Bit Coins - Has anyone heard of this?

There has to be some central management who runs the database and who pays out?

 

Sorry about that. I guess I was confused when I visited the bitcoin website, I thought they offered the product. Government is already jumping in, they will smash this if it becomes popular like they do with every other currency:

But the growing attention the currency has experienced has come with numerous setbacks as well, in the form of hacks, the shutdown of various exchanges, seizure of accounts and huge selloffs in Bitcoin.

In March, Bitcoins were trading for roughly US$30. Then for a brief period in April its price on the Tokyo-based exchange Mt. Gox skyrocketed to over $230. A couple of days later, its value plummeted to roughly $120 as a massive sell off forced Mt. Gox to temporarily shut down.

This past week, Mt. Gox received a seizure order of its funds by the Department of Homeland Security, triggered by an alleged failure to comply with U.S. financial regulations.

 

Not exactly. It was specifically designed to avoid that. It is more similar to a pure gold economy:

In a gold economy, some people choose to get gold by mining it. These people trade that gold to others in exchange for goods or services, who trade that gold to others, and so on. If the exchanges are done by pure weight, not by printed value there is no need for government involvement or central control at all. There is on one in charge. The value is set by the people accepting and using the gold. There is no central tracking of the gold, it is exchanged on the individual level.

Bitcoins work in a similar manner. People "mine" new bit coins. They exchange them with other people directly. No central source, or central control. No one is in charge of them.

The specifics of how it works are a little bit complicated, but in the end, the effect is very similar to a pure gold-based economy.

 

Sounds good, I mean it is certainly a brilliant concept. I got $5 says if it catches on, governments will ban its acceptance by vendors. You will be stuck with few vendors. It is still a nightmare for accounting for taxes I think, but have at it. Without the faith of the public it will fail in my opinion, and when it is exposed to acceptance risk it will not gain public acceptance. I wouldn't mind being wrong.

 

I do expect that various governments will try to manage and control it, just like you suggest. The US shut down the private gold exchange market by outlawing private ownership of gold, they could do the same with bitcoins, if they wanted.

Still, that would just make it a blackmarket currency. It may still exist, but be used exclusively outside of the market. In that case you wouldn't be able to use bitcoins to buy something from your local grocery store or from Amazon, but you could still use them to pay your neighbor to mow your lawn, if both of you were willing to make that exchange. I'm sure that certain online sources would continue to accept them, regardless of what the governments say, but you are right that some governments will likely try to block them in the open market.

We'll have to see how things turn out.

 

Maybe it is a good investment, but I will warn you not to put you life savings into it. It's backed by nothing.

 

Easier then that. They just do what tendon too hold and make sales of it and exchanges taxable events. Of you don't pay they come for you.

 

The trick with that is enforcement. Right now you are supposed to pay taxes on money you get for mowing your neighbor's lawn, but no one actually pays. Likewise, you are supposed to pay VAT on anything you buy over the internet, but no one pays that either. Bitcoin transactions aren't easily tracked, so it will be tough for the IRS to get you for not paying taxes on bitcoin transactions.

 

well that is a strong argument, but they will come after the vendors.

 

No. There is no central management. That is precisely what the creators of bitcoin had it mind--a decentralized currency. There are no databases that anyone is running. I am sorry, but I really don't know how to explain it any simpler to you.

 

Government can't smash it. That's why makes it different, and that is the point I keep repeating but your are simply not grasping.

Pasting a few lines from an article off of Computerworld.com does not demonstrate to me you really understand the concept. Of course bitcoin is volatile, and nobody was arguing it was perfect. It has its issues, which I've never denied. That does not make it a bad idea. It makes it a pioneer. The first cars had their problems too. Did we give up on cars because of those problems, and say cars were a bad idea? No. Their flaws were improved upon with new models. That is what I have been arguing will happen with digital currencies like bitcoin. Bitcoin is simply one of the first.

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I wouldn't invest my life savings into it. That would be foolish. Its too risky an investment. But that does not make it a scam. Can you please explain how bitcoin is a scam? That was your original claim, which you are skirting away from.

 

If the government does not allow vendors to accept it, it does not attribute a basis to the bitcoin based on the goods sold for it, then they can tax it into nothing of value except in case you want to use it to cheat taxes. In any event, hope it works out. Maybe a good currency for purchases of online services internationally.

 

Government can shut down exchanges of bitcoin to dollars, but if the vendors are only accepting bitcoin, and they are based online, it would be difficult to shut them down. They could have servers outside of US government control. It is not possible to trace a bitcoin to its owners--it is anonymous in that way, which is why it is commonly used for the exchange of illegal goods. I hope bitcoin is improved upon through other currencies like it. Large companies would have to abandon dollars for another currency to take over, and I just don't see that happening soon. But the idea is a good one, and money removed from government and bank control is the ideal.