#bitcoin - CrowdChat

Bitcoin

We're here to explore the ramifications of cryptocurrency on tech, society and money.

#bitcoin @kytsune @rizzn @stevenkaufman1 @rjmcgirr @jon_hq btc bitcoin cryptocurrency

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#bitcoinBitcoinWe're here to explore the ramifications of cryptocurrency on tech, society and money.

#bitcoinBitcoinWe're here to explore the ramifications of cryptocurrency on tech, society and money.

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James Duchenne16

Hypothetical: Banks join the bitcoin economy, they purchase Bitcoins then peg it to their own virtual currency which they lend out, practicing fractional reserve banking. What issues do you see in that scenario?

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Mark 'Rizzn' Hopkins

If they peg the price to anything, then I can see an amazing opportunity for arbitrage between what they say the value is and what the market says.

James Duchenne Agreed. However, they will be lending out money that they've created out of thin air again (sounds familiar) assuming FRB is 10%. The two things I think that make it different, no central banks to bail them out and all transactions on public ledger!

Mark 'Rizzn' Hopkins You're right - assuming they do all lending and banking on the public blockchain, which may or may not be guaranteed. You can do a lot of wizardry if you go off blockchain that could ultimately be very unhealthy.

Pegging it doesn't make a whole lot of sense. Banks are a necessary part of the current Bitcoin eco-system. Coinbase only functions because they have a good relationship with a bank. Banks can benefit from Bitcoin. Reduces wire-cost for them

If you have fears of fractional reserve banking, Bitcoin exchanges could already hypothetically do that, since a lot of their customers hold their BTC on the exchanges.

If Bitcoins become mainstream I am sure Banks and other Financial Institutions will enter. They may be early adapters too for cashless settlements with low/no transaction costs

Mark 'Rizzn' Hopkins Absolutely. It's not a question of if, but when, in my mind.

Gresham's Law: Bad money drives good money out of circulation. How does it apply to Bitcoins?

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Applies only if you use Bitcoin solely as money ;) The issue with applying economic theories to Bitcoin is that it is not only money or only a payment system or only a protocol.

Mark 'Rizzn' Hopkins Nailed it. Truth is that we haven't seen anything quite like Bitcoin, ever. A lot of old theories, axioms and laws aren't directly applicable.

Counterfeit Bitcoins...have they made their appearance yet?

Mark 'Rizzn' Hopkins It's called double-spending. It's one of the things Bitcoin was engineered to defeat.

Jon Holmquist One of the great things about Bitcoin is that it's impossible to counterfeit them (with proper precautions). If you know where every Bitcoin in existence is (viewable on the public blockchain) then how can someone introduce a fake one?

kytsune One of the problems the Bitcoin protocol was designed to solve was counterfeiting. To perform a double-spend takes a prohibitive amount of resources and engineering and would take the counterfeiter down with it when confidence in Bitcoin falls.

Mark 'Rizzn' Hopkins

It's a great question. I don't have a perfect answer here, but I don't think Gresham's Law is directly applicable to Bitcoin, because Bitcoin as a technology functions differently than most money we're use to does...

Mark 'Rizzn' Hopkins .. it's a payment processing vehicle, and also a possible store of value. I think you can look at the world of Bitcoin mining, and apply aspects of Gresham's law to legitimate mining v. illegitimate (i.e., stolen electricity vs. legally obtained).

Mark 'Rizzn' Hopkins ... but for the protocol itself, I'm not sure you can directly apply Gresham's Law. Ask me again in a couple of weeks at the next Bitcoin Crowdchat , and I'll have a better answer for you.

@jon_hq "impossible" has too much finality to it. Perhaps "difficult" may be more apt

Mark 'Rizzn' Hopkins Compromise: difficult enough to be cost prohibitive. :)

Jon Holmquist I'm fairly confident in my answer. Even double spending only allows you to respend coins you own, not create new ones from thin air.

One thing that I'm radical on is that "connected" and "instrumented" data changes the game (same for currency) and algorithms will emerge bc the "cash is on the barrel"; it goes where value is; good money works

One point we discussed last night with folks who were in Silicon Valley from Northwestern Kellogg Business School was the notion of "behavioral economics" in all this -- new ways drive both behavior and economic change; this is the fun crazy part

Deepak Seth Yes, that is intriguing and interesting

@rizzn sure , would be great if you could check and share

Open question: People’s thoughts on the current climate of Bitcoin and gaming economies? MMOs and casual games often use microtransactions and their own internal currencies to pull in money from World of Warcraft selling virtual pets to Farmville and cows.

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The big benefit I throw to developers is the fact that if they make a currency on a centralized server, they will have to spend resources to protect those servers. Issuing points on a p2p shared ledger protects all players and keeps the game fair.

Mark 'Rizzn' Hopkins

I've always thought that Zynga, Facebook, or any of the prominent gaming companies that have their own "token" should consider using a form of crypto currency to manage that process. There are numerous benefits to going that direction.

Mark 'Rizzn' Hopkins The infrastructure tends to "manage itself," so to speak, being the biggest benefit. Exchanges, value, security get offloaded to a community happy to take up the slack.

WoW gold and Everquest and IGE is how the idea for this all originated from anyway

Steven Kaufman10

What are some of the best Bitcoin venture programs you have seen around the US?

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I really enjoy the programs Plug and Play is building around Bitcoin. Ultimately though the best venture program is the Bitcoin community itself. Bitcoin as a community has plenty of talented programmers, and now, plenty of cash.

Steven Kaufman yeah I hope to visit a meetup at Plug and Play soon

The first that comes to mind is http://www.bitangels.co/

Marc Andreessen @pmarca is very bullish on Bitcoin and said at #ocsummitv that bitcoin disruption is the first "web like" disruption he's seen since the browser and he's been looking for that next big #gamechanger

Jon Holmquist Most of the VCs I've talked to about Bitcoin are very excited about it.

John Furrier VCs a are salivating on this bc it represents the biggest land grab to come around in years :-) total disruption oh yeah technology & money is involved

Mark 'Rizzn' Hopkins

I don't personally follow everything 500 Startups does, but I am friends with Sean Percival, who was recently brought on as a VC. With him on board, they're bound to make some moves worthy of attention.

Are Bitcoins the tulips of this era? http://en.wikipedia.org/wiki/Tulip_mania

Tulip mania - Wikipedia, the free encyclopedia
Tulip mania or tulipomania (Dutch names include: tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily h...

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The big difference is the lasting ramification of Bitcoin. Like the Inrternet, there *might* be a bubble associated with Bitcoin, but the end result other than unhappy speculators will be a changed landscape of the world. It is revolutionary.

Mark 'Rizzn' Hopkins

I don't personally view the tulip analogy as app applicable to Bitcoins any more than comparing Bitcoins to beany babies. There are too many deep differences between fads and what Bitcoin as a technology and a currency represent.

Deepak Seth Can you elaborate pls. What are those differences?

Mark 'Rizzn' Hopkins Well, it's obvious to the point of it feels a little elementary pointing it out, but tulips are a renewable resource, and are at the very least easily duplicatable. Bitcoins are a finite resource.

Mark 'Rizzn' Hopkins That's why I try to make the distinction that while the Tulip Craze was a bubble, it's more like a fad - it bears stronger similarites to the Beanie Baby craze than the hype around cryptos.

Deepak Seth Well oil reserves were considered to be limited/finite and then shale fracking came in as a disrupter...why would bitcoins stay finite

Mark 'Rizzn' Hopkins Deepak: To change the structure of Bitcoin to be from finite to infinite would be so deeply disruptive to the nature of the protocol that it would have the net effect of killing it entirely.

Mark 'Rizzn' Hopkins Deepak: The culture of the movement wouldn't stand for it, even if you could get around the logistical challenges to making that happen.

Deepak Seth maybe not from finite to infinite but surely to "controlled" or regulated like traditional currencies are?

I think we've seen several events in the BTC market that mimicked a sort of Tulip mania -- but the real indicator for me isn't that BTC are being valued at some $ but that the underlying technology is significantly useful.

I don't think so. Technology is here too stay.

Mark 'Rizzn' Hopkins Welcome, Steven!

Lol, the tulip mania analogy did get the conversation started :-)

Some of the differences are that Bitcoin represents an economic technology (and exemplars well in solving specific problems such as DNS with Namecoin, encouraging development with Devcoin, etc.) Tulips and collectibles don't exchange value.

this regulation trend can really put a damper on the momentum http://www.vcpost.com/articles/21358/20140204/hearing-highlights-more-regulation-coming-for-bitcoin-report.htm - thoughts from leaders here?

Hearing highlights more regulation coming for Bitcoin
The hearing held by New York State banking regulator Benjamin M. Lawsky points to more regulation in Bitcoin's future, The New York Times The Dealbook reported.

Deepak Seth I guess no escaping that...if there's the smell of money, government can't be far behind. and currency has been a governmental prerogative till now

Are there any other bitcoin variants/alternatives on the horizon? What could disrupt bitcoins?

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Yes, new ones pop up every day. Most are blatant copies. But I'd keep an eye on Ripple, Ethereum, Mastercoin, and some of the other ones with actual developer talent behind them. If smart guys are interested in it, you know it's going to be good.

Deepak Seth So will Bitcoin and Bitcoin variants become like what national currencies are today - all traded and coexisting?

Mark 'Rizzn' Hopkins @SetDeep I think they'll be akin to the stock market. We have hundreds of thousands (millions?) of stocks out there. Most of are no consequence, but many are important.

Dogecoin! Well, not really, in fact I think most of the alternatives right now do a good job of buttressing why Bitcoin represents such an innovative technology. To be disrupted a crypto needs to emerge that better solves a problem BTC doesn't.

Possibly. Hard to say what will happen in the future. There is a huge hole though in that scenario, and that is a decentralized exchange on which to trade those variants on. That's what Ripple is.

this is a good question one about "the category" vs bitcoin per se. It will come down to adoption and ratified approach by parties involved in the pipeline of the transactions including the "clearing"

I'd love to hear what the crowd thinks Bitcoin is... in only one word.

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"Wire" is how I'd describe it.

revolution

...Bitcoin. ;)

Jon Holmquist Probably the best answer. I keep telling people, Bitcoin is Bitcoin. You don't call the internet a network of data tubes.

Mark 'Rizzn' Hopkins

"disruption."

Fascinating

Radical_Value (one word)

Mark 'Rizzn' Hopkins Spoken like a developer. :)

future

Sanguine.

"Funny"

Mark 'Rizzn' Hopkins7

Open question: (and related to @SetDeep's question), what is your opinion of Canada's pending digital currency? Is it positive to have a centrally controlled gov't crypto-currency or not? I have my own opinions, but I'm curious as to the crowd's thoughts.

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Mark 'Rizzn' Hopkins

Here's an op-ed posted on SiliconANGLE about it some time back around when it was announced: http://siliconangle.com/blog/2012/04/24/say-hello-to-mintchip-and-goodbye-to-the-canadian-economy/

Say Hello to MintChip and Goodbye to the Canadian Economy | SiliconANGLE
Digital currencies and payment systems are big news these days. Everyone from governments to private companies to groups of hackers and geeks compete to invent the next killer app in payment systems. Creating a successful digital currency offers rewa...

I think it's a great step! Canada's always on the leading edge with stuff like this. The MintChip however, falls a little short in terms of actual performance.

Every large-scale experiment with virtual currency will be a net positive (fly or fall) because it will give working knowledge to how adoption works and what problems need to be solved. The extra data will be priceless in the long run.

Bitcoin is powerful because it is a public decentralised distributed ledger on which nodes achieve undisputed consensus as to the state of affairs trusting only simple math. From now on, nothing else can win... & not another BoC issued currency...

What does the Crowd here think about this news ? http://www.theverge.com/2014/2/4/5374172/the-coin-prince-charlie-shrem-bitinstant-bitcoin-money-laundering-scandal

The coin prince: inside Bitcoin's first big money-laundering scandal
By Adrianne Jeffries and Russell Brandom A week ago, 24-year-old Charlie Shrem landed at JFK, home from giving a talk about the virtual currency Bitcoin at an e-commerce convention in Amsterdam....

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I know Charlie! We've met several times. He's a good dude, so I'll reserve any thoughts on his case until he's tried by a court. Right now it's only an allegation. Ultimately, does not affect Bitcoin.

John Furrier Jon thx for that data point - we will reserve judgement but the "high priests" of old ways will take any means to kill a mega trend imho

it was necessary and it appears crimes were committed.

I think this gives a black eye to the momentum as any trend there are underbelly forces just like the web

@furrier I'm not nearly as paranoid about the 'high priests'. The Federal Reserve themselves have called for a better payments system in the US. I think crypto can work with the existing systems to make the world a better, more connected, place.

Mark 'Rizzn' Hopkins

It was unfortunate that he served on the Bitcoin Foundation board, and while he's innocent until proven guilty, separating himself from the movement was important.

The evidence looks pretty light I think it's going to be a tough thing to get across the line

@furrier Let's think about it this way, for the last 20 years I've been able to put reach customers from all over the world w/ the internet. Only once Bitcoin came along, I could actually sell to them. Bitcoin allows global commerce.

John Furrier Bingo - that is the gamechanger truly enabling new ways to do commerce - that is the big huge "lever" to change; value creation in a new infrastructure; like the web did for information; this is one of Andreessen's points which I agree with

Will countries/organizations be able to generate their own branded bitcoins? Like currency is today.....

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Yes. In fact, the concept of "colored coins" allows for adapting the Bitcoin block chain to permit a sort of "branding" on coins without disrupting BTC itself.

Deepak Seth That may need to evolve further if bitcoins have to become mainstream currencies - A "Dollar Bitcoin" and a "Euro Bitcoin"

Yes. The issue with that inherently though is that Bitcoin is crossborder. Unless a country gets started now, they'll be hard pressed to beat the network effect Bitcoin has. Local currencies today exist because other currencies aren't as intn'l

Deepak Seth Excellent point...but nations want to have their own currencies even when options like say gold or diamonds or platinum are available as internationally recognized

yes

Mark 'Rizzn' Hopkins

Yes - I think you'll see it with the colored coins concept as well as forking Scrypt and other variations on crypto.

Yup, but ultimately the network effect decides what currency is used for trade. Right now that currency is the USD.