Editorial: BitCoins & LiteCoins; Mining the Future?

[kodiak799]

Further, I'd argue that fiat currency is superior to the gold standard for multiple reasons. People that like to pretend otherwise typically ignore that the gold standard wasn't immune to recessions (some severe) and liquidity issues. And I'd contend many European countries have something to say about the loss of sovereignty and policy response with a "global" currency.

 

[kodiak799]

it explains how gold has continually revalued itself, it's certainly not a worthless commodity and it has been fallen back on by governments as far back as the Romans, and farther.

You might want to read a a little more. It's widely acknowledged that gold has value because the market says so. It has little productive use, as opposed to copper or even silver. It's really come to represent more of a hedge, or tracking stock, for the USD. What causes investors to buy gold again and again is ONLY confidence investors in the future will continue to do so. If gold should ever lose that it would become virtually worthless. But it's simplicity and directness in exposure has pretty much cemented it as a viable and lasting financial instrument.

Bitcoin has a much better shot of replacing gold than it does a major fiat currency, but why would everyone holding and trading gold allow that to happen? It's really a psychological phenomenon, and not one I can see being replicated by some electronic medium. Who knows what happens hundreds of years for now, but there's added security/confidence in the fact that any turmoil/disruption in the gold market can always be settled by who physically holds the gold.

 

[liftedplane]

Further, I'd argue that fiat currency is superior to the gold standard for multiple reasons. People that like to pretend otherwise typically ignore that the gold standard wasn't immune to recessions (some severe) and liquidity issues. And I'd contend many European countries have something to say about the loss of sovereignty and policy response with a "global" currency.

I never said that gold was immune to recessions, that's not the problem, the problem with a fiat currency is that the government, as ours has, can print money willy nilly and devalue itself in an instant. when it's backed by gold it's only worth what gold is worth and only worth as much gold as they have. I'd much rather have something that has value, be is perceived or otherwise, than a currency that the government can exploit at will

You might want to read a a little more. It's widely acknowledged that gold has value because the market says so. It has little productive use, as opposed to copper or even silver. It's really come to represent more of a hedge, or tracking stock, for the USD. What causes investors to buy gold again and again is ONLY confidence investors in the future will continue to do so. If gold should ever lose that it would become virtually worthless. But it's simplicity and directness in exposure has pretty much cemented it as a viable and lasting financial instrument.

Bitcoin has a much better shot of replacing gold than it does a major fiat currency, but why would everyone holding and trading gold allow that to happen? It's really a psychological phenomenon, and not one I can see being replicated by some electronic medium. Who knows what happens hundreds of years for now, but there's added security/confidence in the fact that any turmoil/disruption in the gold market can always be settled by who physically holds the gold.

I need to read more? seriously. gold has always held value, pretty much since forever. it doesn't have a lot of uses but it does have enough gold has swung up and down, been worth next to nothing and then been one of the most expensive commodities on the planet. either way it has ALWAYS revalued itself as a currency. clearly that's not just because "investors" have always held faith in it.

 

[kodiak799]

I need to read more? seriously. gold has always held value, pretty much since forever. it doesn't have a lot of uses but it does have enough gold has swung up and down, been worth next to nothing and then been one of the most expensive commodities on the planet. either way it has ALWAYS revalued itself as a currency. clearly that's not just because "investors" have always held faith in it.

No, 99% of the value of gold is literally driven by speculators. It doesn't "revalue" itself, it is subject to speculative swings (i.e. nothing to do with its productive use or inherent value). Gold is worth only what speculators agree it is worth. It is not nearly as subjected to the laws of supply and demand to determine value/price as other goods and commodities.

 

[94lt1]

Everything we hold dear in this world is subject to people assuming or speculating... This could very easily take on momentum and go somewhere...

But I'd be very carefully watching it...

 

[Hugh Jass]

Bought one at $240 and now I'm not so sure it was a good idea, but I'll sit on it and see if it rally's again.

 

[FoxKat]

What I find amusing is that this form of "currency" doesn't follow the required laws of "transfer for value", in which all other forms of currency work - at least in some respect. Money was created for and is used to gauge or reference the "sweat equity" or "energy" expended by the physical being to perform a service or produce a product, or the ingenuity they use to create a product that performs a valuable service. It's that sweat equity and/or the product that other people want, that gives the currency its value, and so they use that value to exchange it for currency. Then once they have that currency, they yet again use it to transfer for another form of value, in this case usually food, clothing, shelter, healthcare, and all manner of products and service that bring them to the level of lifestyle they aspire to. In other words, it's a medium in which barter can be used to make the exchanges more fair and equitable.

So the poor sucker that's working his or her "buns" off, flipping burgers onto a "bun" at minimum wage is performing a service (labor), creating a product (the Big Mac) that is marketable and desirable (just look at any McDonald's and see the people buying them), as well as being a "staple" food (though not a very healthy one, I might add...and yet they buy it), and his "sweat equity" along with the chain of service and product he's produced are "transferred" for the "valued" currency by his employer at the counter to the ones desiring that product. He internally decides whether his or her sweat equity is "worth" the pay rate being offered by his employer or not, and so decides whether or not to take the job. His pay "rate" is what gauges the "value" of his labor (sweat equity), by both him his employer and determines how much "work" he's done to deserve the "transfer" of the work for the "value" of currency he receives in pay.

The person on the other side of the counter decides whether the burger is worth the number of hours of sweat equity they've expended to get their own currency at whatever rate their employer and they agreed their sweat equity was worth, and whether or not to make the exchange. In other words, you need to "produce" something to get something..."I'll scratch your back if you scratch mine", the transfer for value. Farmers produce fruit and vegetables, manufacturers produce cars and computers and chainsaws and houses and shoes, and attorneys produce arguments, and accountants produce numerical wizardry, and teachers produce education, and stocks produce assets that are used to finance the production of other products and services which produces or increases profits...and the final value of that product and/or the increased profits are what increase the value of the stock...another form of currency, etc., ad nauseum, infinitum.

The "Gross Domestic Product" is supposed to be a measure of the total value of products and service that the country produces, and the float, whether it be M1, M2, or M3 are relative gauges of that GDP. Don't get me wrong, there's plenty of "float" going on right now, and HUGE leverage of the GDP which is that "faith" we've all been talking about, but even if "faith" were to disappear, there is still an intrinsic value to the production capacity of the country and its individuals, which would thereby translate into a "value" of whatever form of "currency" that populous decided to use to gauge it. Simple barter can work to an extent...my apple for your tomato, but it only goes so far as each individual places their OWN VALUE on the commodity they produce themselves...so MY APPLE may be worth 2 tomatoes in MY eyes, whereas your tomato may be worth 2 apples in YOUR eyes. Only currency can divide the apple and the tomato into slices or fractions sufficient to give them an arbitrary value tied to the "sweat equity" required to produce it, coupled of course with supply and demand.

Here's where this so-called "virtual currency" steps completely out of the equation. The computers that are "mining" the bitcoin are not producing any product, nor are they performing any service that anyone desires. The utility company isn't "funding" the bitcoin by converting the profits they gain in the extra "power" use into a return on the user's investment...the use of that power and the MONEY they spend to use it. The computer isn't performing any "valuable" service that I can tell - while it's crunching numbers away, "mining" these so-called bitcoins. The entire power-wasting and cycle wasting process produces nothing (i.e. no GDP). I could see if the clock cycles were being purchased (back to transfer for value), by companies to use for their computational needs, and that "service" provided the companies with the "valuable" clock cycles and mathematical computations they required for their businesses to run more efficiently or more profitable (back to transfer for value). This is unfortunately not the case. This so-called currency is completely cloudware (not to be confused with software running in the cloud).

I want a currency that's tied to something either completely tangible (i.e. Gold, Silver, Platinum, Copper, etc.) or somewhat tangible (the GDP, sweat equity, agricultural products, services, etc.), whether it's a "fair trade" (back to transfer for value), or a somewhat unfair trade, as long as I feel it's "fair enough". To me, the bitcoin and litecoin are nothing more than pure speculation as to how many fools will buy and when, versus how long it will be before the tide turns and those fools are left holding nothing while other's have cashed out before the turning tide.

By the way, I have a piece of virtual land, it's 600 virtual acres, and I'm interested in selling it if anyone wants to buy it...only catch is - I want DOLLARS for the virtual land. :blink:

 

[xeene]

As I said before, the only known use for it is to purchase illegal goods as this "currency" leaves no trace. Is why it's used in black market. I would not invest in it unless I planned on trafficking drugs/weapons/sex.

 

[kodiak799]

Doesn't this honestly sound like some evil invention of the shadow banking cartel :biggrin:

Actually another great criticism I saw is that govt won't allow this to prosper. Besides the obvious loss of tax revenue (which prevents it from getting very big without govt regulation), there's also an issue with anonymity (think AML laws).

Like I said, the problem with a true global currency is a loss of sovereignty - you have a global economy but it's not uniform and uniform responses aren't going to be the solution for every economy because you still have "micro" issues. One global currency would handcuff your policy options.

It's also kind of scary what implications such a one global currency would bring. Fixed money supplies truly have gone the way of the horse and buggy. So now that we've established Bitcoin couldn't function in that role as a fixed supply, then who determines how and when to grow it, and by how much, and - the really scary part - how is that distributed?

So that leaves you with just, theoretically, displacing gold. Never going to happen. Even if Bitcoin did get some real legs, there's absolutely nothing to prevent alternatives from springing into existence. Then we get a scenario where you fail to pick the 1 winner out of 1000 and you lose everything.

 

[Jeyman]

So that leaves you with just, theoretically, displacing gold. Never going to happen. Even if Bitcoin did get some real legs, there's absolutely nothing to prevent alternatives from springing into existence. Then we get a scenario where you fail to pick the 1 winner out of 1000 and you lose everything.

Let me start out by saying I do not own anything of bit/lit. Still what I do not understand is why this has been said more then once now? why does it have to be one winner? Every country trades in more then one currency, why would we be fixed to one here as well(if it did work out).

If both did live on bit coins would be worth more my guess would be, mainly do to how hard they are to mine. Lith on the other hand wont see as big of a price tag. I know people who for a time traded in Amex travelers checks. Whatever people give a value to can be used as a currency.

In closing I will not be buying any of them because I still think it will fail one day lol.

 

[B-Unit]

...
Here's where this so-called "virtual currency" steps completely out of the equation. The computers that are "mining" the bitcoin are not producing any product, nor are they performing any service that anyone desires. The utility company isn't "funding" the bitcoin by converting the profits they gain in the extra "power" use into a return on the user's investment...the use of that power and the MONEY they spend to use it. The computer isn't performing any "valuable" service that I can tell - while it's crunching numbers away, "mining" these so-called bitcoins. The entire power-wasting and cycle wasting process produces nothing (i.e. no GDP). I could see if the clock cycles were being purchased (back to transfer for value), by companies to use for their computational needs, and that "service" provided the companies with the "valuable" clock cycles and mathematical computations they required for their businesses to run more efficiently or more profitable (back to transfer for value). This is unfortunately not the case. This so-called currency is completely cloudware (not to be confused with software running in the cloud).

I want a currency that's tied to something either completely tangible (i.e. Gold, Silver, Platinum, Copper, etc.) or somewhat tangible (the GDP, sweat equity, agricultural products, services, etc.), whether it's a "fair trade" (back to transfer for value), or a somewhat unfair trade, as long as I feel it's "fair enough". To me, the bitcoin and litecoin are nothing more than pure speculation as to how many fools will buy and when, versus how long it will be before the tide turns and those fools are left holding nothing while other's have cashed out before the turning tide.

By the way, I have a piece of virtual land, it's 600 virtual acres, and I'm interested in selling it if anyone wants to buy it...only catch is - I want DOLLARS for the virtual land. :blink:

Not accurate. The 'value' of bitcoin (and by extension, the 'mining') is the cryptography of each exchange and the necessary processing power to encrypt each transaction into the blockchain. The 'value' in the case of bitcoin is security, its essentially hackproof at current difficulty. Granted, at present, mining is being subsidized by the 25 btc reward for each block, but if the digital currency gains enough traction, the processing fees for transactions will provide the payoff.

 

[kodiak799]

Still what I do not understand is why this has been said more then once now? why does it have to be one winner?

Because there's no tangible or physical value. If there are multiple winners, each new emerging asset is going to cause a crash of the other as money flows from one digitial currency to the next. And that destroys the credibility and stability that are necessary for the asset to gain popularity. Without price stability, buyers and sellers do not hold the currency to transact. It's the chicken/egg problem again, and you don't have any backing or regulation or any asset linked to stabilize prices.

And like I said, gold and other precious metals pretty much do the job intended - they HAVE the long history of credibility and stability (relatively speaking) so there's no reason that Bitcoin could become a viable alterntive - it just crashed over 50% yesterday.

 

[Hugh Jass]

Actually a market correction is seen to an investor as a positive thing in this respect, the market has been suspended on MTGOX to allow for upgrades and cooling but will be up in a few hours. If I had the money I'd double down right now because as confidence gains in it's sustainability it will likely rebound again, perhaps less impulsively so thus more confidence and so on until a balance is reached. The benefits of the idea are interesting, they allow citizens of countries to circumvent laws that prevent them from buying illegal books for instance.

The bad can be pointed out in anything because bad is fundamental, but when good is created, even temporarily, it's for the better IMO. In the mean time I'll sit back and watch the show.

 

[xeene]

The benefits of the idea are interesting, they allow citizens of countries to circumvent laws that prevent them from buying illegal books for instance.

or launder money from one country into another without paying taxes or fees.

 

[Jeyman]

Because there's no tangible or physical value. If there are multiple winners, each new emerging asset is going to cause a crash of the other as money flows from one digitial currency to the next. And that destroys the credibility and stability that are necessary for the asset to gain popularity. Without price stability, buyers and sellers do not hold the currency to transact. It's the chicken/egg problem again, and you don't have any backing or regulation or any asset linked to stabilize prices.

And like I said, gold and other precious metals pretty much do the job intended - they HAVE the long history of credibility and stability (relatively speaking) so there's no reason that Bitcoin could become a viable alterntive - it just crashed over 50% yesterday.

you have good faith just like every other currency in the world.