author here: there's a cost with storing gold in the ground and securing it, and there's a cost with printing counterfeit-resistant paper and finding and jailing counterfeiters (and a cost with not doing so - unbounded inflation)
an interesting question then is: are the above costs greater than the cost of operating bitcoin? it might seem so at first, but don't be so sure and run the numbers on the back of an envelope.
also walk around downtown in SF and NYC and look at the amount of skyscrapers that are nothing but banks, scratch your head, and ask yourself what value they're actually adding.
>also walk around downtown in SF and NYC and look at the amount of skyscrapers that are nothing but banks, scratch your head, and ask yourself what value they're actually adding.
True. But I suppose one would need to define "what is a bank". From a pure "money warehouse" definition they don't deserve to be that big, however from a lending / investment perspective there is more value there.
I think in the end, a decentralized lending scheme (Mike Hearn has spoken and written on this subject) integrated to bitcoin as the possibility to radically change the social order.
It will very hard to fund wars without a printing press.
bitcoin's problem is that the financial sector is massively regulated - you're going to jail if you attempt to compete.
creating a website where you can store $10, send it to me, and then let me withdraw it, is a 5 year felony in california. that's even when the site is complying with all anti-money-laundering and know-your-customer regulation that could be argued for because of terrorism. it's purely a licensing issue.
bitcoin's influence probably won't significantly grow until people find legal workarounds/ways to comply (of which there are plenty, but likely implementing them takes someone committed at least a year), or something happens that makes enforcement of the law unlikely.
i personally know of a sizable number of bitcoin startups with working/finished software and a great marketing strategy, that gave up in the face of financial regulation and threatened jail time.
A legitimate question: is it possible for Bitcoin to still gain traction even if no one profits? I mean, is there a scenario, sort of like social media and the Arab Spring, where people will run the risk and break the law to gain access? Perhaps in a hyperinflation environment like Zimbabwe a few years back? Or for that matter like Iran right now?
could they not just run their services off Tor and thumb their nose at the financial authorities like certain other sites and services do, seemingly with impunity?
only if you're ok with never buying any physical goods with bitcoin. the weak point is the exchange between bitcoins and classical currencies or physical goods.
Running through TOR doesn't actually affect this. After the first node, the only data on who is giving money to who is the bitcoin public keys. The only way to attach those keys to a person is to have access to a node that is 1 degree removed, in which case you have the IP adress from TCP, or look through the. block chain to see who else the bitcoin ID you are looking into traded with. The first aproach is not common, and TOR will not help on the second.
When you are a business fearing regulation, this is all irrelevent, because you need to make public what customers get in return for sending you bitcoins, as well as your public key, so customers know who to pay.
It would be interesting to see a truly anonamaus bitcoin system. You would need invalidate a coin for which you do know a secret, and create a new coin for which someone else knows a secret, in such a way that when the other person proves they know the secret no one can figure out that the coin they know about is the one you gave them. Giving all of the things already possible, this seems like it is easy in theory. Doing it in a computationally efficient way is a different story.
What financial regulations don't apply to Bitcoin?
Just because you're using Dunning-Krugerrands instead of US Dollars doesn't mean what you're doing with them isn't transacting, banking, investing and so on.
It's the act that's regulated, not the currency used for it. (Though that could be regulated too.)
This to me is one of the most interesting aspects of bitcoin.
Some have speculated that if bitcoin is widely adopted in the global economy, then a certain percentage of all energy produced on the planet will have to be spent doing proof of work to secure the blockchain.
It's pretty easy for me to see a swing back to centralised currencies in that situation, it's only worth all the energy needed if you really don't trust the central authority.
There are a number of suggested solutions to this problem, one of which is proof-of-stake and there is already a client based on bitcoin called ppcoin which uses it. Currently ppcoin is a hybrid of proof-of-work and proof-of-stake but potentially could be a low energy version of bitcoin.
I have often thought that if bitcoin is really successful it will be worthless, because it will have forced the central authorities to be more fiscally responsible, removing the reason for bitcoins existence.
But I can't also help thinking that maybe we just need several competing global centrallly printed currencies, and you can pay or be paid in whichever you choose. As long as a cartel doesn't form competition should keep the central authorities honest.
