Archive for the 'Money' Category

FinCEN sounds death knell for US based Bitcoin businesses

Tuesday, March 19th, 2013

It seems that FinCEN has finally decided to opine on Bitcoin, without naming it specifically. This US pronouncement spells death to all “compliant” US Bitcoin companies that choose to remain based in the USA.

There is one thing you absolutely must bear in mind; nothing that FinCEN unilaterally declares has any force outside of the USA. If you do not base your business there, their bespoke rulings, “guidance”, that is not even law in the US, has no effect on you or your business. This is a problem for Americans only, and no one else.

Here is the relevant passage:

De-Centralized Virtual Currencies
A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.

A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.

The first thing you will notice about this is that if you are a Bitcoin miner, FinCEN says that what you are doing does not fall under their jurisdiction. This means you can be a Bitcoin miner, with the biggest mining rig in the world, and then take your mined BTC and buy whatever you want without the threat of any interference from them. Even though you must transmit your mined Bitcoin to make a purchase, you are not a “money transmitter”. Its crazy talk.

If however you pay someone to mine for you, and thenreceivethe Bitcoin, all of a sudden, the situation is somehow different, and you arecommittingan act that they are claiming they have jurisdiction over. Its utter nonsense of course; Bitcoin is no different to Monopoly Money, which presumably FinCEN does not think is worthy of their attention. And if not, why not? How is Milton Bradley’s Monoply Money different from Bitcoin, and why is it not regulated? These are questions that no one asks, like, “why is the Emperor naked?” If the purpose of FinCEN is to stop people “misusing money” whatever that means, surely if the Bitcoin is mined or paid for is completely irrelevant. The thinking behind this is pure illogic on stilts.

You will note also that FinCEN does not name Bitcoin specifically, but instead generates an arbitrary ruling on an entire class of software technology. This means that you will not, if you are an American, be able to claim that Litecoin is different to Bitcoin, “because FinCENdoesn’tmention Litecoin”.

Thisunconstitutionaland arbitrary guidance has grave implications not only for American Bitcoin companies and users, but for the First Amendment of the Constitution of the United States.

Bitcoin, if it is read out or printed onto paper, is protected speech under the Constitution. Americans had this debate many years ago, where peopletattooedRSA code on their bodies and read it out inpublicinexerciseof their first amendment rights. PGP was exported out of America, legally, when its source was printed on paper (First Amendment protected act) and then read back in by OCR in the free world.

All of this precedent applies to Bitcoin, but now, instead of a single book of source code, you will have millions of people printing out Bitcoin and transferring it everywhere, storing it, exporting it, and there is nothing that anyone can do about this.

As more and more moneydisappearsintoBitcoin wearegoing to see an escalation in the reach, scope, fines and penalties meted out to Bitcoin users and businesses who in the future will no longer bedistinguishedfrom each other, once (forexample) services likeLocal Bitcoins comes into the radar of FinCEN.

Bitcoin is going to be the new Internet Poker,whichfunnily enough, hasstartedto accept Bitcoin as an alternative to money because Bitcoin is not money.

Clearly, a SupremeCourt challenge is in the future over this, and I suspect a coalition of Poker companies, real Americans and sensible people are going to join forces to stop the insanity.

What we can also expect is an attack from the Crony Capitalists who want Bitcoin regulationarbitrarylicenses and fees levied by the state and policed by FinCEN to stifle competition and keep out agile upstarts. It will not work.

Like Suprnova, MiniNova, the Pirate Bay, Kickass Torrents andfinallyMEGA, it will be impossible for America based, FinCEN crippled Crony Capitalists to stop a huge,popular easy to use Bitcoin business from sucking up all the US Bitcoin business andeventuallybankrupting them.

This is what these Crony Capitalists have asked for; a noose aroundtheirnecks to endtheirown lives. If you want to see what this looks like in real life, as it has actually happened, you need look no further than the case of Think Computer Corporation and the arbitrary crony capitalist writtenCalifornia Money Transmission Actthat caused that company to shut down. Every Bitcoin startup basing itself in California will be subject to this; and most extraordinarily, the license fee applied tocorporationsoperating there is not set. The amount payable for a license is arbitrary, and calculated and levied on a case by case basis. I suggest you research this case. It is astonishing. How a Bitcoin company can know this and decide to move to California is frankly, baffling.

Finally it must be repeated; this document is guidance only. It is not new law, and as a matter of fact, you are free to ignore their guidance and do what ever you want, if you are an American of that vanishing breed. Guidance is not Law, it is guidance;a suggestion of practices, and nothing more.

We are still a long way from a true legal attack on Bitcoin, but you can be sure that it is coming, and you can be just as sure that its effect will be precisely ZERO, just as it has been with Bittorrent recently and Warez for decades. The best they can do is make anexampleof the highvisibility,high earning Bitcoin businesses, but for the billions and billions of transactions taking place daily between iPhones, iPads, Droids and desktops FinCEN will be absolutely powerless and impotent.

Warehouse banking,Hawala, and all the other private, person to person money transacting services are going to become more powerful and efficient by many orders of magnitude, thanks to Bitcoin and its frictionless, massless ability to move money anywhere in the world in the blink of an eye.

Finally, this is a great opportunity for a country to cause Bitcoin startups to congregate in their territory. A 150 year moratorium on any law that touches anything to do with Bitcoin / Blockchain technology would create a new Hong Kong island of super prosperity, as it becomes the world’s hub for all Bitcoin business, and the trillions of dollars in Bitcoin flowing through it, leaving thepitifuldemocracies in the dust.

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Bitcoin and the generational divide

Friday, September 21st, 2012

This video is a visual representation of the difference between the Austrian School Bitcoin detractors and the people who understand what Bitcoin is, what it can do, and how it is the biggest thing since email.

On the right, you have James Turk the head of GoldMoney, who is old, and on the left you have Felix Moreno de la Cova, who is young. The old man doesn’t understand computers, cryptography or the internet. The young man does. They have a very illuminating and friendly conversation about Bitcoin and money, without confrontation, rancour or irrational nonsense like, “I just don’t like the product”.

This is how discussions should take place, and I have alot more sympathy for Mr. Turk now, because he is genuinely reaching out to understand something that is clearly incomprehensible to him, and he is not intimidated or defensive, is eager to learn and is patient and thoughtful.

We need people like James Turk, because he has a vast amount of experience to offer, and once he understands Bitcoin, I would say that his presence on a board of directors would be invaluable.

Compare and contrast this gentlemanly interview with the appalling article that just appeared at The Daily Bell (which I will not link to; one click from me is quite enough) where every sort of fallacy and nonsense is trotted out in what is a blatant attack piece trolling for clicks.

As I have said before at length, GoldMoney is a fundamentally flawed idea:

http://irdial.com/blogdial/?p=3103

and it is now suffering from its exposure to the State, and is becoming harder and harder to use thanks to suffocating regulations. The exact opposite is true of Bitcoin, which is becoming easier and easier to use, with better software and more outlets accepting it every day, and a response from the State which amounts to a shrug of the shoulders.

When the economic collapse starts to bite, I am betting that GoldMoney will be forced to shut down entirely, because it serves its customers against the interests of the State. The gold confiscation of 1933 is a precedent that can happen again in a heartbeat; this is not beyond the realms of possibility. People who hold real money with third parties are going to face the institutionalized theft of their savings. Bitcoin on the other hand, will never be shut down by the State, it cannot be confiscated en masse or stopped, just as Bittorrent will never be shut down.

Whatever your opinion on what Bitcoin is or is not, it is here to stay, and it is going to change everything. Wether or not you take advantage of it is up to you, but the future is not going to wait for you to wake up and catch up.

McDonalds Money: the solution to the banking and monetary crisis

Thursday, July 12th, 2012

It seems that another crack in the dam has appeared:

http://blogs.telegraph.co.uk/finance/thoore-scandalous-than-libor/

How long can it be before it cracks all the way and the whole creaking edifice bursts and the pressure is relieved?

Bad stuff is what happens when the state is involved in the production of money and the regulation of banking. Banking is no different to flipping and selling hamburgers; money is a commodity just like any other. The state should regulate neither banking nor burgers. If McDonalds was in the business of manufacturing money, there would be standardized, reliable, consistent money, redeemable everywhere on every high street, at a stable price.

As revolting an idea as this sounds at first, being people who know a little about good food:

it makes perfect sense. The McDonalds consistency ethic superimposed on the manufacture of money, free of regulation, would solve all the problems of unsound money.

Selgin outlines the foundation of this:

http://www.amazon.com/Good-Money-Birmingham-Beginnings-1775-1821/dp/0472116312

if you superimpose the Birmingham button maker money from the 1700s with McDonalds and modern computers, how this would work becomes instantly clear.

Dystopian Pingit from Barclays cannot win

Wednesday, May 23rd, 2012

The Financial Services Club Blog has an interesting piece on Barclays Pingit:

http://thefinanser.co.uk/fsclub/2012/05/case-study-barclays-pingit-for-consumers-and-corporates.html

Pingit is the new service from Barclays that runs on iPhones and Android. In order to use it, you need to be a Barclays customer.

Barclays Pingit is growing fast. They have over seven hundred thousand users. They are using the PayPal “recipient becomes a user” as a way to spread the service. This is a fascinating trend, and they probably have so many initial users because they were able to target existing account holders directly in the branch or through the post or other points of contact to offer them their new free app.

Pingit is very interesting for anyone interested in Bitcoin, banking and liberty, for several reasons, and it is a bad product for anyone interested in the future of money transfers over devices that is beneficial to the users. Look at the onerous and invasive sign up procedure you have to go through to use Pingit, and you get a taste of what that service is all about; arbitrary controls and restriction:

As a non-Barclays customer you have to go through a very complex account verification process that involves not only a PayPal like penny drop into your current account with a reference number that you need to enter; but this is followed by a letter to your house via snail mail with another verification number.

More on this in detail below. None of this ‘account verification’ has anything to do with the utility of the product, how it works, its security or anything else. If Barclays did not have to do this, Pingit would be on the phones of seventy million people, not seven hundred thousand. And this is a very good thing, because once a service becomes entrenched it will be hard to displace it.

Or maybe not.

Everything has changed in the internet mediated world. Pingint might have seven hundred thousand users today, but there is nothing to stop another app developer creating a product that sits four millimetres adjacent to it on your iPhone’s home screen that does a better job without any nasty restrictions or requirements.

Pingit users could then move their money into that app and then never open Pingit again. Think of it as similar to MySpace users migrating to Facebook, and of course, all the people who are un-banked and who do not live in the UK are also on the same internet with the same mobile phones that Pingit users are on. The market for these users is bigger than the population of the entire UK. On this basis alone it is clear that Pingit will eventually reach an upper limit that is a subset of the UK population. The field is wide open to disrupt and capture the money on mobiles market, and the winner will not be Barclays Bank.

Imagine the following scenarios. Barclays doesn’t like what you are doing on your mobile phone. They can unilaterally or by order of the State, freeze your account and disable your Pingit access. They have total surveillance of every transaction you make, on both ends, to whom, when and from whom. Their 4,123 word long terms and conditions include the following arbitrary restrictions:

  • You need to be 16 or older to use Pingit.
  • You can send 1 or more but not less than 1.
  • You must have a UK current account.
  • You must give them your UK mobile number.
  • Pingit can reverse payments at any time.
  • There is a maximum daily limit of 300 for payments.
  • The payment can be made only once the Payee has registered for the service.
  • There is a maximum daily limit of 5,000 for all payments received through Pingit. Barclays will refuse to process a payment if it exceeds the arbitrary limit.
  • Barclays places arbitrary restrictions and limits on how you use your Pingit account.
  • Users may not be able to install or use the app on a jail-broken or rooted device.
  • You may not attempt to derive income from the use or provision of the service, whether for direct commercial or monetary gain or otherwise.
  • Pingit can refuse to process a payment if they believe that you have not met any of the conditions.
  • You must authorise Pingit to display the full name of the account and your mobile number to the payer when they input your mobile number into the app.
  • Depending on the information you provide when registering, Barclays may require you to complete registration at a Barclays branch or to provide us with further information before you can use Pingit.

Arbitrary, absurd, completely ridiculous and even astonishing.

These terms and conditions, and this is only a cherry picked selection of them, are unacceptable to all decent people with an intact moral centre, and none of them are needed for Pingit to work if it had been designed properly; they are made to surveil the user and to be compliant. People in other countries or of no country at all will not be bound by these arbitrary, anti human, anti market restrictions, and when an entrepreneur launches a rival e-money app, they will eviscerate Pingit and all other competitors that are spawned by banks.

This might be the reason why Blockchain.info’s Bitcoin app was removed from the iTunes store after having been approved. It is exactly the sort of app that is an existential threat to Pingit and products like it. Both Pingit and Blockchain.info’s apps are free, so there is no friction there. One surveils you and you cannot use it ‘out of the box’ upon download. The other works as soon as you run it and does not surveil you. Bitcoin allows you to send and receive very small fractions of Bitcoin. The arbitrary one pound limit, apart from being denominated in fiat Sterling, means that the world of micro-payments is forever shut off from Pingit. It is a major flaw. Blockchain.info’s app wins over Pingit.

Blockchain.info’s app and service has no KYC restrictions, no fees and no ability to arbitrarily shutdown your account. It is a friction free service. It has no default surveillance, and you do not need to identify yourself in order to use it. There are no limits to the amount of money you store on it. It is international, ‘instant on’ and interoperable with a plethora of different services. By any measure Bitcoin running in Blockchain.info’s app is infinitely superior to Pingit.

On top of all this, Pingit only allows you to send Sterling back and forth. This means that the money you use in Pingit is deflating, losing purchasing power on a monthly basis, by design. Quite apart from the fact that you cannot use this ‘money’ anywhere else but in the UK, the inflation tax is another reason why people will opt for Bitcoin rather than Pingit when the two apps are installed side by side on their phones.

This has implications for Apple also. If they continue to refuse to allow Blockchain.info’s app to be given away for free on iTunes, people will turn to Android phones where they will be able to run the apps that they need without any fear of arbitrary shut down. Imagine that you have 50BTC on your iPhone and you run iTunes to update your apps. Apple, because they have disallowed Blockchain.info’s app, prevents you from getting updated versions, and if you need to download it again, you cant. This is an unacceptable risk, quite apart from being insulting and anti consumer. Its clear that Android phones are the future when it comes to e-money provided by third parties, because Apple cannot be trusted to allow you to use your device for what you need it for. Add to the mix the rumours that Apple is working on iWallet, and you get a sense of what Apple’s motivations might be in removing Blockchain.info’s app. They don’t want any competition… CAPISH?

Barclay’s Pingit service is interesting because it means that money on mobiles is going to happen in a big way. Now it is a matter of who has the best product that will fit into the space, avoiding the bear traps like iTunes, the attacks from the banks (shutting down the accounts of Bitcoin businesses), the technical difficulties and the State.

On top of this, and perhaps the biggest barrier of all for Bitcoin, is the PR problem; getting the public to understand what Bitcoin is, how it works and why it is superior to services like Pingit. In order to make this happen, the merchants are the first line of attack. Bitcoin, if it is accepted in many places will trigger installation of the clients on phones, and a spread of the ecosystem. Blockchain.info’s app is potentially, a key piece of this puzzle.

It should now be clear to anyone with an interest in this that regulation and registration of Bitcoin services will not help adoption. If this is a race between services, clearly Bitcoin has the advantage and the better potential to go viral far more than Pingit or MintChip or any of these broken by design bank offerings.

In order for the chain reaction to happen, nothing must stop the flow of money in the system. Registration and regulation are carbon rods in the pile. What is needed is a runaway chain reaction so that the Bitcoin is spread everywhere, into every device in every pocket. Tying down Bitcoin into jurisdictional boxes, hampering it with onerous regulations, KYC and other arbitrary nonsense will allow Pingit and other services to mature, spread and solidify. Once again, this does not mean that their dominance will be permanent, it will simply mean that for a time, the market is broken and people are hurt. It would be far better for humanity if Bitcoin wins without going through a stage of broken e-money, and there is no reason why this should not happen.

Pingit cannot win. By popularising e-money on mobile phones, they are educating the users about money on mobiles. Once this information is spread everywhere, a new challenger can arrive and wipe them out in a matter of months, and there will be nothing they can do to stop it.

Bitcoin and the State: Asking permission to be free

Thursday, May 17th, 2012

Should people who want to see the widespread and rapid adoption of Bitcoin seek tight regulation and integration with the State, or should they rely only on their skills as developers, marketers and entrepreneurs to create the rock solid, reliable and trustworthy products that people will use in their millions, like the other well known internet companies that have changed the way we do things?

*****

A Bitcoin innovator has just applied for and received a registry entry from the US Federal Government’s Financial Crimes Enforcement Network:

http://www.fincen.gov/financial_institutions/msb/msbstateselector.html

on that linked page you can read the following statement clarifying FinCEN’s position on each entry they list:

“The inclusion of a business on the MSB Registration Web site is not a recommendation, certification of legitimacy, or endorsement of the business by any government agency.”

This disclaimer appears on the certificate as the first paragraph, in large letters. The certificate also says that, FinCEN does not verify information submitted by the MSB. Information provided on this site reflects only what was provided directly to FinCEN. Read the rest of this entry »

TransferWise: limited, lacklustre and locked in to the State

Thursday, May 17th, 2012

TransferWise may or not be the next big thing, but as far as I can see their appeal is limited both in terms of who needs it, can use it, and the time it will take for them to be completely outflanked by superior services.

The VentureBeat press release:

http://venturebeat.com/2012/04/18/transferwise-undercuts-the-banks-with-crowdsourced-currency-exchange/

says “Banking is broken”; this is true, but what is needed to replace it is not ‘the AOL of banking transfers’; what is required is the open Internet of banking transfers, and that means Bitcoin.

Back before the internet permeated every home, AOL was the main way millions got online and used email. It was the consumer method of getting online. Anyone who knew anything about how the net really worked understood that AOL was garbage, and not the true internet. Similarly, anyone who had a friend that needed to get their contacts list out of AOL Messenger knew what a jail and walled garden it was. TransferWise is the AOL of money transfers. and I predict that it will end up just like AOL, even if it becomes massively popular for a short time.

TransferWise suffers from several problems. First, it is under complete control of the State. Look at its boast of full integration with the UK regulatory bodies. This means that all transactions are subject to complete surveillance and control. Read the rest of this entry »

The heat is slowly building up against the Canadian Royal Mint’s Mint Chip

Thursday, May 17th, 2012

Mint Chip, the Canadian Royal Mint’s attempt to enter the digital money market, is doomed to fail. It is being thoroughly attacked from all sides, the technical, the philosophical and economic.

Via a post on Slashdot, we are reminded of Bruce Schneier’s warning signs of Snake Oil, which the Mint Chip suffers from.

What is ‘Snake Oil’ I hear you ask? In cryptography, snake oil is a term used to describe commercial cryptographic methods and products which are considered bogus or fraudulent. The name derives from snake oil, one type of patent medicine widely available in 19th century United States.

There are several parts of Mint Chip that cause even those with a casual interest in cryptography to smell snake oil. Read the rest of this entry »

LOLcaps

Wednesday, February 8th, 2012

You may have seen there is ‘outrage’ from leftists and liberals in the UK that state handouts – benefits – are proposed to be capped at 24,000 per year. George Monbiot, for example, bleats until his green-eyes pop out of his misguided head about the rich, hard-working business people who should be punished for earning their money. Just when you think he has proposed the most stupid idea possible, he comes up with, instead of a benefits cap, a wages cap!

But back to benefits.

24,000 netequivalent to an income of over 32,000 per year for a working family. Unfortunately many benefits claimants are sadly unable to survive on such a meagre sum when having to not work or contribute meaningfully to society for the privilege of receiving the money.

The BBQ, of all people, have provided an example of how a family would be affected by having their benefits reduced from over 30,000 to the proposed cap of just 24,000.

So, should tax-payers support these people? Let’s see how they struggle…

Current benefits: 30, 284 of money taken under threat of force from people who work for a living. More than half of it just as a reward for having bred uncontrollably.

91 per week ‘other outgoings’: to keep the kids happy via consumerism, apparently. You don’t believe the crap about school trips, every week, do you?

20 per week ‘entertainment’: your taxes buy this man a night out at the pub. Every week. Does he deserve this respite from his seven children and wife? Would you give him that money charitably?

15 per week on SKY TV:’We get the Sky Movies package because we’re stuck in the house all week – otherwise we wouldn’t have any entertainment.’ How did people survive before SKY TV? Will the family unit collapse if they have to resort to library books and freeview? Or talking to each other, heaven forbid!

30 transport: his eldest son is scamming him for most of this if he believes 5 return bus rides to college are 30.

32 per week on mobiles:’My wife and I have mobile phones, and so do all of the teenage children. You try telling teenagers they’re going to have to do without their mobiles and there’ll be hell to pay.’ Your taxes are saving this man from growing a pair and keeping his children in a world of ‘whine and it shall be given’.

Energy: ‘If they do cut our benefit we are going to have to choose between eating and heating the house properly.’ Or choose between mobiles and heating. Or beer and heating. Or fags and heating. NEVER believe these sob stories from ill-disciplined and spineless, willpower-lacking, idiocracy-generating fuckwits.

Rent 76 per week: As your state-sponsored incubus notes, this would be much more expensive were it private. Hence you are ACTUALLY paying much more than the 76 per week, as you are subsidizing the housing cost already, before a small portion of the cost is charged to, and then reclaimed by and from, our father-of-seven. All that admin costs too.

Shopping 240 per week.Includes food and household goods, 24cans of lager, 200 cigarettes and a largepouch of tobacco. Has ‘Ray’ sent you so much as a card to say thanks for the fags and booze you buy him every week? And of course none of these ‘essentials’ could be sacrificed, which makes these proposed benefits cuts so damaging to people like Ray.

 

It’s easy to pick on people like Ray, and so it should be!He moans that “The market for my skills dried up 10 years ago – there’s a total lack of work in my area of expertise.” but has spent TEN YEARS breeding and little else. Retrain, do menial work, start a business, anything!

Stop supporting Ray and his work-shy ilk and let him remember where he left his self-respect, or let him rot in his own filth, before you find yourself sat at home on your recliner toilet chair watching nothing but this.

Save us from the lawyers and the luddites

Saturday, November 26th, 2011

John Matonis has a new and excellent post on his ‘Monetary Future’ blog.

In it, he logically goes through some of the issues surrounding Bitcoin. It is well worth reading.

One section however, spurred this BLOGDIAL post. It’s the part about Vili Lehdonvirta’s ideas on ‘virtual goods’…

[…]

I am worried that Bitcoin is a step too far as it leaves no possibility for even democratic governments to enforce their laws. This is a topic I would love to debate with the community and hear opposing views. I think the end result could be a better understanding for me, but also a better understanding for the Bitcoin community on how to live in harmony with democratic authority.

Absolutely astonishing. A ‘step too far’? Towards or away from what exactly? We do not want to live in harmony with democratic authority. Democratic authority, to us, is inherently illegitimate, evil, immoral and completely unjustifiable. There are people who are attracted to Bitcoin precisely because it is beyond the control of ‘democratic authority’. As for it being a step too far, we must bear in mind that no one is forcing anyone to use Bitcoin. You decide on your own to use it, and if it succeeds or fails, you take the benefit or profit or losses respectively. Violent Statists are of course, vehemently opposed to free trade, voluntary exchange and liberty. Bitcoin is to the Statist as sunrise is to Dracula.

Matonis chimes in with…

For the most part, I respect Vili Lehdonvirta’s academic work on virtual goods ownership, but he harbors confused thoughts on the broader acceptance of bitcoin through dilution of its most beneficial properties, because he mistakenly extends the notion of virtual goods legal recognition to virtual currency legal recognition.

Fascinating. The Statists from the legal profession class are described by Murray Rothbard in ‘For a New Liberty’ as follows:

We see clearly why the State needs the intellectuals; but why do the intellectuals need the State? Put simply, the intellectuals livelihood in the free market is generally none too secure; for the intellectual, like everyone else on the market, must depend on the values and choices of the masses of his fellow men, and it is characteristic of these masses that they are generally uninterested in intellectual concerns. The State, on the other hand, is willing to offer the intellectuals a warm, secure, and permanent berth in its apparatus, a secure income, and the panoply of prestige.

[…] since the early origins of the State, its rulers have always turned, as a necessary bolster to their rule, to an alliance with societys class of intellectuals. The masses do not create their own abstract ideas, or indeed think through these ideas independently; they follow passively the ideas adopted and promulgated by the body of intellectuals, who become the effective opinion moulders in society. And since it is precisely a moulding of opinion on behalf of the rulers that the State almost desperately needs, this forms a firm basis for the age-old alliance of the intellectuals and the ruling classes of the State. The alliance is based on a quid pro quo: on the one hand, the intellectuals spread among the masses the idea that the State and its rulers are wise, good, sometimes divine, and at the very least inevitable and better than any conceivable alternatives. In return for this panoply of ideology, the State incorporates the intellectuals as part of the ruling elite, granting them power, status, prestige, and material security. Furthermore, intellectuals are needed to staff the bureaucracy and to plan the economy and society.

[…]

In all societies, public opinion is determined by the intellectual classes, the opinion moulders of society. For most people neither originate nor disseminate ideas and concepts; on the contrary, they tend to adopt those ideas promulgated by the professional intellectual classes, the professional dealers in ideas. Now, throughout history, as we shall see further below, despots and ruling elites of States have had far more need of the services of intellectuals than have peaceful citizens in a free society.

[…]

For States have always needed opinion-moulding intellectuals to con the public into believing that its rule is wise, good, and inevitable; into believing that the emperor has clothes. Until the modern world, such intellectuals were inevitably churchmen (or witch doctors), the guardians of religion. It was a cozy alliance, this age-old partnership between Church and State; the Church informed its deluded charges that the king ruled by divine command and therefore must be obeyed; in return, the king funneled numerous tax revenues into the coffers of the Church. Hence, the great importance for the libertarian classical liberals of their success at separating Church and State.

For a New Liberty

The whole idea of ‘Digital Goods’ is a fallacy, created by Statist professionals in order to gain a foothold in the emerging digital economy that threatens to disrupt their authority and completely replace the old world economy in many areas, specifically the delivery of films, books and music, and now through Bitcoin, the process of moving money around the globe.

The fallacious notion of ‘Digital Goods’ is pyramided on the idea that copyright (an artificial concept of the State) is legitimate and logical. As is the case with copyright, the idea of Digital Goods conflates the correct idea of property rights in real-world physical goods with a false right in intangible pure information, which can be infinitely copied, transmitted and transformed without loss.

An idea can have a human originator, but once that idea is conveyed to another man, it resides in the mind of that man. The only way that you can prevent that second man, the receiver, from using this idea is to initiate force against him. On this basis alone copyright as a legitimate idea falls, since it violates the non aggression axiom. I will leave it to you to explore the rest of this idea at your leisure. I also strongly recommend that you read ‘Against Intellectual Monopoly‘.

Bitcoin is an extraordinary and important innovation. It is the first system where a ‘Digital Good’ cannot be double spent. That means Bitcoins can be duplicated perfectly an infinite number of times, but they cannot be spent more than one transaction at a time between two people.

Bitcoins retain all the qualities of information (near zero cost transmission, infinite transformability, infinite lossless replicability), but the Bitcoin ecosystem changes them into something that has some of the qualities of physical property, whilst retaining all of the advantages of pure information. You can actually own a Bitcoin secure in the knowledge that even though everyone can read your Bitcoin, make copies of it, and see it in the Block Chain, they cannot steal it from you and spend it. You can copy Bitcoins ad infinitum, but inside the system is the only place where they have value or more accurately, utility. Bitcoin is the first instance of a digital representation that has some of the scarcity properties of a physical good.

Interestingly, this idea if transposed onto a music file, picture or film, could not work to prevent people using (double spending) those things, because there is no inherent value in owning a digital copy of a music file, film or book.

Imagine that instead of digital signatures, the Bitcoin block chain was used to control signed MP3 files. You could then have an ecosystem where unique copies of tracks (unique in that they were digitally signed, could not be forged and ownership was verifiable) could circulate for payment. The problem with this is that in this scenario music has two uses, one when it is stored in a file, and another when it is played in a music player, as well as being a string of numbers stored somewhere. There is also the ‘problem’ of the intent of music creators being that the same music is available to many people all at once.

Bitcoins do not have any use other than to confirm that they are owned by someone. This is why they can be used to transmit money over the internet. A digression, but interesting nonetheless, because this is the sort of thinking the large media companies should be doing or paying to have done for them, if they want to survive in any form over the next decade.

Apart from the revolutionary and singular case of Bitcoin in the Bitcoin ecosystem, all digital representations of ideas have zero intrinsic value, because they can be copied at a cost that approaches zero. In fact, the more copies there are, the lower the cost of obtaining a copy becomes because there are more storage locations to get them from and the cost of your time to search for them decreases. On some level, the law industry understands this, as they put pressure on Google to remove search results that point to files they claim contain ‘intellectual property’ belonging to their clients.

Digital technology has changed the way the world handles information forever. Trying to superimpose the outmoded, ridiculous and erroneous 19th century ways of thinking about property and business on people living today is a fruitless and anti-human endeavour. What’s more, it does not make everyone more honest and make business more efficient. Look at the dispute resolution mechanisms in eBay and Amazon, and you get a glimpse of how the free market works to protect everyone and benefit everyone. The State does not poke its snotty nose into the dispute resolution systems of these online services and the vast majority of transactions happen without any problems, and where there are problems, they are resolved within the mechanisms of the services to everyone’s satisfaction.

Just as the buggy whip makers, the lake ice industry and all superseded industries were eliminated by progress, the notion that music, books and any work that can be digitised should remain scarce, by force, is an astonishingly evil idea. The difference in people today as compared to those living in the age of the horse and cart it seems, is that this generation of men is not sufficiently agile, and a subset of them is unwilling to pivot and change business models to deal with the new reality. This is probably due to the very rapid pace of change, and the fact that there appears to be no future whatsoever for the people in the business of hoarding and supplying scarce information distributed in physical containers. They are squeezing this model for every drop of blood they can get before it becomes untenable to ask for money in exchange for physical discs or files.

Ill informed and self interested cronies and Statists are trying to keep man in horses and carts when the internal combustion engine car is in the garage of every home. It simply doesn’t make any sense on any level, is immoral, and the only reason why they can get away with it is they have an agent with the monopoly of violence to back them up: the State. In absentia of this force, no one would listen to the Statists, the MPAA/RIAA, the luddites, the lawyers, the buggy whip manufacturers and the Statists. Since they offer nothing of value, they would simply be ignored.

I predict that there will come a time when none of these people are taken seriously, and they are ignored and sidelined. The world simply will not be held down to the level of Stone Age Man to suit the needs of a vanishingly small number of venal, violent and ignorant men and their blinkered apologists. The dispute resolution systems that are an emergent property of sites like Amazon and eBay will spread out into the real world, making the State and its proponents redundant. It would be a fascinating project to try and separate these arbitration services and generalise them so that the public could use them instead of the courts of the State.

The fact of the matter is that lawyers have no right to tell anyone how to voluntarily exchange goods and under what terms those goods are to be exchanged. Their role is to arbitrate in disputes where both parties agree to be subject to the rules of the arbitrator, and nothing more. Because the vast majority of humans can exchange without disputes, they must create conflict in this area to maintain their social status and incomes, with the help of the State. This is why lawyers support the fallacious idea of copyright, and why they want to extend this sickness to Bitcoin, and all areas online.

The Statists refuse to accept reality, or cannot understand it, or understand it and actively fight to control it with violence. Lawyers especially have the most to gain from keeping the immoral, illogical and absurd copyright laws in force.

Or do they?

The fact of the matter is that once copyright laws are removed from all statute books, the amount of work for lawyers will not decrease, but will in fact increase, as creative people adapt to the new business models.

For example, no one has the right to steal a physical disk from anyone. If a musical work is created and stored in a fixed medium, and the right to be the first to sell it is sold to someone, a person who steals that disc and releases what is stored on it could be held liable for the damage caused to both contracting parties.

A disc of an unreleased highly anticipated pre-sold masterpiece would have an agreed value that is set out in a contract, and a value in pre-sales. Once it is leaked by theft and no one will pay for it, losses have been imposed upon the creative party, since exclusivity has been broken by the thief. In this scenario, damages are not calculated by how many copies are in the wild but by the fact that a physical disc has been stolen, its contents leaked and sales potential has been destroyed through cancellations. This is of course, completely separate from a work that is released on a disc, sold to a person, and that person making a copy for whatever reason. This is entirely legitimate, for reasons laid out clearly in Against Intellectual Monopoly.

This scenario is the same as someone breaking into a jewellery store and stealing a diamond necklace. Once that necklace has been stolen, it cannot be sold to someone else. The scenario of a pre-release disc being stolen and released is even worse, because the irreplaceable, unique first use opportunity has been destroyed forever. This is the true nature of the damage and theft done to both parties by this sort of act; the value of such a theft can be estimated and a valid moral claim made against a thief. Once again, this has nothing to do with the subsequent copies made by people who got a hold of the data by whatever means.

I use the example of the theft of a necklace deliberately, because it is used by the copyright monopoly to justify everyone being forbidden from making copies of what they own. Note how I am separating the act of copying what you have legitimately purchased from the destruction of potential by an unauthorised pre-release of a stolen disc.

There are many other circumstances where fault can be placed in this scenario. For example, if one party fails to maintain security and this is the cause of the leak, someone is at fault and has to pay. This can be laid out explicitly in a contract. These byzantine details are the job of lawyers to sort out, set terms for and organise. It is for lawyers to define these agreements, fix the agreed penalties, pursue the wrong doers in case of a breach of information. This would be a huge amount of complex work, worth an enormous amount of money. Lawyers are major beneficiaries of a world without copyright.

Of course, once a suite of music or book or other information is released, it can be copied ad infinitum, but then the next thrill is the thing that is valuable, and the public has an insatiable appetite for the new; this is just one possible model for the creative to explore, and of course, since they are the creative, its up to them to think of new ways of approaching the market in a reality where every idea can be copied and can spread world-wide in a matter of hours, if you hit exactly the right note.

The ignorant, imagination-less Statists want to prevent this astonishing world of the super abundance business model from fully emerging. They are doing everything they can to wreck the exponential growth of tools, contracts and technology that will unarguably benefit the entire planet, for the sake of a handful of ignorant, comfortable, computer illiterates.

Unfortunately for them, the harder they push against the internet, the stronger it becomes. Every service they have tried to cripple has either resulted in that service strengthening or spawning new services. Bulletin Board Systems, IRC DCC channels, Napster, Gnutella, Bittorrent are all examples in chronological order of how software outpaces the luddites, and of course, that list excludes the peripheral discoveries like MP3 that fuel the creation of new services.

This is a battle that they cannot win and which they should not win, because they have no case or moral foundation whatsoever.

Read this article in Hungarian.

Crony Capitalists deploy glove puppet schizophrenic luddite

Tuesday, September 13th, 2011

The crony capitalist copyright monopoly has rolled out its latest delusional computer illiterate schizophrenic luddite, Jeremy Hunt, to try and cripple the internets.

First things first.

Culture does not need a secretary. The idea that the State should have a position to ‘have a say’ in matters to do with culture is absurd on its face. Art galleries, artists, authors, music makers, sculptors and anyone involved in culture in any way do not need to be overseen, managed, given ‘guidance’ or ‘represented’ by a ministry. Only States like the USSR have traditionally had such corrosive, totalitarian and frankly, disgusting posts. Actually, France has a Minister of Rock & Roll, but France doesn’t count.

Even if you accept that the State should have a ‘Culture Secretary’ the internet is a technical brief, not a cultural one. No doubt there are moves afoot to create a new ‘Secretary for Digital’. The State should not be able to produce these new positions willy nilly, since they are public servants.

OK, Lets do this.

Google should join fight on piracy, says Jeremy Hunt

Culture secretary calls on advertisers and search engines to make life more difficult for those that ignore copyright laws.

What a disgusting, irrational and ridiculous call; to ‘make life more difficult’ for people. The internet exists to make life easier. What Jeremy Hunt is calling for is to cripple the internet, to make service providers divert capital away from improving their services into something that no one but a tiny group of venal beasts want. This is not the call of a human being, this is a call from a monster that wants to destroy progress, inhibit the utility of the greatest invention since fire, and to harm millions of people all over the world. Absolutely repulsive.

Jeremy Hunt, the Secretary of State for Culture, Media and Sport, is to tell Google and other search engines that they should play a greater role in the fight against online piracy. Mr Hunt will ask them to make life more difficult for pirates.

And they are all going to tell him, politely, to go straight to hell. Jeremy Hunt is in good company; he is spouting the same garbage that Andy Burnham used to on this matter.

Copying music is not piracy. It is not theft. The BBC even said so, in a grovelling apology after they aired a scandalous, unforgivable, stupid, retarded and evil attack on Bittorrent and were taken to task for it:

First though, an apology. File sharing is not theft. It has never been theft. Anyone who says it is theft is wrong and has unthinkingly absorbed too many Recording Industry Association of America press releases. We know that script line was wrong. It was a mistake. Were very, very sorry.

If copyright infringement was theft then Id be in jail every time I accidentally used football pix on Newsnight without putting Pictures from Sky Sport in the top left corner of the screen. And Im not. So it isnt.

No where near enough of an apology, but as far as the BBC goes, this is grovelling, first class.

He is expected to tell the Royal Television Societys Cambridge Convention that reasonable steps will make a significant difference, and also make the suggestion that if the industry does not help the Government it will legislate via the new Communication Bill. We intend to take measures to make it more and more difficult to access sites that deliberately facilitate infringement, misleading consumers and depriving creators of a fair reward for their creativity, Mr Hunt will say.

The world is changing. The number of people who know about crony capitalism, the abuses of the RIAA/MPAA and the rest is growing exponentially. Even the scumbag lying State shills at the BBC say that people like Hunt, “..(are) wrong and (have) unthinkingly absorbed too many Recording Industry Association of America press releases”.

Jeremy Hunt is on the wrong side of history, and he hasn’t got the brains to know it. If he does know that what he is saying is unfounded, illogical codswallop, then he is a coward for not stating the plain truth, which is that the internet has changed the way people consume media, these changes are benefits which will bring prosperity to everyone, and the old business models are dead as the Dodo.

The Government wants search engines to penalise website whose content is ruled unlawful. Less prominent results would have a direct effect on revenues from advertisers as well as sales.

If you removed all the links to any torrent site or site that provides links to other sites, what would happen is that someone would write an application that will absorb and re-distribute all those searches. It would spur the creation of a one stop place to find everything you need, and it could be designed in such a way that it can not be shut down. It would make the distribution of links more efficient, and this would mean more file sharing.

The internet sees Jeremy Hunt and his luddite ideas as damage and routes around him and them. Anything that is done to stop people communicating will cause more robust systems to be developed and deployed to bolster communication. We have seen this again and again. Napster was shut down and that caused gnutella to be developed. Then, the Bittorent protocol was developed as a direct answer to the problem of hosting files on central repositories. The same thing can be done with links. A distributed search engine, unstoppable, with no central point of attack will up the stakes and Jeremy Hunt would be the one that caused it to come into being. That is what is called an ‘own goal’ in the UK.

Mr Hunt will argue that online businesses deserve the same legal protection as physical ones. We do not allow certain products to be sold in the shops on the high street, nor do we allow shops to be set up purely to sell counterfeited products. Neither should we tolerate it online, he is set to say.

This is a fallacious, straw man argument. Physical goods are not the same as information and it comes right out of the MPAA script. When you copy a file or an idea, nothing is lost, and more to the point, Google does not facilitate copying, it merely points to resources that may or may not ‘infringe copyright’. There is no reason whatsoever to call upon business to take proactive measures against links that potentially point to items that are not even criminal in the first place.

He will add, however, The government has no business protecting old models or helping industries that have failed to move with the times. But those new models will never be able to prosper if they have to compete with free alternatives based on the illegal distribution of copyrighted material.

This is double talk. Government is protecting the old business models by insisting that there is such a thing as copyright. It is helping industries that have failed to move with the times, explicitly, the music and film industry. Secondly, Hunt says ‘free alternatives’ are bad; what if the new business model is the free model?. By saying that free is not acceptable, Hunt is picking winners, helping the dinosaur media and failing to move with the times. It is not the place of Jeremy Hunt or any public servant to determine which business models are and are not appropriate. Jeremy Hunt is talking nonsense on stilts.

Despite campaigns from internet freedom activists, the high court ruled in July, after a lengthy process, that the internet service provider BT should block a website that flagrantly infringed copyright, called Newzbin. Although the Internet Watch Foundation is able to use a sped-up legal process, it currently can only do so for sites relating to illegal online pornography. Google, however, claims that takedown requests from reliable copyright holders are dealt with in four hours. The government moving its pressure from ISPs to search engines marks a new approach to its multi-faceted attack on digital piracy.

http://www.telegraph.co.uk/technology/google/8759414/Google-should-join-fight-on-piracy-says-Jeremy-Hunt.html

They will fail.

Since the advent of modems running at 14.4k people have been sharing files, and it has grown year on year without fail every year. The mainstream media and the copyright monopoly have lost both the war and the argument. The movie studios still pull in hundreds of millions for their blockbusters, and so the much reported death of their industry has not materialised, as it never does whenever they whine that a new technology is going to wipe them out.

It is nothing short of absurd that Jeremy Hunt and his cohorts want to turn Britain into a leader of all things internets, but in the same breath, they do everything they can to cripple the companies that work with it. You cant have it both ways; either you want your East End Fantasy to take root or you do not. If you do, get out of the way, and let business flourish. If you do not, carry on as you are, making these ridiculous paid promotions for the copyright monopolists and watch everyone write you off as a potential place to locate.

In the past, anyone thinking about writing an innovative service, like a CD Ripping service, would have run a mile from the UK. Only now, as the CD is dying as a format will it become legal for a company like this to set up… or will it? Who knows? What is for sure is that if you plan on starting an internet business in the UK, you are taking a huge risk that Jeremy Hunt & Co. are going to suddenly, at the behest of your competitors, put you out of business either by directly legislating against you, or scaring investors away by giving a speech.

One thing is for certain; the tide is turning against Jeremy Hunt and all the glove puppets who sound suspiciously similar. What do I mean by that? Hmmmm, Which one is Jeremy Hunt, and which one is Andy Burnham? can you tell?:

Hunt or Burnham?:
“We must ensure that copyright delivers maximum benefit to performers and musicians. That’s the test of any model as we go forward”

Hunt or Burnham?:
“Let me be absolutely clear so there are no misconceptions about where the Government is on this. We share a real support for artists and musicians.”

Hunt or Burnham?:
“Music has been hit hard over the last ten years, and if we dont do something there is a real danger that parts of the music industry will be washed away.”

Hunt or Burnham?:
“Developments in communications have changed the music world and I think we are now at a time that calls for partnership between Government and the music business as a whole: one with rewards for both of us; one with rewards for society as a whole.”

Hunt or Burnham?:
“My job Governments job is to preserve the value in the system.”

Hunt or Burnham?:
“What do we need to do to help our businesses grow and evolve between now and 2025? Where can regulation help and where is it a barrier? What can we do collectively to enhance the whole UK market?”

Hunt or Burnham?:
“We have an extraordinarily strong and diverse media landscape in this country, combined with a remarkable wealth of talent in our creative industries.”

They are indistinguishable are they not?

Honestly, I dont care about what these people think; the only thing that matters is that they have the guns. As long as they have the monopoly on violence, they will be able to distort, destroy, corrupt and damage. If they did not have the monopoly on violence, Jeremy Hunt might be a school teacher somewhere, harmless, quiet and of no concern to anyone.

Thankfully, the market, the internet, and the people on it are more powerful than Jeremy Hunt. No matter what he says, no matter what he asks for, and no matter who he can bully into obeying his luddite wet dreams, the internet and the market will route around him and his disease and the spice will flow!

Thinking correctly about Bitcoin

Tuesday, August 30th, 2011

An essential feature of the standard attack against Bitcoin is to point to the price charts generated by a single Bitcoin exchange and then use that as definitive proof of Bitcoin’s unsuitability for any purpose.

The attack uses these single source charts to ‘prove’ that Bitcoin is a mania, like the Dutch Tulip mania or Bollengekte of 1637, or that Bitcoin is ‘insecure’ or any other fundamental flaw, technical, financial, philosophical or psychological you care to mention.

Let us be perfectly clear; these Bitcoin detractors are ignorant of what Bitcoin is. They are near horizon thinkers, dullards, luddites, and the sweetest irony of it all is they are peddling their flawed ideas on a medium that directly disproves their theories.

I have already debunked and quashed many of the fallacies that are routinely trotted out whenever Bitcoin is discussed by the ignorant on our blog; now I want to clear up a different fundamental mistake that all the current detractors of Bitcoin are routinely making, which is perfectly exemplified by the recent MarketWatch video item, which unintelligently parrots all the anti-Bitcoin nonsense as if it were being read from a centrally provided script or press release.

The fundamental mistake these ignorant people are making is this; Bitcoin is not an investment, it is a container and payment method.

When you think about Bitcoin in these terms, it becomes instantly clear that Bitcoin itself should not be treated like stocks or commodities. If you think of Bitcoin as only a container you use to shuttle payments to people for things on and off-line, you immediately understand that looking at stock market style charts of its value from a single exchange as a way of gauging its future potential is completely ridiculous.

Bitcoin’s potential lies in its power to facilitate peer to peer purchases; it is not a commodity or a stock or a company, it is a method, a container, a protocol that people use to make purchases between themselves.

Think about it this way; if, in 1997 you were told about a thing called ‘the Internet’, that would replace sending letters, utility bills and postcards through the mail to people all over the world at no cost, via a system that would not be run by any central authority and which was sure to utterly change the world and make people millions of dollars, you would be interested in it as an investment.

Someone could (having fundamentally misunderstood what the Internet actually is) buy many domain names and then issue certificates against them, put these certificates into an exchange, and then start to sell them to investors. Charts would have been generated, and as a land rush began as the potential of the Internet became apparent to everybody, you would have seen a massive spike in the quoted prices of domain name certificates.

Unique names like ‘sex.com’ could have been bought into by syndicates, who issued shares in it so that the cost of investing in ‘rare’ domain names could be spread out. You could buy shares in that domain name syndicate, and see their value rocket up.

Are you beginning to get the picture? Domain names are nothing more than a method to instruct client programmes on computers to connect to a numeric address that refers to a server computer on the internet. They have no value in and of themselves; the value in a domain name rests solely in the work that programmers put into expressing the ideas of entrepreneurs who run the websites the domain points to.

A three letter domain name like ‘sex.com’ is no guarantee of success on the web in and of itself; the same is true of Bitcoin. No one would have paid a billion dollars for the domain name ‘google.com’ before Google put millions of man hours and genius into their software, for example.

If you want to ‘invest in the Internet’, you need to invest in a company that uses the internet to provide value to people. You cannot invest directly in the Internet, which is nothing more than a series of protocols defining containers for information that have been agreed upon by individuals. When you think about Bitcoin in these terms, you start to understand why all these foolish pundits sound so ridiculous. They literally have no idea what they are talking about.

Bitcoin is a way to convey value from one person to another without a third party. Email is to postal services as Bitcoin is to money. It has no monetary value in and of itself; it has a very high utility, not intrinsic value. This is why looking at a single chart from MTGox and inferring anything about Bitcoin in general, or its future, or its utility and true nature is completely absurd. This is why attempting to apply Austrian monetary theory to Bitcoin is a fool’s errand. Bitcoin is not money, any more than a leather wallet is money or an email is a letter written on your personal stationary; you would not define a wallet as money, or a domain name as money or a piece of paper with ink on it simply because someone buys and sells them as goods.

The real issue is not whether Bitcoin will ever be so widely adopted that it, “acts like a real, stable currency”. The only issue is wether or not it is widely adopted, and when the disruptive effects it will have on the current crop of online payment systems that are in thrall to the State, begin to emerge.

And Bitcoin is a very very disruptive technology.

Think about Bitcoin in comparison to PayPal. PayPal is essentially a centralized brick-less bank, that keeps a ledger of user’s accounts and transfers, and which charges per transaction fees. It strictly controls how much of your own money you can withdraw from them to your own bank account, how much of your own money you can spend at any one time, and PayPal are notorious for their freezing of user’s accounts, service problems and lust for compliance with the regulations of the State. For example, users of PayPal unfortunate enough to live under the yoke of the government of India have recently been informed that they will not be allowed to receive payments that exceed $500 per transaction and that they will not be able to keep any of their money in their PayPal accounts longer than one week; all money received into PayPal must be transferred to their Indian bank account within 7 days.

I will take for granted your outrage at these anti-human and arbitrary restrictions.

Now consider Bitcoin. Bitcoin turns every user into an operator of their own fully functional, trans continental, free of State control PayPal service. They can accept money and then transfer Bitcoins from their computer to anywhere in the world instantly, without interference from anyone. They can accept Bitcoins on their computer in exchange for goods or services in a similar manner. The key insight that mainstream thinking people are missing is that Bitcoin can be exchanged for anything, not just money. Its accounts are essentially disposable and not tied to you permanently. You do not have to identify yourself to any third party in order to use it. If you adopt Bitcoin you are at liberty to use it in any way you like, with as much of your money as you like.

When you think about Bitcoin correctly, you can begin to see that its potential is as big as the advent of the internet itself, since money is half of all transactions. In the same way that email disrupted the postal service, Bitcoin will disrupt the making and receiving of payments. If you want to send a post card, you do not have to use a postman or government mail. You simply send an email. From your mobile phone. This is taken for granted, now, but it represents a tectonic shift in the way people communicate.

Think about how the internet and Fraunhofer-Gesellshaft’s Perceptual Audio Coding software (that powers the MP3 file format) has changed the way music is distributed and consumed. No more buying Cassettes, Vinyl records and CDs in stores; no more middle men between the musicians and the music lovers. This is what Bitcoin is going to do in the realm of money transfer. And of course, the circle will be completed when music lovers pay tributes to their favourite musicians with Bitcoins.

Very small payments will now become possible and plentiful…anyone can develop their own money transfer and content monetizing service on top of Bitcoin without having to interface with one of the main payment processing companies. This represents a massive shift and unprecedented opportunity on a global scale. There are so many possible uses of Bitcoin you could spend all day imagining its potential uses, and you might still completely miss its killer application.

None of the people trying to pour cold water on Bitcoin ever mention Namecoin, which is a DNS alternative based on Bitcoin. This is probably because they are ignorant of what Bitcoin actually is, and are simply regurgitating what others have written and said about Bitcoin, rather than doing their own thinking about it. DNS, as I say above, is the system of marrying words with the numeric addresses of computers on the internet. It is how people connect to sites on the net with their browsers, allowing them to type in a name instead of a number. The DNS system is being attacked by the State as a way of taking publishers off-line. Google “ICE domain seizures” to find out what I am talking about. Namecoin has the potential to decentralise the DNS system, making it impossible for the State to seize domain names and attack publishers.

This is only one possible future use of Bitcoin, and as we have seen with the appalling totalitarian police state scandals surrounding government sabotage and poisoning of the centralised DNS system, Namecoin could remove the power of the State to control this critical part of the Internet infrastructure.

The potential of Bitcoin is obvious to those that are intelligent, that understand computers and software, who have some knowledge of the present state of and recent history of the internet and the problems of money transfer online. Anyone who knows what this really means is awestruck, gobsmacked at how everything is about to fundamentally change.

To conclude, whenever you hear anyone attack Bitcoin, your first response should be to be skeptical of the intelligence and depth of understanding of the attacker. They will cite any or all of the following to try and dissuade you from adopting Bitcoin:

  • Bitcoin has no backing
  • The exchange rate is volatile (with obligatory MTGox chart)
  • Bitcoin is a Speculative Bubble
  • Bitcoin is used for buying drugs
  • Bitcoin is run by amateurs ‘The MyBitcoin Fiasco’
  • Bitcoin is only for techies, not for the average person

All of these reasons for avoiding Bitcoin are straw men, trotted out by the unintelligent who cannot think for themselves, have weak powers of insight, are very probably computer illiterate, or who are philosophically predisposed to disliking Bitcoin because they have mistaken it for money due to other people having claimed that it is money.

The first and last straw men are particularly galling. The dollar is backed by nothing, and these same people insist that it is money simply because other people accept it as money, but by magic, this logic cannot simultaneously apply to Bitcoin. The Internet was once ‘only for techies’ and now everyone uses it, and the people who do not are the exception, the ‘disadvantaged’ who must be helped to get onto it. If it were not so tragic, you would think these pretexts for rejecting Bitcoin were funny.

I predict that the same will be true of the mass adoption of Bitcoin as it was for the mass adoption of the Internet. In the very near future, the people who do not use Bitcoin for sending and receiving payments will be the exceptions, and the disadvantaged.

I will leave it to you to extrapolate from that, what the true value of Bitcoin is.

Introducing the Satoshi Gate

Friday, August 12th, 2011

The Satoshi Gate is a new way for Bloggers to monetize their writing.

It is a WordPress plugin that allows you to collect very small, easy to make payments from your loyal readers.

It works like this.

When a user comes to your Blog, she is presented with a fresh Bitcoin address to which she may send a ‘Satoshi’ (the smallest denomination of a Bitcoin).

Once she sends the Bitcoin, The Satoshi Gate plugin does the following:

It records a hash of the IP of the visitor, and puts it in the DB against the Bitcoin address that was generated for this IP and this visit and/or this page request.

The Satoshi Gate plugin checks the blog owner’s running instance of the Bitcoin client to see if/when the payment is received.

After the payment is sent, a cookie is set and this user/IP is allowed to read the article, or is allowed access to the blog for a day, week month or in whatever way the access policy is set in the Satoshi Gate preferences pane in WordPress admin.

Satoshi Gate gives you the following advantages over other payment systems:

  • Free to download and use
  • No recurring use fees
  • Instant install
  • Easy to configure
  • Super small transaction fees
  • Super small payments
  • Unobtrusive to the readers of your blog
  • No third party involvement
  • Collect your money in realtime, no monthly payouts
  • No risk

The Satoshi Gate allows you to specify the way you divide up and serve your content in a fine grained way.

You can run your Satoshi Gate in tip mode, where a small, vey mild floating nag box appears to one side until you tip to remove it. You can set teaser posts, or give people the first half of a post only, the rest being unlocked by a Satoshi. You can allow them to read three posts for free, then pay for the fourth. You can create flexible post bounties where an entry will be released to everyone for free after a certain amount of Bitcoins have been received… and those are just a few examples of some of the cool marketing strategies you can create and mix and match with the Satoshi Gate plugin.

Because you can ask for extremely small payments for access to your blog, no one will begrudge paying you, and if you are a good writer and have thousands of visitors, or perhaps a blog post that goes viral, it will be possible to collect significant amounts of money.

You can of course, set your Satoshi Gate to collect any number of Bitcoins, including ‘pay what you want‘ not just the smallest denomination.

The Satoshi Gate is quite naturally, open source, and will be available through the WordPress plugin site.

Market volatility and Bitcoin

Monday, August 8th, 2011

One third of all the Bitcoins that will ever be created have now been mined. This is as a good a time as any to re-state the facts about Bitcoin.

It needs to be pointed out to the easily frightened out there on teh ineternetz, that Bitcoin has not ‘failed’ simply because the first company to provide a service that uses it (MTGOX) has attracted users who exhibit a class of behaviour and needs.

MTGOX is nothing more than a single company that is providing a service. It does not set the true value of Bitcoins, it publishes what its users are willing to pay for it. This has nothing to do with the actual value of Bitcoin now or in the future.

We can infer this by using a thought experiment.

Imagine a world where Bitcoin is in use by one hundred million people. Every day, people use it for every conceivable type of purchase. It is easy to obtain Bitcoins and people have no problem understanding them or spending them.

Now imagine this world with or without MTGOX.

The value of Bitcoins does not change in this world very much, one way or another with or without MTGOX. The aggregate demand of one hundred million people, all trading Bitcoins between themselves, measuring its true value on a minute to minute basis will tell each user what the real value of Bitcoins are.

And that value is orders of magnitude greater than twenty Federal Reserve Notes.

For example, lets suppose that you buy a Chinese take away meal for eight people for one Bitcoin. And that includes four bottles of Champagne. You get an instant feel for what a single Bitcoin is worth in the real world.

This is how real people determine the value of their money. This is how they know that ten dollars is too much for a can of coke.

What is happening now with Bitcoin right now is that it is circulating in a closed feedback loop populated by highly skilled programmers with financial software backgrounds, Libertarian monetary policy enthusiasts and over-clocking geeks. Once the Bitcoin economy breaks out of this closed feedback loop and is in wide use, it will not be possible for a single exchange to alter its value.

This is the inevitable scenario that the Bitcoin detractors cannot see. Bitcoin now is exactly analogous to the birth of email, and all the arguments against email taking off and replacing the post, all the arguments against shopping on the internet all apply equally to Bitcoin.

As I said before, the rate of adoption that Bitcoin will experience will be very much faster than the rates of adoption of email and web browsing. What needs to happen to push adoption along is this:

  • The building of simple to deploy tools so that anyone can accept Bitcoin.

And that means plugins for Word Press, Magento, OS Commerce and every other platform that is out there. Imagine a ‘+01’ button for every page you publish on the internet. Imagine Stack Exchange implementing this ‘+01’ button. Do I even need to go on?

It doesn’t take a genius to imagine what would happen if someone developed a Bitcoin app for Facebook. If it spread virally, you would exceed one hundred million users of Bitcoin in a very short amount of time.

Already, people have been donating to posts on BLOGDIAL through the address that is published on every post made by ‘irdial’. Other bloggers are explicitly asking for Bitcoin tips in their sidebars. Once the word gets out that you can make money simply by posting a string on every post, adoption of Bitcoin will explode in the Blogosphere. I imagine the quality of posts will also improve dramatically, as people craft their words to solicit tips, rather than to simply get something off of their chests.

Bitcoin is not MTGOX. MTGOX is a service that is built around Bitcoin. At any time, some piece of software or some service could emerge that will cause adoption of Bitcoin to go viral. Even something as simple as a simple Tweet from a highly influential blogger could cause literally millions of people to download the client and start using Bitcoins.

Anyone who says Bitcoin is finished because a small group of people are agreeing on artificial prices on its first ever large scale service doesn’t understand what Bitcoin is, or what its potential is.

And a final note. The Federal Reserve stopped publishing ‘M3’ the metric that told you the number of dollars in circulation. Bitcoin is different. We know how many Bitcoins are in circulation at every instant because it is public knowledge and will always be public knowledge. In this respect, Bitcoin is more transparent than the dollar, and of course, there is an upper limit to how many Bitcoins there will be, unlike with the dollar that can be printed willy nilly.

The low exchange rates that Bitcoin services are quoting are a great opportunity, maybe (or maybe not) your last opportunity to get Bitcoins at a low price through the current exchanges. As it is with Gold, you will kick yourself if Bitcoins go to $5000 per Bitcoin, just as gold is predicted to go at least ten times higher than it now stands, at record prices of $1671. Both gold and Bitcoins are cheap at today’s prices.

You have been warned.

The Dollar Crash

Sunday, August 7th, 2011

The US Dollar, the first pure fiat world reserve currency, has lost almost all of its value against gold, falling from $1 to around $1680 per ounce.

Its now looking increasingly likely that the record-high price of $1680 on June 8 represented the peak of a financial fraud that is now slowly unravelling. The interesting question is: where will the price decline stop?

Most assets have a fundamental value: the value that reflects the practical use to which that asset can be put. You can always live in a house regardless of what happens to the real estate market, so we can be confident that house prices wont fall to zero. Similarly, if the price of gold fell too much, people could always use it to make jewelry, so gold is a relatively safe investment.

The puzzling thing about the US Dollar, is that the currency doesnt seem to have any fundamental value at all. True, you can currently purchase many goods and services with Dollars. But despite the volume of Dollar-denominated commerce being high, Dollar-denominated prices seem to be driven up by the current rounds of quantitative easing (money printing).

The US Dollar is different from traditional currencies. The fact that there are 300 million Americans who use dollars for their day-to-day transactions creates a floor for the value of dollars. Most of us dont pay much attention to the exchange rate between dollars and other currencies, because were used to thinking of dollars as our fundamental unit of value. And even if we wanted to stop using dollars, it would be hard to do since most of the people around us wont take anything else. So, despite a major screw-up by the Federal Reserve, we can still count on the value of dollars not falling very much. This logic of course, will also apply to the new pure digital currency ‘Bitcoin’.

In contrast, theres no significant community of people who conduct commerce exclusively (or even primarily) in Gold. And you cant eat, live in, or make a fire out of Gold. And this means theres no logical stopping point to Golds price increase. So far Gold enthusiasts have been buying Gold as the price increases, convinced that the price will go up eventually. But as the hoped-for Dollar rally has failed to materialize, more have gotten discouraged or bored and cash out the Dollar, pushing the price of Gold up further. This process has been going on for a couple of months, and now it appears to be accelerating. I suspect the Dollar is terminal.

http://blogs.forbes.com/timothylee/2011/08/07/the-bitcoin-crash/

Bitcoins are Baseball Cards

Wednesday, August 3rd, 2011

The responses to Bitcoin from different camps that encounter it have been fascinating to read. Bitcoin, like the Internet, is a mirror reflecting the philosophy of the person who is talking about it.

Libertarians see it as a way out.
Statists see it as a way of receiving the blessings of the state.

and so on…

One of the many interesting sets of thoughts swirling around Bitcoin is the idea that somehow, the State must be involved in Bitcoin, and there are people out there who are keen to try and shoehorn any legislation or rule that is out there to fit the Bitcoin case.

Take a look at this:

FinCEN Brings KYC Requirements To Bitcoin?

The U.S. Department of the Treasury (FinCEN) issued a Final Rule making non-bank providers of pre-paid financial instruments subject to comprehensive Bank Secrecy Act (BSA) regulations similar to depository institutions.

Why this particular rule, and not the first amendment of the constitution? Cryptography, it has been argued, correctly, is a form of speech that falls under the first amendment protections guaranteeing your right to write whatever you want.

Bitcoin is made up of cryptographic signatures that can be printed out as text. This means that they are clearly protected speech and not financial instruments.

Why should FinCEN have anything to do with Bitcoin at all? If FinCEN applies to Bitcoin, should it also not apply to Baseball cards?

Baseball cards or comics or YuGiOh cards could be used as money because someone somewhere values them.

They could be stored in a vault and then certificates issues against them that could be traded automatically at online exchanges.

Does that mean that these certificates are money? Does that mean that FinCEN rules should apply to them?

Of course it doesn’t. Applying FinCEN rules to Bitcoin, quite apart from the immorality of these regulations, is improper and ridiculous.

The regulations affecting stored value now use the term prepaid access which is more broad and technology-neutral. Though FinCEN has not formally asserted that Bitcoin would fall under prepaid access regulations, earlier contact with the agency referred to bitcoins as a form of stored-value. If correct, then Bitcoin sales to U.S. customers would likely be a regulated activity per this Final Rule.

The new regulations become effective on September 27, 2011, 60 days after its July 29, 2011 date of publication in the Federal Register.

This is absurd. Who made contact with FinCEN, and where is the written record of this contact? Who did the contactor represent, and whoever she was, she did not represent ‘Bitcoin’ or any of its users, but was acting on her own. The details of that contact are something that would be interesting to read.

To comply with the Final Rule, providers of prepaid access must register with FinCEN. Because bitcoins are decentralized, it is uncertain who a provider would be. Might every exchanger be considered a provider, for instance?

This is all springing from a false assumption, that Bitcoin is a store of value that FinCEN has jurisdiction over. It is not.

Also under the Final Rule, sellers of prepaid access must collect personal information from customers, maintain transaction records, file suspicious activity reports and comply with other requirements of money service businesses (MSB). Last month FinCEN issued a ruling that was intended to clarify the definition of an MSB and includes the possibility that even businesses outside the U.S. conducting money transfer over the Internet could still be classified as U.S. MSBs. Additionally, the definition no longer requires that an MSB be a business any individual who receives funds in exchange for a stored value might be considered an MSB.

This is of course, absolutely absurd. Even if you concede that FinCEN has jurisdiction over U.S. companies and persons that deal in Bitcoin, to assert that people and companies outside the USA would need to register with FinCEN betrays a complete lack of understanding of the concept of jurisdiction.

Its like those very sad webmasters in the UK who put up DMCA takedown notification pages on their sites. The DMCA does not apply anywhere in the world other than in the United States of America, and no webmaster, publisher, company or person is required to obey its strictures who is not based in or who does not have servers in the USA.

If FinCEN actually tries to attack Bitcoin, and then tried to demand that entities outside the USA register with it, they should be met with this type of response.

Though the ruling has exemptions to not impact the typical prepaid debit card found at grocery stores, for example, the exemptions would likely not apply to Bitcoin. These exemptions give a pass to providers and sellers when the following conditions are met:

  • The funds cannot be transmitted internationally.
  • Funds cannot be transferred from one user to another.
  • No additional funds can be loaded except from a depository source (e.g., from a bank).

There is no way to limit where bitcoins can be spent and the value is easily transferred from one person to another so Bitcoin will not likely be considered exempt from the AML regulations.

Bitcoin, being a form of speech, should not be regulated by anyone. In the same way that you have protections against fraud (someone misrepresenting some reproduction Baseball cards to you as genuine, or someone stealing your YuGiOh cards) you have those same protections with Bitcoin. If someone defrauds you or breaches a contract they have with you, take them to court or arbitration.

The state is not needed to control Bitcoin, police it, regulate it or have anything whatsoever to do with it. It has, like the internet, grown in popularity all by itself, will grow in utility just like the internet has by virtue of people adopting it and using it, and any interference in it is illegitimate on its face.

Following these regulations will be a serious burden to sellers. For instance, compliance requirements as specified in an article by Perkins Coie LLP include:

Identifying information includes the customers name, date of birth, address and identification number. Sellers must retain this information for five years from the date of sale.

The records must be easily accessible and retrievable upon request from FinCEN, law enforcement or judicial order.

The bigger impact of following AML may not necessarily be the cost of compliance but instead will be the likely result to effectively de-anonymize Bitcoin.

Following these regulations is unthinkable. Even if you accepted that these regulations were in some mysterious way beneficial, it would not and could not stop people from trading Bitcoins client to client, without identifying themselves to a parasitic third party.

When Bitcoin usage reaches critical mass, there will be trillions of transactions happening on a daily basis. The people who serve as enter and exit points for it would be recording meaningless details that would serve no use whatsoever after the first purchase of Bitcoins.

Bitcoin is not anonymous, despite what people think. There are services out there however, that can make it completely anonymous, and these will be improved and will multiply in number as the precise nature and level of anonymity in bitcoin becomes well understood by everyone. In the same way that The Anonymizer, Hide My Ass and the many proxy services that have come into being to cater for those who want anonymity, its a safe bet that the same entrepreneurs will apply their knowledge to the problem of making Bitcoin completely untraceable.

As for the cost of compliance, only US companies will be forced to pass the expense of these ridiculous regulations on to their customers. It will mean that customers, who see high prices due to regulation as damage and route around it, will choose exchanges outside the USA, simply because it is cheaper. This will create another tier of middle man in America; businesses that will take your money and then interface with foreign exchanges for you, rather like the Dorian Grey services we have written about.

Ironically, these new regulations may drive even faster Bitcoin adoption. These restrictions may cause many retailers to discontinue offering the prepaid cards that can be used at ATMs internationally. Since global redemption of stored value is a service that is legal to offer, is in huge demand and is something that Bitcoin does well using digital currency might become the more popular alternative.

Unintended consequences!

And of course, as Bitcoin passes critical mass, it will become absolutely impossible to clamp down on the international flow of ‘money’, since Bitcoin is a peer to peer system.

When the global economy becomes dependent on Bitcoin, as it does now on SSL, no politician will dare raise a finger to control (damage) it, just as it is now completely unthinkable to regulate the cryptography behind SSL, as the French tried to do and which Dominic Strauss-Khan put pay to.

A more immediate consequence will likely be the employment of lawyers to specifically consider how this Final Rule affects Bitcoin.

http://www.bitcoinmoney.com/post/8412471372/fincen-prepaid-access-final-rule

Maybe so. Certainly there are people out there who are desperate to interface with the State when it comes to Bitcoin.

One way or another, the State is not going to control Bitcoin. Either because it is not in their financial interest to do so because it is a world-wide phenomenon, or because they cannot possibly stop the hundreds of millions of people who are going to be using it.

There are 2,095,006,005 people on the internet. That is 30.2% of all the people on earth and an increase of 480.4% in ten years.

If only ten percent of all people use Bitcoin. No. Lets say five percent. That is 104,750,300 future users of Bitcoin. There is no reason why this number cannot not be achieved, and of course we are working only with today’s assumptions; there is no knowing what new innovations related to the block chain that are around the corner. Or innovations in the shape of client that people will be using. Imagine new versions of Google Chrome or Firefox that are not only browsers, but Bitcoin clients.

Every browser, doubles as a Bitcoin client.

Think about that for a moment. An HTML5 Bitcoin client, with an interface designed by Google or Mozilla. Easy to use and absolutely everywhere; on every computer in the world, by default.

One thing is for sure, there is no going back.

People have complained that ‘the next Google’ could not come out of Britain, because Britain is toxic to business.

If Bitcoin is going to be the biggest revolution since the internet itself, and the British establishment are desperate to entice companies to set up here and take root, then any regulation on Bitcoin (or for that matter, Internet Business which is serious business) is, to put it lightly, not a good idea. In fact, the smart thing to do would be to draw an arbitrary area on the map in London, and declare that area an Internet Free Trade Zone, where there are no restrictions, taxes or regulations, for a period of 150 years.

This would instantly attract every Internet business on the planet to the UK. There would be an unprecedented inflow of brains and money into London, making it the ‘Internet Capital of the World’.

Or, you could regulate Bitcoin, and be an also-ran gaggle of losers, while Hong Kong, Dubai and other jurisdictions suck up all the brains, money, skills and entrepreneurs.

To sum up, Bitcoin is to money as PDFs are to hardback books. Bitcoins are speech, not financial instruments. The State has no business interfering in Bitcoin in any way, and US regulations and laws do not apply to people and companies outside of the continental USA.

Bitcoins backed by gold launched

Thursday, June 23rd, 2011

There is another interesting article over at Lew Rockwell about Bitcoin, which is a transcript of a conversation with Doug Casey, who we have blogged about before. This man is a truly great speaker and thinker, and as proof of this, I direct you to watch Mr. Casey in action.

In the interview, Doug Casey says something truly astonishing, because if it is true, it means that the next iteration of Bitcoin is already here and is sure to fulfil the promise of a decentralised, unregulated, freedom and pure value centred money. Here is the line that I am talking about:

So, way before the dollar value of Bitcoins stepped off a cliff last weekend, I was telling people who asked me that I didnt use them and didnt plan to use them.

Frankly, I cant see why anyone would, when theres already an electronic digital currency like Bitcoin but backed with gold: GoldMoney. I should disclose that Im a small investor in the company.

http://lewrockwell.com/casey/casey89.1.html

My emphasis… What?!

An electronic digital currency like Bitcoin, backed with gold?!

I had to find out more about this!

GoldMoney has a good looking website:

http://www.goldmoney.com/

It says its ‘simple and secure’ and that you have ‘Complete ownership of the metal you buy’.

Better and better!

But where is the ‘download’ link? I want to start using it right now!

When you click on ‘Find out more about how to get started with GoldMoney’

Ooookkkkkk.

OnMouseDown we are not presented with a link to some software but instead we are displayed the following:

At GoldMoney we make it very easy for you to conveniently buy, own and store precious metals. The first step is to sign up for free to open a Holding, which is a personal record of your activity in GoldMoney and the metal you own. After a short verification process, you can transfer money to fund your Holding and start buying metals to preserve your purchasing power.

You have to sign up for a ‘holding’, complete ‘identity verification’ and then transfer funds.

Personal Record?
Verification process?

This doesn’t sound like Bitcoin at all!

It gets worse.

They then ask you for your country of residence. What on earth has that to do with MY MONEY?

And then it gets even WORSE:

Country of Residence

Depending on the country you live in, you can sign up for different types of Holdings. GoldMoney accepts customers from 93 countries. If your country of residence is not one of the countries listed above, unfortunately we are currently unable to accommodate your application. If you are temporarily living in a country not listed above but your primary country of residence is on the list, please contact us to discuss your situation. For example, if you are an international aid worker temporarily assigned to a non-listed country but your primary residence is in the UK, we will most likely be able to accept you as a customer.

If you move to another country after you open a Holding, please take into consideration that this could affect the type of Holding you are able to have.

Netherlands & Netherlands Antilles

Due to a review on the rules applicable to the sale and storage of precious metals, we are currently unable to accept applications from Dutch residents.

Sucks to be Dutch then. I guess that the Dutch don’t have any property rights. I guess that if I am Dutch, I can’t spend money on the internet, with this ‘Bitcoin like’ money. What?

And then it gets unimaginably worse:

We claim that we are from Italy, and then say submit. You then get this:

Enter your name and contact details during the sign-up process

Upload a scanned image of a bank statement or bank cheque before the initial funds are sent from your bank account

Upload a scanned image of your photo ID (passport, national ID card or driver’s license)
Send a certified copy of your photo ID and an original bank statement or utility bill along with a completed CAP Form (letter or A4-size) to us by post

Additional verification of your identity and the source of your funds may be required depending on your circumstances and the Holding value

Unbelievable.

And this, given the interview, is the most surprising thing of all:

Security and integrity

As a company regulated by the Jersey Financial Services Commission, GoldMoney complies with anti-money laundering legislation, which requires GoldMoney to know the identity and residential address of each of its customers. We make use of a Customer Acceptance Policy (CAP), to ensure the security and integrity of the GoldMoney system. More information about the CAP and how to sign up for your GoldMoney Holding can be found in our CAP FAQ.

But in the interview, Casey says:

Thats why the U.S. government and its media lapdogs have been so antagonistic to Bitcoin, claiming its primarily of interest to drug lords who want to use it as soap for their money laundering. They always mention it in conjunction with Silk Road, which claims to allow purchase of any drug through mail order, using Bitcoin as its payment system. I have no problem with that, but its a totally impractical idea in todays world. Its just an idea intended to scare witless Americans. Frankly, Im disgusted at the fact money laundering is even accepted as a crime; thoughtless people believe whatever theyre told. Its not a crime, by any rational definition. But thats another subject for another day.

Well, I certainly agree with that sentiment; there is no such thing as ‘money laundering’… but I digress.

This service is as far from Bitcoin as you could possibly be. There is no software to download, you cannot buy and sell it from anywhere without restriction, you have to integrate with the state at a very intimate level, indeed, they cannot even offer this service to everyone, even Europeans like the Dutch, thanks to the State.

What if the State says that all gold in private hands is to be confiscated, as they did in 1933, and as they appear to be heading for right now. Is this company, for ‘Security and Integrity’ going to simply go along with the State and steal your money?

Who knows. Who cares.

I would never put my money into a service like this where the State is alerted of all your details and ‘holdings’. They offer no utility whatsoever in comparison with Bitcoin. You cannot spend your GoldMoney at retailers directly, you can only redeem your stored gold for cash, which you then have to either take in person or spend through another intermediary if you want to buy something from Bangalore. And of course, there are the myriad fees and taxes you have to pay each time you move YOUR MONEY around between these entities.

This is the reason why Bitcoins are valuable. There is no service like it anywhere.

You can get started with them instantly.
You do not have to identify yourself.
You can use them from any location.
You can send them to any location.
You can fund them with any currency.
You can spend them immediately.
Your transactions are private.
There are no taxes on transactions.
Transaction fees are so small as to be irrelevant, and if you are a miner, you get the fees back from other users.

All of these features and more make Bitcoin a tool with a very high level of utility. Bitcoins are scarce, and you need them if you want to make purchases without the onerous and illegitimate predations of the State.

If the ideas of Liberty are spreading, and they are, Bitcoin will have a very large and primed population of users who recoil at something like GoldMoney.

The utility of Bitcoin, which is a function of the number of users who want it, will entrench it, or at the very least, the idea of it.

We will never go back to government run money, just as we are not going back to music pressed on vinyl. The quality of sound has been sacrificed for Digital Convenience, and more music than ever before is in everyone’s hands, accompanied by a new economy where the middle man is being killed off. Digital music is here to stay, and so is Bitcoin. The middle men are going out of business, and everyone is going to benefit.

The frictionless utility of Bitcoin, like the experience of finding music, books, films and software and then downloading them immediately is something that once you taste it, changes your perception forever.

No one who uses Bitcoin is going to accept GoldMoney as ‘digital currency like Bitcoin’. Its like saying buying DRM’d iTunes files for 99 is like sharing FLACs on IRC / Dropbox with your friends (sorry, I slipped into ‘tecchie speak’ as the illiterates call it. What I mean is the experience of downloading and sharing unencumbered music files that you can play anywhere, freely, between friends and colleagues for nothing, is not at all like paying money for files from Apple, where what you get are files that you cannot share or use on all of your music devices. Apple is a cumbersome, restrictive and invasive intermediary vendor that spoils your music experience. Is that better? I can only dumb it down so much… sorry!).

The genie is out of the bottle, just as it is with file sharing. Eventually no one will pay for entertainment files. It will be culturally unacceptable and commercially impossible. Similarly in the near future, no one will accept that you cannot spend your own money whenever you want, however you want, without anyone other than you and the recipient having a say in it.

Bitcoin, or its immediate decedents will provide the secure infrastructure for this, and most certainly not GoldMoney or services like it.

This does not, obviously, invalidate the immutable, irrefutable idea that the best money is gold. All it means is that on the internet, if you want to spend money, the best way to do it is Bitcoin. It is the easiest, the most Libertarian styled, the most secure (yes, the most secure, all the recent problems with Bitcoin users have not been due to a problem with Bitcoin, but with the people who are running it and the incorrectly managed computers that they control) and transparent way of spending money.

Finally, it seems like the Ghandi rule is sweeping through the Libertarians who at first, instinctively and irrationally railed against the idea of Bitcoin.

The people on the wrong side of history appear to be very quickly moving from the laughing stage, and are already past the fighting stage it seems.

Bitcoin has already won.

First they ignore you, then they laugh at you, then they fight you, then you win.

UPDATE!

Jon Matonis hit the nail on the head about this company back in 2009. His article is just the sort of thing that journalists cannot produce, and that the best Bloggers are good at; concise, rational even handed, insightful and purely fact based writing that spells it out just as it is. Read it!

And check out this informative, in depth interview with Mr. Matonis:

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

The clear divisions on Bitcoin

Wednesday, June 22nd, 2011

It is now clear where the lines dividing freedom minded people on the issue of Bitcoin are drawn.

On the one side, you have mostly older computer illiterates who are out of their comfort zone, and on the other, you have younger computer literate people who are comfortable with both free market ideas, sound economics and computers.

The former camp, the computer illiterates, all use the same form of argumentation and fallacious reasoning to attack Bitcoin, including straw men. Here is a good example:

Approximately 2,000 years ago, Aristotle said good money must be:

  • Durable
  • Portable
  • Divisible and consistent
  • Have intrinsic value

The astute reader will immediately realize that Bitcoin does not possess any of those characteristics and was subject to trouble from the getgo not to mention the security issues that immediately arise with anything computer and Internet related. A computer generated currency is not durable, as the recent hack demonstrates. And its certainly not portable. Can you imagine bringing your computer to the door to pay for your next Chinese food delivery? You get the idea for the remaining characteristics.

[…]

http://howestreet.com/2011/06/grim-decade-employment/

The straw man here is the line about Chinese food delivery. There is no reason of course, why you could not pay for your Chinese food in advance by Bitcoin. Its like saying, “imagine ordering books by computer from a company, lets call it ‘Amazon’. Imagine the delivery man having to keep change for all the sales! Its a security nightmare. IT WILL NEVER CATCH ON!”

The astute reader recognises faulty reasoning when he sees it, and is not persuaded by straw men.

As for the Aristotelian qualities that money must have, lets go through them for Bitcoin.

Bitcoin is durable. In fact, because it is not a physical good but is instead, an idea fixed in media, it can last for an indefinite time as long as it is copied to another medium. You can keep backups of it, which of course, you cannot do with physical money. Once again, the fact that you can have two copies of your money and cannot spend it twice is the breakthrough of Bitcoin.

Anyone who says Bitcoin is not portable, is not thinking clearly. Bitcoin is the most portable ‘money’ ever created. It can be sent anywhere in the world in an instant. There is no other money like it in the world in this respect.

Bitcoin is divisible. Each coin can be divided into one million equal parts. Bitcoin is consistent in value, if we accept that the value of a commodity is related to its supply.

The only test Bitcoin fails, some would argue, is that it has no intrinsic value. Lets go to the dictionaries to be absolutely sure:

What Does Intrinsic Value Mean?
1. The actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value. Value investors use a variety of analytical techniques in order to estimate the intrinsic value of securities in hopes of finding investments where the true value of the investment exceeds its current market value.

[…]

http://www.investopedia.com/terms/i/intrinsicvalue.asp#ixzz1PzdrOzEy

In finance, intrinsic value refers to the value of a security which is intrinsic to or contained in the security itself. It is also frequently called fundamental value. It is ordinarily calculated by summing the future income generated by the asset, and discounting it to the present value. Simply put, it is the actual value of a security as opposed to the market or book value.

[…]

http://en.wikipedia.org/wiki/Intrinsic_value_(finance)

An intrinsic property is an essential or inherent property of a system or of a material itself or within. It is independent of how much of the material is present and is independent of the form the material, e.g., one large piece or a collection of smaller pieces.

[…]

http://en.wikipedia.org/wiki/Intrinsic

I think the last one puts the nail in the coffin of the argument that Bitcoin has no intrinsic value.

Bitcoin has intrinsic value, by definition, because the system has value to the people who use it. It also has intrinsic value, by definition, because the amount of material in a thing is not relevant to wether or not a thing has intrinsic value; Bitcoins are immaterial, and they are part of a system that has value.

The fact that a single exchange, MTGox was hacked does not demonstrate that ‘A computer generated currency is not durable’; this is another instance of fallacious thinking. For fun, can you pick the correct one?

Once again all of these fallacious arguments are being made on the internet, and the irony of this appears to be lost on the people making them.

Even if Bitcoin is only used by one one hundredth of the entire internet population regularly, the number of people using it will be enough. More than enough. “For what?” I hear you ask… anything we need.

The people who build the systems that change the world do not need luddites, computer illiterates and sticklers to urge them to do what they do. The internet was built by a small number of people, and it has spread everywhere. Bitcoin was devised by one person, and it has already changed everything.

While we are at it, there is another prediction that has gone out of the window, the lone wolf inventor was declared extinct a few years ago, the claim being that the research and development costs involved in creating new things meant that unshaven men in their garages would not be able to produce world changing technologies.

How wrong they were. Bitcoin and Bittorrent are only two examples.

This is true for Bitcoin and the systems that are going to come after it. You need only look at at a widely adopted system like Skype, which is a decedent of ideas behind Gnutella, which itself was a decedent of Napster.

This is another problem that afflicts the discussion of Bitcoin; not only do very few people have a knowledge of how software works in general, but even fewer know about the recent history of some of the amazing tools we now take for granted.

Take a look at Nautilus, the file browser. Did you know that a company raised 11 million dollars to develop it? The company was called Eazel, and now we all benefit from that massive investment whenever we use the file browser in our Linux desktops, since Nautilus is now free and open source. Before this company, file browsers on Linux were not so user friendly. The people who invested in Eazel might not have made a profit, but that is not the point. The point here is that a world class piece of software was released that made something that was hard much more easy. The same dynamic can happen with the Bitcoin client, and when it does, we are going to experience massive, permanent disruptive change.

When thinkers like Mark Shuttleworth or Justin Frankel or a consortium of developers with many millions of dollars in the bank decides to fork and polish Bitcoin, you are going to see the emergence of a new version of the Bitcoin client, which will be as usable as the Skype client, that will sit on top of the existing Bitcoin network. Adoption will then go exponential, and all the short sighted people who claimed that it will never catch on will be forced to eat their words.

This new Bitcoin client will not only address all of the problems of the present client, but it will introduce new features that will make the adoption of Bitcoin accelerate; like being able to print out your Bitcoins so you can spend them like paper money.

Thinking is hard. Reading and understanding technical specifications is not easy; you have to spend many hours cross referencing different documents, each of which is liable to cause you to have to read other difficult to digest documents.

If you are not willing to do this, its not a problem; the world will go on without you. Thats why all these people are able to send out email newsletters, publish websites and make Skype calls without knowing how it all works or the history of the tools they are using.

What you cannot do however, is claim that something, in this case Bitcoin, cannot work when you are not capable of understanding it or even worse, are unwilling to make the effort to research it properly, and then expect people to take you seriously.

Something as important, significant and world-changing deserves proper attention and analysis, not flippant twaddle masquerading as insight.