out.

  • guest

    You caution to check the definition of fiat, which is good as far as it goes; but such caution does not address the objection implied by referring to bitcoins as fiat money.

    The problem with fiat money isn’t ONLY that government forces us to use something, but ALSO that what they force us to use is not physical; not a commodity.

    If government forced us to use gold and silver, that would be bad; But it would be better than government forcing us to use something that isn’t a commodity.

    Mediums of exchange that are not commodities make inherently bad monies because they don’t have value other than being a medium of exchange.

    (Note: A distinction needs to be made between value in the sense of a measure of a unit of account, and value in the sense of utility.

    (Bitcoins have arbitrary value in the sense of utility, which is NOT true of commodity money; This is a response to the claim that bitcoins have subjective value in the same sense that gold does.

    (Commodity money gets its subjective value from the utility it gives someone as a non-money. Commodities don’t have contrived utility, but actual utility; and the utility is subjective to the one who finds actual utility in it.

    (Bitcoins have subjective value as a unit of account, to be sure – they have that in common with gold and silver – as does fiat money; But the units of value that bitcoins account for are contrived, which is true of fiat money, but not of commodity money.

    (Real money gets its accuracy as a unit of account due to it having utility as a non-money.)

  • guest

    What we mean by “intrinsic value” is that it has utility as a non-money.

    The subjective value of commodity money is not arbitrary – it has real utility to someone as a non-money; That utility is subjective to the individual, but the utility is not arbitrary.
    Water and fire don’t have intrinsic value, but I can’t just declare that water has the same utility to me as fire – that would be arbitrary (there are circumstances in which they WOULD have the same utility, but this is a simple example).

    Bitcoins are an arbitrary unit of account. Therefore I cannot expect them to represent value.
    (Tom, this is like your “Five Woods Bill” example: it doesn’t matter that the supply of “Woods'” are limited – nobody would know what they were worth.)
    And just because you can get something in the mail using bitcoins doesn’t prove anything; If I can get you to give me a car for a piece of paper with some numbers written on it, or for a bag of sand, that doesn’t mean that the paper or sand is money – all it means is that you were willing to give something of value for something of zero value. (Responding to someone else’s comment, here.)
    And, no, I won’t just “try it out”. (Responding to someone else’s comment.)

  • Rothbardian

    “What we mean by intrinsic value is that it has utility as a non-money.”

    That is not “intrinsic” value. Something having utility as a non-money is subjective value. That value is imputed by individuals, not inherent in the object forever and always.

    The value of bitcoins is subjective to the individual as well – to you it is worth probably nothing. This is not arbitrarily determined.

    Gold does not have intrinsic value, only subjective value based on history.

  • Jack

    You seem to be a bit confused. Either there is intrinsic value defined as non-monetary use (and therefore value) in the lack of monetary element to it, or there isn’t. Agreed that both values are subjective – all are, but disagreed that there isn’t a distiction between say a silver coin and paper dollar. I gather that you don’t like the term ‘intrinsic value’ because some people say bitcoin is no good as money because of lack of that value which (in their opinion) would mean it’s not money according to Regression Theorem. They are simply wrong and do not get what the RT means. It does not say what money is but how the thing must have become money.

  • guest

    Something having utility as a non-money is subjective value. That value is imputed by individuals, not inherent in the object forever and always.

    You are correct that subjective value is imputed by individuals, and not inherent in the object, itself; but the value imputed is not arbitrary. Different individuals impute different levels and kinds of utility to objects; It is in this sense, only, that the value is subjective to the individual. The utility that each individual derives, though – however varied from one individual to the next – is very real.
    An individual sees real utility in commodity money as a non-money, which is where it gets its trade value from, and ultimately it’s value as a money when it becomes widely traded.

  • Gabriel Sukenik

    The Bitcoin network clearly has subjective value as a non-money. Individuals and corporations pay for network security for all sorts of things (emails, websites, network infrastructure, databases, etc). The computers that mine, store, and account for Bitcoin have non-monetary use, “actual utility” as you call it. The fact that you are on this website already shows that you value digital network security.

  • Rothbardian

    I’m not disputing that the value imputed is not arbitrary.

  • Rothbardian

    Perhaps I should be more clear: nothing has intrinsic value. This opinion is somewhat irrelevant to bitcoin, although yes, I do not like when ‘intrinsic value’ is used as an argument against it. This article by Gary North does a better job explaining this than I can:

  • Alven

    “the processing power of the combined network is certainly valuable and was utilized by many others for non-monetary purposes.”

    I agree with what’s quoted; however, I don’t think this explains how Bitcoin is derived from the components & software needed for a network to successfully operate.

    Also, are you suggesting that the processing power of the combined network is a homogeneous good? That’s my impression, but I’m not certain it’s the correct impression.

  • guest

    Perhaps I should be more clear: nothing has intrinsic value.

    I have already agreed with this, above. We both cannot be clearer on this point.

    And yes, Gary North does a great job of explaining that value is subjective to the individual.

    (By the way, Gary North is OPPOSED to “Social Credit”, which is what bitcoins are, so he’s not saying what you think he’s saying:

    (Keynes, Crackpots, and Deflation

    Money is the most marketable commodity, said Ludwig von Mises in 1912 in The Theory of Money and Credit.


    But my disagreement with you is that the value imputed to bitcoins is completely arbitrary, in the sense that it has no utility other than an accounting unit.

    And since money gets its accounting accuracy from its value as a commodity, bitcoins aren’t money.

    It’s not enough to say that people impute value and therefore bitcoins will work as money because people can impute whatever value they want into it like they do gold; Because people DON’T impute value arbitrarily.

    Subjective value is still real value. The value in money cannot be imputed arbitrarily and it still function as money.

  • Gabriel Sukenik

    “it has no utility other than an accounting unit.” No, bitcoin is an accounting unit as well as a payment system.

    Bitcoin’s utility is its ability to transfer value anywhere, instantly, and privately. Take a look at the size of the global remittance market if you think there isn’t any value in transferring currencies internationally. And you can do this without holding onto actual bitcoins for extended periods of time (removing the volatility risk).

  • guest

    Bitcoin’s utility is its ability to transfer value anywhere, instantly, and privately.

    You’re conflating the bitcoin accounting unit with the Bitcoin service.

    The Bitcoin service could theoretically have utility, if the accounting units meant something.
    (But then, a service is not a currency.)

    But the bitcoin currency has no utility other than as an accounting unit, and is therefore not money; And since they don’t account for units of real goods, they can’t even be a money substitute.

  • Anonymous

    Another flash crash last night in Bitcoin… 23% drop in value in a heartbeat. A lot of suckers are going to get fleeced by Bitcoin when it becomes worthless.

  • Nathan Scott

    What about when scientist figure out how to transmute gold? Or perhaps find a giant deposit somewhere that massively increases the world supply of gold? What do you do with your precious gold then?

    Also, anyone who can “hack” bitcoin could make far more money hacking banks who have much weaker security systems.

  • Nathan Scott

    So something that can be used on the bitcoin service has value. Only bitcoins can be used on the bitcoin service.

    Regression theory is nonsense anyway. What use is gold to the average person. Jewelry? Sounds a lot like people who buy bitcoin out of interest. All regression theory says it that you need a way to anchor value initially. After a certain point how something came to be money is of no consequence.

  • Anonymous

    Gold has held it’s value for thousands of years. I think it’ll be plenty safe during my lifetime. Your digital currency can and will vanish overnight. There’s so many ways for it to go “poof”. Good luck with that.

  • Nathan Scott

    And when scientist can transmute any metal cheaply and easily your gold will be a relic of people with no imagination or sense.

  • mojhale

    President Jefferson,
    I know mathematics has developed a lot in the last 200+ years, so it would probably be wise of you to withhold your statement that Bitcoin “can and will be hacked” until you understand the actual nature of bitcoins.

  • mojhale

    You can see my other comment directed at you, Mister President, but I’ve tried and can’t foresee any possible way that humanity will outlive the internet and mathematics. People may stop valuing bitcoins, and the price would plummet, but people might also stop valuing gold. Neither has happened, but either could.

    When I compare that to the USD, I can foresee humanity outliving the US government, and I can think of some times when people have lost their faith in a fictionally-backed and centralized currency. Nonetheless, I still use my bills with your handsome face on them quite regularly.