On 06/21/11 22:06, Jon Cox wrote:

Institutions with the market share of Mt Gox become part of the de-facto monitary policy. Hence they are not external to "the currency" at all.

I'd say there's multiple layers. "Bitcoin" is defined by name in a paper describing the crypto algorithms. But there's a "bitcoin economy" that is based around bitcoin itself, plus a number of traders who will swap bitcoins for things (some of those things being other currencies). Then there's a "bitcoin community" that encompasses those traders as well as mere players in the market, interested parties, pundit bloggers... Bitcoin itself seems to be weathering the recent turmoil of the bitcoin economy well. The economy is in tatters because it's small and immature, but such things can only be grown upwards from tiny seeds, so this is a hard-to-avoid stage of growing pains. Whether it will succeed or not remains to be seen, but even if the bitcoin *economy* fails, bitcoin itself may well still succeed, perhaps by finding a new application in more limited economies... we'll see.

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Bitcoin is therefore a 100% faith-based immature currency with full code transparency but almost no institutional transparency or independent auditing.

For sure. However, it's got to start somewhere.

Plainly.

I am asking raising some specific issues here that go above and beyond that obvious fact.

o Is this the only option for an anon/decentralized currency?

Who knows? It's the only decentralized algorithm I've seen yet for *electronic* currency (gold/diamonds/etc work in the Real World).

o How decentralize is Bitcoin mining in the long run anyway?

That's hard to predict... let's wait and see!

o What out-of-band factors influence its __effective__ anonymity?

Communications interception powers vs. Tor and VPNs, mainly

o What trade-offs / dynamics are implied by the trust model?

That's complex :-)

o Is the trust model used the best option available, overall?

It's hard to say... People need to think of more electronic currency systems so they can be compared. Digital bearer cash has never quite taken off, for mainly commercial reasons. The decentralisation of Bitcoin seems to be an important factor.

o Is it having zero intrinsic local value a necessary feature?

Not necessarily

o Can audited digital commodity/credit receipts be used instead?

It's been tried, and not taken off; but if the exact reasons why can be pinned down sufficiently, and fixes found, they may have legs in the long run.

Once we accept that we're making trade-offs in the area of de-facto centralization, anonymity, validation, security, and coupling to the underlying real economy of goods and services, a different picture emerges. The mathematical guarantee validating that a quantity of (otherwise worthless work) was done has some good and bad properties that are not contained within the code itself.

This is the kind of analytical dialogue that I'm hoping we can engage in.

Yep! But I think we need to watch and see for now... stuff is happening faster than people seem able to reason about it :-)

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Why shouldn't it? The bitcoin economy is tiny; Mt Gox dominates it like the Bank of England dominates GBP. However, Mt Gox has no de jure power, and in due course, competitors will challenge it, thereby decentralising the economy again.

The reason is simple: the goal is to design something better.

It'd be nice if something better could be designed, but as I see it, while currencies can be designed, economies and communities are complex dynamical systems that have to *evolve*.

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I hole 18 bitcoins; I'm not too worried that it's dropped like that - because I think it'll rise again. In fact, now would be a good time to buy some more...

People lose more at Las Vegas. Have fun!

Exactly... I wouldn't bet my life savings on it, but it's an interesting gamble, and an investment into something that could lead to an interesting new economy if it takes off :-) There's not much I actually want to buy with bitcoins, but I try and spend them when I can, to encourage the actual merchants into the market - all this currency speculation is well and good, but I'd like more of an actual products market. I've bought a "I bought this badge with a bitcoin!" badge from nerdmeritbadges.com, and donated a few bitcents to some folks who were doing good work for the community; but most of the fun stuff for sale in BTC is in the States (bitmunchies.com and the alpaca socks people), while the same products can be had a LOT nearer me...

Regulatory structures in the US are so weak that most folks will remain in a state of nervous denial until it's too late for them. When all debt obligations are factored totaled, we supposedly owe $500k/person. I can only think of 5 options that have been used (alone or in combination) by countries that get into this kind of difficulty:

Ouch

My central message is very simple: the real-world institutions that sustain currencies are *part* of them, not external to them. Bitcoin is no exception. Bitcoin software is not the sum total of Bitcoin as a currency. Not even close.

Quite. We're mainly disagreeing over terminology ;-)

I believe that the sooner we embrace these ideas, the sooner we'll have a digital "people's currency" that's more than a play-thing. Bitcoin is a groundbreaking play-thing, but we need more than that.

Yep!

Cheers, -Jon

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