[Chugalug] Chugalug Digest, Vol 14, Issue 36

Mike Robinson miker at sundialservices.com
Fri Sep 6 13:06:47 UTC 2013

You bring up several interesting points, answered inline:

>> "The perfect currency unit" today is probably "the ACH wire-transfer data packet." 
> Oh dude.. you opened up a BIG can of worms. ACH is not the same as a Wire although they are similar. 
> They are fairly well controlled "file formats" [...]
> You are talking about a transport method, a file format, a set of rules for transferring the government issued and controlled currency we commonly call a "dollar". 

My point was that the ACH and wire-transfer systems are ... systems, supposedly "secure" ... by which "Money" (strictly by-agreement) can be transferred in real time from one place to another.  Any "government issued and controlled currency" can be transferred in this way, and such transfers are accepted by all concerned ... without the need for lugging-about gold bricks or printed paper.

> Bitcoins have value because people agree that they do. Dollars have a value set by the government AND various entities (other governments for example) AND the general population reaching a consensus. 

"Only" because people (currently) agree that they do.  If someone stole your Dollars, and you could catch them, then you could put them in jail and make them give you your Dollars back.  Bitcoins, on the other hand, are "barter trade units" in the eyes of the law:  "someone stole your file."

> Gold has intrinsic value, Bullets have a more easily used by common people (that own guns) intrinsic value. A gallon of potable water has intrinsic value.. Food has intrinsic value. 

All of these things have "intrinsic value" only to the extent that they are desirable.  Gold has been capturing the human imagination for millennia because it is pretty, malleable, and rare.  (It has a different sort of "intrinsic value" to an electrical engineer.)  A gallon of water is priceless in the Sahara; or about 80¢ at the Golden Gallon.  Food is priceless to a starving-man, or on the dollar-menu at Wendy's.  (Maybe.  Heh...)  

> Dollars and bitcoins, litecoins, and other "non-anchored" currencies have values that we, as a society mostly agree on.

The =idea= =of= a "Dollar" has value.  The number in your bank-account "has value" because, well, "because you can spend it."  Likewise the plastic cards in your wallet.  Furthermore, if someone misappropriates your account, or your wallet, you have legal recourse.  Your deposits are guaranteed up to a quarter-million dollars ... and it does not make the slightest bit of difference to you where those replacement Dollars came from.

> They are easily exchanged and transported. 

More specifically, they are "fungible."  "Able to replace or be replaced by another identical item; mutually interchangeable."  They can be, by agreement, "transported" (and "exchanged") by computer.  They are also =liquid.=  We will never run out of, say, Dollars.  We will increase the supply as necessary to ensure that anyone who wants to settle a transaction using Dollars has, by definition, access to sufficient Dollars to do so (if he is entitled to possess them, and sometimes even if he's not).  If there was even the slightest hint that this were not so, we would instantly have "a run on the banks."

> If Bitcoin reaches critical mass for larger transactions it will change international commerce in interesting way. 

Bitcoin is fundamentally based on the idea of "artificial scarcity."  They are "gold nuggets hidden in a vast quantity of dirt."  They are perceived as valuable to you because they are hard to get, and because they are perceived as "things," that is to say, "unique."  A dollar, on other hand, is not unique at all.  You don't get them by digging a hole in the ground.  (Most of us get them by writing computer programs; some do it by selling food and water at Wendy's.)  But it is their very "scarcity" that makes them unusable as "a medium of exchange."

"Money" doesn't have "value."  "Money" is a medium of exchange; nothing more or less.

The "scam" issue arises from, not any technical fault of bitcoin per-se, but rather of human nature:  "money for nothing."  People can be and are persuaded to pay $5,000 USD for, literally, "a money-making machine."  The system is based on "trust," basically in the complexity of a computer algorithm and on "one another" (most of whom are people you have never met and never will), yet it lacks recourse.  Thus, the perception that "this IS a nugget of gold" can be fostered, and, having thus been fostered, it can and therefore will be abused.  The one sure-fire way to turn a bitcoin into a fungible unit of currency is to build and to sell a money-machine for $5,000.  (I don't see them saying that you can pay for 'em in bitcoin.)

I have, personally, stood in the "sanctum sanctum" of a working gold mine:  the final step, in which a thin stream of gold is clinging to a certain spot on the shaker-table and this stream is carefully scooped up.  (Other heavy-metals are basically discarded.)  There is a GLEAM in the eyes of the people who work for that mine when they stand in that room.  You know not to take one step closer to that table; not to make the slightest move.  They're nice gentlemen and you've been with them all day, but ... but ...  but.  "Gold Fever."  It is real, and it is an inextricable -- and exploitable -- part of our human nature.

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