Bitcoin: a currency for which capability to buy pizza is noteworthy, required custom programming, comes with a 10% novelty tax, and is incapable of maintaining a single price for 24 hours.
Surely there is more to the Bitcoin movement that a desire for a currency that's worse than those sponsored by nation states. Just pointing out that Bitcoin sucks does nothing to address the underlying reason why people want to use Bitcoin. Where I live, alternative currencies seem to have sprung up as a response to feelings of disgust with the current economic system, or mistrust of government or bankers.
States and groups are looking at how the federal reserve is currently purchasing more than half of all newly issued U.S. Treasury Bonds, and drawing the inevitable conclusion that the the failure of the system is accelerating. The natural end to an inflationary currency is BOOM! There is a desire out there for a deflationary currency. Bitcoin is deflationary, right?
Now I think Bitcoin Sucks is sound economic advice because for every altruistic financial scheme, there have been a hundred scams, but I don't know if Bitcoin has the potential to be useful if we experience hyperinflation.
"And yet inflation is as low or lower than it has been in the past 30 years. Not to mention compared to the high inflation of the '70s."
The problem with this statement is that 'inflation', as a measurement, has changed greatly over 30 years. To use a technical analogy comparing inflation in the 70s is like comparing "lines of code to implement a function" in a RISC assembly language and python. The only thing that is comparable is that they are both programming languages.
There is a particularly telling comment that came out of the fiscal cliff negotiations, where the Senate asked for a change in the way 'inflation' was computed to avoid a big hit with respect to government programs tied to the CPI. (search for "chained CPI fiscal cliff" for various examples). This very explicit mention of managing the CPI to avoid increases aside, my father who is on a military pension (also indexed to the official government "inflation" rate) has a pretty good history of expenses, and their rise, during his retirement which does not correlate at all with the government rate.
There are some pretty tin foil like sites like www.shadowstats.com but you can also use various search metrics to create a 'bundle' of expenses (housing, food, clothing, gas, taxes, and utilities) and create your own view of what the cost of living has done over the last 20 years. Add in the effects of 'unit deflation' where a 16 oz box of breakfast cereal is now 11.2oz and you realize that the cost of living is going up more than your government is sharing with you, even informally. Their motive is pretty simple, they want to avoid killing the budget with huge increases in indexed aid and indexed treasuries (called inflation protected securities).
But it is interesting that you mentioned the 70's because that is where this started. No one except economists and policy wonks "cared" about inflation until it became an election issue. Then voters started "caring" a lot so the congress has helped "clarify" what it means more and more. Its one of the things I would do if elected to congress (not that I'm running) is I would create a steel wall between economic statistics and legislators. Government manipulation of them does more harm than good unfortunately, but nearly every government manipulates them to some extent.
The CPI has a number of (serious) problems and I would never suggest that congress attempted to change the calculation for anything other than cynical reasons, but the proposed change would coincidentally be the better measure.
The current method which is often used to adjust nominal expenditures into current dollars is calculated using a Laspeyres index which, year-over-year, does not account for the fact that when prices change people shift their patterns of consumption.
A Paasche index is somewhat the reverse of this in that it assumes that what you purchased last year was the same as what you purchased this year.
The Fisher index is the geometric mean of the two and if you've had a chance to study some of the methods and difficulties of constructing price indexes, it does offer a plausible compromise between the two, allowing for substition but giving some weight to both indices.
However that it accomodates changes in consumption or "substitution" lets lobbies like the AARP exclaim that it hides the case that retirees have to switch from beef tenderloin to cat food when prices rise.
But in actuality it's both a pretty minor change and the better measure of price changes (if the underlying data can be trusted).
'Inflation' hasn't changed, one particular measure of it, the CPI has changed. There are other measures, though, that are calculated differently. And the PPI, the GDP deflator, what wage indices I can find, and the Billion Prices Project all say that the current rate of inflation is between 1 and 3%. Which is basically as low as US inflation has gotten in post WWII-history, baring the bout of deflation we had at the start of the financial crisis.
Yes, by selectively looking at one category of good while ignoring other you can create your own special index such that inflation looks like it's high, but that's always true except in a static economy.
As to people worrying too much about inflation, well, I agree in general. But please read the Wikipedia page on inflation to see the reason why politicians might want to care about inflation even if the voters don't.
CPI is only one measure of inflation. For example, substituting housing price index for owner equivalent rent raises the CPI a lot recently.
Look at asset prices, they are going up very fast (historically). Or healthcare or higher education, they have been growing faster than CPI for decades with fiat money. You have to look at who has the newly created currency, and where they spend to see the inflation (gov't, high wealth, and upper middle).
The yields on treasury bills are extraordinarily low by historical standards (i.e. the prices are high) because they are in high demand, not low demand.
House prices went down, and a recession happened. So making the prices of some other investment (which probably has to be government debt in order for them to not get sued for favoritism) go up by a similar amount, should make the recession stop happening.
I actually like the concept of alternative currencies. But bitcoin really does suck. It's not just an alternative currency. It's an alternative currency with a built-in retarded fiscal policy.
Bitcoin's fiscal policy is only one part of the whole bitcoin idea. It is possible to change the fiscal policy while keeping the rest of the crypto-based system.
The fiscal policy is controlled by two numbers which are chosen by 'consensus' among bitcoin users: The reward for mining a block, and the 'difficulty' of mining a block. You can always mine blocks in violation this consensus (eg reward yourself too much), it's just that no one will listen to you, and no one will accept the bitcoins you 'mined'. However, If everyone agreed to change how we choose these numbers, we could change the policy.
I'm pretty sure you could set up a 'bitcoin-2' network which would honor transactions from the original bitcoin network into the new network, yet have different algorithms for reward and difficulty. For now though, it doesn't matter since the current 'fiscal policy' is quite expansionary.
Moreover, there is a strong argument that deflationary currencies are morally wrong because of their effect on generational wealth inequality. In a society with a deflationary currency, nearly all wealth will be held by older people, simply because they got there first.
You don't even have to look very far to see what a society with deflationary currency would look like. There is a market that has many of the same properties as a deflationary currency, and that's real estate in places like SF and NYC. In Manhattan, there are a ton of older people who purchased real estate in say the UWS in the 1980's and 1990's. Property values have skyrocketed since then, to levels that these people never could have afforded at the time they bought their property. Their kids, now the same age/of the same relative financial standing as they were when they bought the property, are totally priced out of the market.
> Moreover, there is a strong argument that deflationary currencies are morally wrong because of their effect on generational wealth inequality. In a society with a deflationary currency, nearly all wealth will be held by older people, simply because they got there first.
Sorry for the stupid question, but isn't this morally equivalent to being old and had more time for your direct or indirect investments to grow (pension funds, ...). I mean in the current system old people which weren't stupid/unlucky to throw all the money away usually do have more money than their children (in fact in Italy where I lived, the young generation regularly needs help from parents for buying a house, a car etc).
I believe that you argue that since in a deflationary system "being old" per-se grants you wealth, this is unfair because you didn't earn it, it just happens. However you can still throw all your money in booze and games when you are young, not unlikely the current situation.
But probably I don't get the magnitude of the bitcoin deflation. Wonder what is the predicted deflation in 30 years (assuming an optimistic widespread usage, not the real case)
Doesn't your example of NYC real estate undermine the point you've made about inflationary monitory policy not rewarding those who got there first? That happened without deflationary currency -- surely it's impossible eradicate rewards for being first.
My point isn't that NY real estate is the result of deflationary currency. My point is that its an example of what happens when assets appreciate without investment, like currency does in a deflationary system. The old people just end up owning all the wealth, in a very dramatic way.
The problem with a fixed M0 is that broad money (credit and debt based on the money) can fluctuate, causing deflation. Deflation makes people delay on investments, which causes a recession, and more deflation. It's a vicious cycle. That's basically how the Great Depression happened.
The GFC was a similar crisis, but the Fed was able to quantitatively ease the US out of it. OK, things were still pretty dire, but given how much debt there was (as a result of the debt bubble which had kept the economy going gangbusters for so long) it wasn't as bad as it could have been.
Austrians (Ron Paul) say things like "that's bad - the Fed shouldn't be able to rescue the economy, because that will force the bankers to act like grown-ups". Unfortunately, it doesn't work that way. The bankers will still take massive risks, and crash the economy every now and then, and the Fed won't be able to help.
Of course, there's reasons to be concerned about the US economy. IIRC, real median wages haven't grown much since the 80s. Basically all the growth has been the rich getting richer. But I don't think that's because of inflation, so much as general policies which favor GPD growth over raising median wages. The US is not a country which cares about the poor, and outsourcing has weakened poor Americans' bargaining power. With the rise of China, that might change (Chinese wages are rising quite quickly, which will make US workers more competitive, which will allow them to demand higher wages). Whatever the case, I don't think it's all the fault of inflationary monetary policy.
And no, I don't blame robots. If robots were taking all the jobs, they wouldn't be going to China. Maybe they will take all the jobs one day, but currently more robots means cheaper products, which means more jobs. Also, before anyone says "the jobs will just go to Africa", they better consider the challenges in building infrastructure there, the fact that Africa is quite diverse (there won't be 200 million peasants all swarming to special economic zones within a decade), and the added demand from all the newly wealthy (or at least, not piss-poor) Chinese.
Even though the number of "real" bitcoins remains given, there is nothing stopping individuals or banks from trading them more frequently or issuing tradeable notes denominated in bitcoins, which would both raise the effective money supply.
Sure, but the (very important to me) difference is that there's no one to bail you out when people come redeem the claims for real bitcoins, allowing people who don't like such schemes to safely isolate themselves from them -- just hold and insist on real bitcoins.
Define "worse". It's an endless pain in the ass to get money from <person X> to <person y>, because I have to mail a check, use PayPal, give out rather sensitive banking information, pay insane wire transfer costs (and delays), or meet with them in person. Now try automating it.
There are reasons aside from "fiat money sucks". The big ones I encounter seem to be "this is interesting", "this has interest, maybe I can make money in it", and "this can do X".
I used to work in actual currency trading and currency volatility is a pretty well understood problem when your dealing with smaller currencies (especially currencies used in politically unstable countries). You just need to maintain a bid-ask spread that's wide enough to protect you from the typical volatility (based upon recent historical data) and have a real-time trigger that suspends trading if the volatility exceeds your spread.
Yes, but I'm saying that there's a standard way to handle it, which is essentially taking the payment at a discount to the market rate in order to give you time to change it to your own currency without taking a loss.
If you do that, you'll realize that accepting Bitcoin has higher fees than credit cards. People won't understand this if their identity depends on them not understanding it.
You missed the point. If you (or your payment provider) add, say, 5% padding to account for exchange rate volatility and then you also pay 1% to Coinbase, your total fees are 6% which is way higher than credit cards.
Almost every new technology is more expensive at first, may be difficult to deploy and requires additional effort to be made interoperable with existing stuff, so what exactly is your point? BTC solves some hard problems in an interesting way, that this comes at a price is a no-brainer.
GBP... The price of a Domino's pizza hasn't changed in the last 6 month's in my area. With this site the price could feasibly change several times in a single day.
I think you missed the point. It all depends on what you consider the true price. If you measure in gold, your price fluctuated too. When Bitcoin gets world domination, GBP will be the one flucuating in comparison to Bitcoin, for the same reasons Bitcoin is fluctuating now.
As someone who doesn't own quantities of gold and doesn't travel around the world much the true price of anything for me is GBP. I think a lot of people would think the true price of something is that of their local currency.
I don't know what America is like. In the UK the Domino's website is very good, very easy to use. Sure you can use BitCoin but I don't understand why someone would want to use BitCoin and pay a premium to do it.
>If somebody can match your key to your person they can see your entire purchase/sell history.
Which is why keys aren't attached to individuals and can be changed with every transaction.
Yes, some traceability is inherent to blockchain crypto-currencies. But using them anonymously is still easier than with any other electronic payment method.
The whole issue is that the pizza-seller takes GBP, or USD, or CAD, or whatever, not bitcoin. Thus, if the price of pizza fluctuates day-to-day in Bitcoin due to the fluctuating exchange rate, using Bitcoin by conversion to GBP or USD to buy pizza is pretty dumb.
Call me when a pizzeria starts actually taking Bitcoins.
Makes no sense to measure fluctuations without a reference. Are you saying the numerical value solely determines the price? If so, the pizzas were very very expensive in Italy before they got the Euro.
Well, that's a function of the 'true price' being measured in a different currency than the one you're paying in. Some retail businesses that accept foreign currency rectify this with a flat exchange rate.
For example, in Canada businesses (at least on Southern Ontario) will generally accept payment in USD instead of CAD, but they tend to have a flat exchange rate (e.g. 1 USD = 1 CAD or 1 USD = 1.10 CAD). If they priced the exchange rate to the current exchange rate as measured by some currency exchange, that would be different.
You run into this same issue when using a US credit card in Canada. The credit card company will exchange (and usually charge an extra ~1% charge). IIRC, they use up-to-date exchange rate info, so technically the price in USD is constantly changing.
This means that if you call up Domino's and ask them "How much does a large pizza with extra cheese cost?", and they quote you a price in USD or JPY or not-a-toy, you can reliably expect that quote to last long enough to pay for the pizza. (There is a related concern, as a pizza providing entrepreneur, that your currency should be stable enough that sales of Monday's pizzas can reliably purchase Tuesday's tomatoes without losing half their value overnight, but it actually does Bitcoin way too much credit to say that that is the main reason you can't reliably make a bitcoin-accepting pizzeria.)
FYI this is a concern that companies using USD also face. (For example Apple will quote a USD price for a laptop that they will build using Yuan... even though the exchange rate between USD and Yuan is always changing).
In fact, your USD pizza parlor example is actually more complicated than you make it sound -- tomato prices, wheat prices, etc all fluctuate based on supply and demand.
I think this is a place where web entrepreneurs get confused because their high margins and large suppliers do such a good job isolating them from the problem: if web profit margins were 10% over the cost of hardware, and if you were running your own servers, you'd be exposed to the fluctuation of energy and bandwidth prices... you'd have the same problem predicting how much it would cost to serve a web request. (I imagine Google actually faces problems like these because of their scale).
So it's not like these problems don't happen when you use USD... it's that your margins are so high, and your providers are so good, that you've forgotten the problem existed in the first place. #firstworldproblems
For those curious how these sorts of problems are handled by non-web companies, the answer is derivatives. Apple will hedge their USD -> Yuan conversions as necessary with currency options, Dominos uses wheat futures, the farmers supplying wheat to dominos are using oil futures, and the oil company will have currency hedges for the 50+ countries they operate in. By buying and selling risk, companies are able to give you the feeling that prices are stable. Even though prices aren't stable.
If you'd like to do something like this for your bitcoin site, you should check out https://icbit.se (a bitcoin derivatives exchange)
I'm kind of disappointed with your attitude towards bitcoin since I otherwise highly respect your writings and opinions. A software entrepreneur should see the things that bitcoin can potentially enable. Just that it is now just used by black markets and some tech freaks, doesn't mean that this will be the case forever.
I never got this argument. Currently the money you pay with in the shop is the only one associated with funding wars, gangs, human trafficking, etc.
One thing that leaves a nasty taste in my mouth is that Bitcoin encourages people to use services that would otherwise be referred to as money launderers, all in order to try and guarantee their anonymity.
Please elaborate on what you're saying. I don't see that Bitcoin encourages anybody to do anything -- Bitcoin just is.
It's not clear to me what services would otherwise be referred to as money launderers, or how they are promoting anonymity. Paypal? Mt.Gox?
Is it money laundering when you buy Dominos gift cards, or phone cards? Pre-paid mobile phones that you can recharge using cash at any gas station? Web hosting from GoDaddy?
https://en.bitcoin.it/wiki/Anonymity
The link you passed seems to start with the misconception that Bitcoin is actually anonymous -- that users of Bitcoin might come because they think it makes them more anonymous.
I was also interested to read http://en.wikipedia.org/wiki/Structuring
Did you know it's called "smurfing" when you read and understand the law, and make your deposits in such a way that they will fly under the radar?
Money laundering just seems like such a nebulous crime to me. Maybe it's because I've never imagined having enough money to bring the scrutiny of federal agencies down on me. I'm still paying so much interest every year in federal student loans, at the end of the year they actually pay me just to have a job and keep it.
EDIT: I misinterpreted what you said. Yes, I do think it's freaky now that you put it that way. However it's not the act of making transactions over $10,000 that's illegal, it just brings increased scrutiny on you. IANAL though, and I don't know how they can determine that your transactions shouldn't be "just under the limit" that they decided arbitrarily was the amount that they should watch for.
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That's not what I thought was freaky. It's that it's actually called 'smurfing.'
You can't disagree that money laundering is a nebulous term! My understanding is that if you're not doing anything illegal in the first place, then it's not illegal, or money laundering, to attempt to remain anonymous and make your transactions anonymous, however, if you are attempting to make your money less traceable because you want to cover up your illegal activities (say tax evasion), then it's an extra charge for the district attorney to get you with.
Have you ever heard of being charged with conspiracy after the fact, when you've already been exonerated of the charge that you supposedly conspired to commit? It happens.
I don't understand why you think this is a point to be made. Yes, the ingredients/labor cost of a pizza from Domino's is USD-relative and the value of this new currency is volatile.
Well, at least your bank nor the goverment didn't know that you were buying that pizza. Unless the pizza broker service or Domino's is working with the goverment.
Bitcoin is as anonymous as cash if you use a mixing service.
No it's not. There's plenty of information that will still leak out, whether it's what service(s) the outgoing money is then sent to, the time of day following transactions take place, and a million other tiny little pieces.
And this is ignoring any issues with the mixing service.
Why not? What if the mixing service operates like a checking account, and you keep a permanent bitcoin balance with them, making deposits as you receive bitcoin payments? When you want to make a bitcoin payment, you instruct the service to make a transfer from its own bitcoin wallet, and reduce your balance in its own records accordingly. With this method, incoming and outgoing payments would be asynchronous, so it would be hard to use timestamps to associate them.
The interesting thing here is that with bitcoin, a cash-like transaction may not be anonymous, but a check-like transaction usually would be.
Of course, the middleman institution could still be compromised here, but since it uses its own protocol to track its customers' balances, it could use one that does preserve anonymity effectively.
Because what you've just described is still just obfuscation.
With this method, incoming and outgoing payments would be asynchronous, so it would be hard to use timestamps to associate them.
Doesn't matter. An outgoing payment will happen at some point in your day, and unless you have zero time patterns in your life, it will help identify you. As will the resulting services and people you send money to, even if the pieces start as small and as basic as "Orders pizza."
I don't see how that would work unless you already had a priori identifying information for the person who performed the transaction.
If I deposit 500 BTC every Friday, and immediately transfer it into the mixing account, then order a pizza for 10 BTC on a Tuesday, paid for from via mixing account, how would you confirm that I was the one who ordered the pizza? All you can determine for certain is that (a) I am a subscriber to the mixing account, and (b) someone who subscribes to the mixing account ordered a pizza. If there are a million subscribers to the mixing account, without access to their internal records, there's no way to conclusively associate outgoing payments with specific subscribers.
>You can split it into a million micropayments whilst you're at it; it still doesn't stop the information leak.
Yes it does. If I split one payment into three different sizes and send them hours apart while I'm sleeping, from a shared eWallet used daily by 1000 other people, you think that is going to be traceable to me in any way?
You want to buy a pizza for yourself or someone else. At some point your transactions will have been gathered together to do so, either in the merchant's wallet or elsewhere.
Hey presto, there's some information. Either about liking to buy pizza, having friends in country X, or being based in country X.
Trace it backwards, you have a list of people potentially involved.
I'm not saying that a single transaction will identify you. However, much like that EFF browser identity page, it doesn't take many bits of information - plus a few "likely good with computers" type guesses - to start putting together a list of very plausible identities.
That might be feasible if you had ten people using it with 100 addresses (where you know one of the public keys of each of them). The problem difficulty almost certainly scales up too quickly to work with a thousand people and a million addresses.
Well, I don't think you're really qualified to disagree, considering that you're revealing ignorance of the relevant domain (computational complexity theory) by arbitrarily equating different problems as "complex but still solvable".
Well, some problems are so hard (in the rigorous complexity-theoretic sense) that no amount of hardware is going to make a difference. For example, problems currently classed as NP-hard take, in the general case, an amount of time that increases exponentially in the problem size, so past a certain threshold, take too much time even given all the computers on earth.
The problem you'd have to solve here is basically the subset sum problem: given a set of transfers in an out of a mixer (let's say you already know which addresses it uses, which is not easy since it can make new ones for free) which subsets of the transfers out have the same totals as which subsets of transfers coming in? (From that point you identify one in/out set of addresses as belonging to the same person.)
That problem likewise takes exponential time to solve in the general case. And since the mixer chooses the transfers, they can pick it so that it's hard to find solution partitions (i.e. drive it to the part of the problem space where heuristics help the least).
Or they could go the opposite approach and add a random, time varying tolerance (i.e. charge a fee that varies between x and y % over time, or promise that you might get up to x% more or y% less than you put in) that makes the problems extremely underdetermined so that there are arbitrarily many constraint-satisfying solutions thus that the aggregate data is uninformative.
No, "Google solves complex problems" does not prove what you think it does.
> The problem you'd have to solve here is basically the subset sum problem: given a set of transfers in an out of a mixer (let's say you already know which addresses it uses, which is not easy since it can make new ones for free) which subsets of the transfers out have the same totals as which subsets of transfers coming in?
This isn't even the right problem, given the usage model that I posited and to which mootothemax replied; if you keep a balance stored in the mixing account, to which you make deposits on a regular payments, then it's highly unlikely that outgoing payments will match incoming payments in the first place. How often do you currently deposit checks into your bank account in exactly the same amount as outgoing payments that you immediately write after making the deposit?
There'd be no conclusively correlating information here; payments into the mixing account would have different amounts and timestamps from payments going out of it, and in order to use inferences taken from patterns as identifying information - e.g. someone orders a pizza from Mario's Pizzeria every Tuesday at 7 PM - you'd have to already have identifying information about the person you're trying to find in the first place, e.g. that I live near Mario's and happen to enjoy their pizza.
It's not just that the complexity of the problem increases with scale, it's that the reliability of the correlations you can make also decreases with scale.
I think it's a bit rich to accuse me of not being qualified to disagree when you've decided to ignore the other half of the equation: that the transfers ultimately end up elsewhere, ie the merchant's wallet.
I fear that as long as you and I fling accusations like this at one another, no good will come of this thread, so propose we end it thus: I consider the problem solveable; and you do not.
What you're describing is a bank. People came to bitcoin to be able to handle their own cash and not use a bank - you're missing the purpose here.
This is also money laundering, an illegal activity. If you need to do something illegal to get the bare minimum of functionality out of bitcoin it's not appropriate for business.
It might enable money laundering, but it isn't itself money laundering; and people use Bitcoin for a variety of reasons, including its ability to offer enhanced anonymity in electronic transfers, which this method would further in some circumstances.
Oh, blast it all! They've learned that my agent 1PvJ8Ncwk9KQjGEDti8uBFpDR1gLgZ8QYn gave 0.92 BTC to 1Nhaw787YjYMjGCzCc9H6jsrxiWFCGzJfK! Now it's only hours until our whole operation is unraveled!
This is where a study by the Feds (I think?) comes in. They found that they were generally able to link accounts as belonging to the same person, based on transaction patterns and flow of money between the multiple accounts the holder owns.
You can make it more difficult to link your accounts together by never transferring funds between your different accounts, but then how do you fund your accounts? It just gets more and more complicated.
I don't really think Bitcoin will bring an end to "Follow the money".
That study was by some Israeli CS students, not the feds. It's methodology was severely messed up. It got absolutely destroyed by this peer review. https://gist.github.com/jgarzik/3901921
Not really. You can create new 'names', i.e. your wallet. But they start off empty. So how do you get the actual money (bitcoins) into the new wallet? You need to transfer the money from your old wallet/name to the new one. And that is publically logged. This means you can always follow the money.
The way to get around this is to generate many wallets and move things around a lot. However it's still money moving within a subset of bitcoin wallets, so potentially trackable still (Google is able to detect 'link farms', so the police might be able to detect 'mixing farms')
It's anonymous in the sense that you can create a different identity ID, but as soon as that ID is correlated to Domino's transaction # for that transaction, or any other slip of personally-identifying info, then you're no longer anonymous.
It's worse than That as you need to fund any new ID from another act. You can mine bitcoins and send them to a new act but the ip's used to generate those bitcoins are public.
Really for most mid sized transactions cash if far better, and dominos accepts cash unlike say amazon.com.
> You can mine bitcoins and send them to a new act but the ip's used to generate those bitcoins are public.
What? There seems to be lots of misinformation here. Please prove your point. There is no need to publish your IP when you mine. Most people mine in pools, and I guess the mining pool announces the block. But you can announce it through Tor, or you can solo-mine through tor.
Good point. Now the pizza shop and unknown intermediary have a record of my purchase and my delivery address. But at least they can't link it to my credit card!
Merchants accepting bitcoins increasingly have real time price quotes in bitcoins.
Likewise, the Bitcoin Foundation operated its finances in 2012 without a conventional checking account, adjusting the bitcoin salaries of its employees each quarter.
The fact that a currency like bitcoin with all the shortfalls you are describing has any traction is more indicative of the feeling we have about our current options.
This is not in any meaningful sense "paying for pizza with bitcoins" anymore that hauling your TV to a pawnshop, they buying pizza with the proceed is "paying for pizza with TVs" - it seems to exchange bitcoins for USD, then it buys a pizza for you with the USD.
From the narrow perspective of a BTC-miner, yes, it's relevant, but for subscribers to the lofty goals of a central-bank-independent/anonymous currency it's pointless.
> This is not in any meaningful sense "paying for pizza with bitcoins" anymore that hauling your TV to a pawnshop, they buying pizza with the proceed is "paying for pizza with TVs"
It works for the very small set of people who have bitcoins they haven't bought with a traditional currency. This is bigger than the set of miners, but not by much.
> This is bigger than the set of miners, but not by much.
From bitcoincharts.com quickly estimating that the volume in exchanges was 2 million BTC. Bitcoins produced by mining = 3600*30 = 108000 BTC. Unless the speculators are constantly buying from each other, I would say that there are people earning bitcoins in the bitcoin economy, and the amount of those people vastly outnumbers the miners.
But I doubt that they care that much about the pizza service...
You would wager wrong, depending on how you define "large." The total exchange volume of all exchanges is only about 93k BTC per day. http://bitcoinwatch.com/
The daily transaction volume, with change transactions removed, averages around 400k BTC per day.
So speculator trade is less than 1/4 of all Bitcoin transactions.
Fun fact: SilkRoad is less than 3% of daily Bitcoin transaction volume
75% of trades are commercial in nature. There are thousands of vendors dealing in BTC- hundreds of which deal in it exclusively. Some are even among the most popular web sites in the world.
25% of the daily volume (100K out of 400K) is pretty huge if you ask me, yes.
How much is money-laundering? How much is people just moving stuff around for the hell of it? Of what's left how much is online gambling (an economic activity but not necessarily a 'good' one)?
These things would be very hard to tell I would have thought.
That's exactly what I thought. Apart from the person who takes your TV to the pawnshop charges you for taking it a 10% commission "in case it's worth less by the time it gets there" but with no refund if it's worth more. The frustrating thing for me is that ... it's just "too simple" . Hell I think I'm going to start a website luxury-cars-for-bitcoins.com and see if any suckers want to sell out.
Selling gold and silver in this way would probably be a lucrative business, actually I would be surprised if somebody wasn't doing that in large volume already.
Has any other bitcoin news media event happened in the last few hours? Not the pizza deal because that is somewhat old news - but this HN post? The price jumped up from 24.5 to 25.5 and I don't see any other trigger!
Back in 2011, I learned about bitcoin mining from HN and solved two blocks myself with a CPU miner. Those coins are worth several thousands of USD today. Thank you HN ...
I don't think there's any truth to this theory. As far as poker, they're mostly all poorly designed and have no traffic. Maybe a straight-up casino site would be better where you don't need people to play against and you don't care about user interface. But I think the whole "drugs, gambling, hookers" element of BTC is just FUD.
However, I think a ton of people are gambling on bitcoin itself. I've read that many investors say they've tried their hand at bitcoin. It makes sense. The market dynamics can't be much different than forex and are probably a fun experiment. But for serious traders I doubt they could wage big enough bets on BTC without driving up or down prices on themselves.
A shop charging 20% to shop for you is not the bitcoin break through that would change the rate within hours. Look at the trade volume in $$. It increased faster than the exchange rate, so my guess is that speculators parted from their coins too fast and the rally will continue for some time and has nothing to do with very recent events. I consider all this the aftermath of the reward split, wordpress.com and the slowly materializing ASICS.
Bitcoin has the potential to disrupt current payment processing. The main advantage to merchants is fraud reduction. Bitcoin transactions cannot subsequently be reversed by the customer once received by the merchant.
Additionally, bitcoin transactions have lower transaction fees than credit cards, wire transfers, cash couriers, and so forth.
No wonder that more startups are developing bitcoin applications.
Agreed, but this factor is reduced for in-person purchases from brick and mortar merchants. Additionally, many online web sites feature merchant reliability scores, e.g. Amazon.
Recent US legislation will make credit card processing fees more visible to consumers, with the consequence that low cost payment processors such as bitcoin will be even more competitive.
The Bitcoin protocol has features (contracts) to deal with that, but I don't think it's really implemented/used yet. And I'm not sure how it would work in the context of pizza or other physical goods delivery.
I don't get why people keep promoting the "no chargeback" aspect of Bitcoins, since the potential for chargebacks is often a good thing, and essential for establishing trust. Furthermore, Bitcoin (like any reasonable currency system, including cash) allows you to layer a protocol on top of it to allow intermediaries that can do chargebacks in the case of bad behavior.
"No chargebacks" = "hey, just like with physical cash, someone can just run off with it once you transfer the money". Sure, sometimes that's what you want, but it's not something you have to accept as a result of using that currency type or unit.
US dollars can be used to purchase marijuana, US dollars can be used to buy Dominos Pizza. Coincidence? Yes, BTC & USD are both mediums of exchange and mediums of exchange are used to buy goods & services with.
The problem for miners is paying off their mining equipment from the daily profit before that equipment is obsolete and can no longer make a daily profit given the cost of electricity.
One thing to note about those calculations is that, if you're using electric heating, the energy you used to mine would of being used to heat your home. So it's not so much of a cost.
"However, it’s unlikely that the customer would be able to actually track the order through Domino’s online order tool."
Actually, so long as they have your phone number for delivery issues/to give the driver directions you can track any Domino's order by phone number on their web site (https://order.dominos.com/en/pages/tracker/#/track/order/). Last time I looked they were passing json around or something and it was easy to scrape.
The exchange rate between USD and BTC is quite volatile. Either they have to constantly change the bitcoin price, or your pizzas will frequently get quite a bit cheaper or more expensive.
No need to speculate, they explain how this works right on the main page of http://pizzaforcoins.com :
"We set our exchange rate APPROXIMATELY $0.50 Cents less
then the current Mt.Gox Rate. The reason for this is that
with rapid fluctuation of rates and occasional drops, we
do not want to be left holding a worthless bag if the rate
drops for some reason. We update prices on a daily basis
to reflect this 50Cent rule."
I imagine stores counter that by setting the price in USD on the server side, and then using an API to convert it into bitcoin on each page view. Problem solved.
Bitcoin is a currency. The point of it is to buy things.
Because it is based on encryption, it can provide both hiding of who you are, and strong proof of who you are. But it is cool that it can also supply you with pizza.
Completely inappropriate comment for HN, but the sentence:
"Because it is based on encryption, it can provide both hiding of who you are, and strong proof of who you are. But it is cool that it can also supply you with pizza."
Seriously made me laugh out loud. You just made my day :)
To expand on that: the main selling points of BTC are that it's easy to transfer and that there is no central bank, which makes it impossible to tap into your funds by increasing the money supply. If your only concern is anonymity, cash is the much superior option (true anonymity vs. mixing).
While it may be easy to transfer bitcoins anonymously, spending them anonymously on tangibles is just as hard as spending any other kind of money anonymously. Tax evaders are often caught because their lifestyle and assets are inconsistent with their reported income, and not necessarily because government is able to follow their money.
It is useful if you happen to have some coins and want to spend them without converting them to USD. Useful to some. I don't see how it defeats the anonymity. If you fear that the pizza service is run by FBI, you can always use your coins through a mixer.
Great, pizza! The more things we can buy with this virtual currency, the better! If you'd like to start using Bitcoins check out http://thebitcoinmaster.blogspot.com
I wonder how dominos lawyers will feel about their brand name being used in connection with bitcoins, which so far are useful mostly for illegal trades.
"I'm sorry, I don't know why someone mailed me a box of drugs. Could have been anyone that placed the order. Want to arrest me for this? Great, looking forward to next week when you'll be arresting your entire HQ for receiving drugs from Silk Road."
[Note: You don't actually say that, rather, your attorney argues the above with reference to the rules of evidence and burden of proof; and asserts that receiving a box of drugs in the mail is insufficient proof by itself that you ordered it, and the only other evidence is that a series of jumbled characters paid for it.]
Um, the police already know all of this. If they use this information, they are not just going to rock up to court with (purportedly) your public transaction history and a subpoena showing that you got a pizza delivered using bitcoins and get a conviction.
They're going to use it to get a warrant to search your house.
And yeah, this trawler like approach will not catch everybody. But it could score a lot of convictions very quickly.
Details, please. How are they able to do that in practice? There seems to be a lot claims like these hanging around, and not many explaining the steps in practice.
Im not an expert, but I will try (and if im wrong, let me know).
When you purchase something via bitcoins, it is public information. You have an address that is public that says abcdef bought this. abcdef cant be traced back to anyone unless you publicly announce you are abcdef.
When you buy a pizza, you are saying abcdef lives at this address. So anyone with a subpoena on Dominos records can tie your address to your previous purchases.
> When you purchase something via bitcoins, it is public information. You have an address that is public that says abcdef bought this. abcdef cant be traced back to anyone unless you publicly announce you are abcdef.
Definitely not. Transactions are public, but definitely not the information that connects transactions to identities or merchants.
> When you buy a pizza, you are saying abcdef lives at this address. So anyone with a subpoena on Dominos records can tie your address to your previous purchases.
Also wrong. If you send the transaction from a web wallet, the merchant receiving the coins can hardly say anything about you.
It seems that there are lots of trolls here shouting something about bitcoin which they don't really know much about.
I am saying that a transaction is public, not the details.
I am also saying that dominos will have that transaction tied to the delivery address. This is not intrinsic to bitcoin, its all done on dominos side as part of delivering a pizza.
So let me try again:
If abc transfers bitcoins to xyz, and the FBI knows that xyz is a drug dealer, then it sees that abc transfers bitcoins to DOM, then it can subpeona dominos records and find the address of someone who purchased drugs from xyz.
The assumptions I am making: the FBI knows that xyz is a drug dealer. the FBI knows that DOM is dominos.
Are the assumptions wrong? Would the FBI be able to know that?
I'm not sure why people make this kind of jokes. Yes some Bitcoin users use Bitcoin to buy drugs. And? What's your point? One of the most popular drugs is about to get legal soon in US.
