Home Forums Hunting & Shooting Hunter's Campfire Why I will invest in crypto currencies

Bitcoins can be taken anywhere in the world and exchanged for many currencies.

I was taking about bitcoin transaction fee's.

Bitcoin is an open source, peer-to-peer payment network and digital currency introduced in 2009 by pseudonymous developer "Satoshi Nakamoto". Bitcoin has been called a cryptocurrency because it uses public-key cryptography for security. Users send payments by broadcasting digitally signed messages that transfer ownership of bitcoins, the unit of currency. A decentralized network of specialized computers verifies and timestamps all transactions using a proof-of-work system. The operators of these computers, known as "miners", are rewarded with transaction fees and newly minted bitcoins.

Oh, OK, yes. There are transaction fees for converting Bitcoins to national currencies. If, however, it took off as a currency in itself, this would be a non-issue since people would accept, accumulate, and spend their Bitcoins, instead of converting them into national currency.

How would that negate the "miner" from charging transaction fee's.

With bitcoins, the "mining" practice is completely decentralized, i.e., anyone can do it. I don't see how they could charge a transaction fee under those circumstances, unless you mean converting them to US Currency.

Read the last sentence of my about post.

The operators of these computers, known as "miners", are rewarded with transaction fees and newly minted bitcoins.

A decentralized network of specialized computers verifies and timestamps all transactions using a proof-of-work system.

My understanding is that such fees are miniscule. It's the conversion to US Dollars and/or vice versa that's expensive. The latter becomes irrelevant, however, if Bitcoins become an actual currency. But I don't think it will, since anyone is free to create competing such currencies, in which case the rarity aspect goes out the window.

And the reason for that is that it takes effort to produce and is in fundamentally limited supply. If some modern-day alchemist found a cheap way to make gold out of lead, or wood, or air, or whatever, then its value would be much less--possibly nonexistent--for pretty much all the non-manufacturing uses it's put to today.

Bitcoin has all the advantages of gold in this area, plus the advantage of being information rather than matter, minus the advantage of being universally understood and accepted.

It is NOOOT a fiat currency.


You're right: the universal understanding and acceptance people across the world have for gold is certainly a feature that sets it above Bitcoin, at least for now.

Currently, Bitcoin is most attractive to libertarians, because most governments have not yet imposed a level of tyranny on other forms of commerce that makes Bitcoin clearly superior to the average person.

Libertarians are mostly self-made folks, in a political sense: in general you don't get to be a libertarian by accepting everything you're taught by your parents and government schools and universities and never questioning it. They're used to doing things for themselves and figuring stuff out, so the fact that Bitcoin is still difficult to use isn't that much of an issue for them.

And while the current inconvenience of Bitcoin would be an issue for non-libertarians who are comfortable with pre-masticated political philosophy, it doesn't come up because they have no reason yet to seriously consider Bitcoin in the first place. They're indoctrinated to be happy with government money and to be suspicious of anything not marked "legal tender."

The current situation won't last, though. One way or another, the dollar is on the way out. Given the average intelligence of the standard politician, the way to bet is that the US government is going to (futilely) go to the mat to preserve it, which means that we will see some really horrifying federal atrocities committed to keep people from using anything but government money.

The economic forces around something like that are going to make the government money economically unattractive, and more and more people are going to look at Bitcoin. This won't be because they've become libertarians--probably they'll still be really passionate about wasting immense amounts of their time arguing and voting red or blue--but because they'll see people around them using Bitcoin to preserve more of their money's value, conduct transactions that are unavailable or illegal with government money, and keep the ongoing federal atrocities from their doors.

Once that market opens up, gray- and black-market entrepreneurs will climb all over themselves coming up with ways to make Bitcoin simple enough that the backwoodsiest redneck can use it without even thinking about it.

There's nothing about Bitcoin that says it has to be intrinsically hard to use; it's just that with only libertarians interested in it so far, there isn't any significant market for popularizing it, so it hasn't been popularized.

Suppose you were a government and you decided that I shouldn't have my Bitcoins.

How would you take them away from me?

Of course, it's easy to criminalize use of Bitcoin, but again, if you were a government, how would you prevent it? Guns and thugs and dogs and police practices that would make the Grand Inquisitor's eyes light up with avarice, combined with jaw-dropping amounts of tax money, have not been able to prevent criminalized practices like the illegal drug trade and illegal immigration from occurring, and those involve actual movement of identifiable physical objects from one place to another.

How are you going to prevent Bitcoin transactions that consist merely of communication of information?

Hint: you're not.

That's not a factor of the difficulty of producing it. That's strictly a rarity factor. It's about supply and demand. Demand being constant, any increase in supply decreases the per-unit price of said thing without any regard for the amount of labor that went into its production.

Goods don't have a memory, so cannot reflect, by their price on the market, the labor that went into producing them. If it takes me a week to make a custom knife, and it takes a master knife maker a day to make an exact copy of equal quality (absent identifying marks as to the maker), without regard for the increased labor I put into making mine, they will demand the same price on the open market, and that based on supply and demand, and nothing else.

Barak, I have some chores to perform. Will get back to the rest of your post later.

There's no central bank in Bitcoin. Anybody who wants to put in the effort can mine Bitcoins.

The transaction fees you've heard of may have to do with what will happen to Bitcoin as new Bitcoins become intractably difficult to mine.

Because there's no central authority in Bitcoin, there's no single entity that's responsible for making sure everything is kept aboveboard. But there are all sorts of potential ways for people to cheat each other in any digital cash scheme, so there's work to be done making sure they're not doing so.

So if there's no central issuing authority, then who does the all the verification work?

The answer: anybody who wants to. You, if you like; the software's easy to download and install.

But that gives rise to another question: why would you want to? You have better things to do with your time, your CPU cycles, and your Internet bandwidth.

The answer: because there's something in it for you. What? Bitcoins. Remember how a single graphics card can be expected to find 25 Bitcoins every 98 years at 120 million tries per second? Well, the task that's being accomplished over those 98 years is validating the block chain--the verification work mentioned earlier. You spend enough of your effort in the service of the Bitcoin community, and you get rewarded with brand-new Bitcoins.

But that's how it works now. What if A) it's too expensive to generate Bitcoins for the effort of validating the block chain to be worth it to you, or B) we've reached the 21-million Bitcoin limit and there are no more Bitcoins to mine? (Actually, these are just two different ways of looking at the same situation.)

Thaaaat's where the transaction fees come in. Once the lure of brand-new Bitcoins can no longer attract block-chain validators, Bitcoin users will have to reserve a small amount of each transaction--a transaction fee--that will go to the person who successfully validates that part of the block chain. They'll have to do this or else no one will be interested in doing the validation work for them, and no one will want to accept a Bitcoin transaction that hasn't been validated.

How big will the transaction fee be? Dunno--it'll be market-determined. Big enough to attract validators, but not big enough to significantly impact the transaction.

Currently, though, the lure of new Bitcoins is still strong enough that almost nobody reserves transaction fees for validators; but I imagine that those who do get their transactions validated more quickly.

Hint, you're wrong. If you think this virtual system cannot be penetrated, you're nuts. It's not the "communication" they would investigate, rather the assest/tangible property.

You've got all these people who want to pay you in Bitcoin, and you can take their money and fix it so that nobody will ever know that it was them who paid or you whom they paid, and you're going to leave all that money on the table not because it's wrong or because it's stealing or because it's hurting somebody, but merely because it's illegal?

Maybe you won't take that deal, but I think it's a little ambitious to predict that "(practically) no one" will, especially if the alternative is using otherwise worthless government scrip that can't be used to buy what you do need and only severely-rationed quantities of what you don't need.

Miners don't get to charge transaction fees.

Transactors get to choose how much of a transaction fee they're willing to pay for a particular transaction. Miners then choose whether or not they're willing to validate that transaction for the fee.

These days, the universe is picking up the transaction-fee tab with brand-new Bitcoins; once the brand-new Bitcoins run out, individuals will need to pay their own transaction fees. Even today, though, you can choose to pay a transaction fee to make your transactions juicier to miners, if you like.

...in which case the competing currency would lose its value through inflation, in which case people using it would have an incentive to switch back to Bitcoin, which doesn't inflate--or at least won't.

Using a "worthless" script wouldn't wind you up in jail though. Frankly, I don't see how using bitcoin's isn't already illegal as most all transactions (purchases) are taxable.

But the rarity factor is absolutely dependent upon the difficulty of production.

Look, I'm not sure where we're going with this, and I'm not sure it's worthwhile to find out; it's gotten a little bizarre so far.

But knives and paintings and gold aside for a moment, my original unornamented point is this: Bitcoin is not a fiat currency, and can never be one.

If we agree on that, we're good, as far as I'm concerned.

First, there doesn't have to be a tangible asset. Lots of folks pay money for information; with Bitcoin it'd be information for information, and given strong-encryption techniques, you'd be hard put to prove or even demonstrate what happened even if you knew from other sources exactly what had gone down.

Second, if there is a tangible asset, it doesn't have to be illegal. Suppose Alice digs Bob a new swimming pool, and tells you that she's donating her services and materials out of the goodness of her heart. What are you going to arrest her for?

Third, if there is a tangible asset and it is illegal, and you and your buddies are so all-fired good at sniffing it out, then how come you haven't won the War On Drugs yet?

As for penetration, if even the NSA with all its supercomputers at Fort Meade could reliably penetrate modern strong encryption, believe me, we'd all know about it. If they can't do it, how are you going to?

This isn't the sort of problem that additional muscle can solve. Try it, and you'll just make the problem worse.

(Note: don't follow that link if you have any imagination. It'll just raise your blood pressure.)

I know nothing about Bitcoins but it does seem to me that Bitcoins are a step in the right directions for real anarchy. Young people today who are schooled in the computer age will certainly see the advantages of Bitcoins or whatever and use them. It's only us old fuddy duddies who have no idea of what you guys are talking about and will stick with currency we have but the young people are going to dump it as soon as they can. The day of nations and states is fast approaching a end. The computer, Internet, and Bitcoins will see to that.

Long live anarchy!