Bizarre Shadowy Paper-Based Payment System Being Rolled Out Worldwide

http://ledracapital.com/blog/2014/2/17/bitcoin-series-19-bizarre-shadowy-paper-based-payment-system-being-rolled-out-worldwide

by user_235711 • 12 years ago

293 299 12 years ago

ledracapital.com

ashray• 12 years ago

Amazing post! I wonder why everyone is called Mike Smith in the article though ? Mike Smith - VP of this, Mike Smith - a tourist, Mike Smith - etc. ?

Something else that wasn't covered is that cash is also dirty and carries grime and infections. Ideally you should wash your hands before you eat if you handle any cash. (this is less of a problem with laminated/plastic notes like the CAD or EUR)

Imagine a super virus propagating and killing people through cash. Ouch!

hapless21• 12 years ago

There are few, if any, documented cases of illness being transmitted by cash.

This is why regulation does not require food handlers to take special precautions while handling cash.

redblacktree3• 12 years ago

A quick google turned up this document[1], which claims that food handlers should wash their hands, "after handling money or a cash register."

http://www.healthandwelfare.idaho.gov/Portals/0/Health/FoodP...

bertil• 12 years ago

[This is satyre, imagining cash introduced now, and mocking BitCoin's critics. Some ring true, some miss the two-sided market issues behind adopting new payment forms.]

To be honest, I’ve been in Nordic countries for a year (where all transaction are card-based, and there is no minimum amount for payment) and that situation rung surprisingly true — especially after yesterday, when I was facing a coat valet who was expecting a ten crown in cash.

busterarm3• 12 years ago

I had amusing experiences in Denmark where I was forced to walk around with about 10,000 kroner because American banks and lending institutions are too lazy and cheap to implement Chip-and-Pin systems. Also almost nobody takes American Express (I don't blame them though).

Anyway, folks' reactions to that much cash were pretty much "are you a drug dealer?", which was pretty funny.

At least I _always_ had cash for the Pølsevogn. :)

I had similar happen to me in Iceland but they're slightly more cash and "Yankee Plastic"-friendly.

hapless21• 12 years ago

The U.S. will be implementing chip-and-pin in 2015.

alayne2• 12 years ago

Bitcoins (and others) aren't backed by a government. One of the major exchanges used to trade Magic the Gathering cards (You know, for kids!). Bills also have serial numbers that provide some amount of traceability, at least between Federal Reserve branches and banks.

clavalle• 12 years ago

Bitcoins are made, literally, of nothing but tracability.

alayne2• 12 years ago

I'm disputing the article's statement that "cash is a 100% anonymous and untraceable payments technology"

shiftpgdn• 12 years ago

A. MtGox never traded magic the gathering cards, this is a myth. The domain might have been bought for that but it was never a trading platform for magic cards.

B. Magic the Gathering isn't just for kids! It's actually quite fun.

kbenson2• 12 years ago

B. Magic the Gathering isn't just for kids! It's actually quite fun.

I'm pretty sure the "You know, for kids!" is a Hudsucker Proxy reference.

Loughla• 12 years ago

But that one sentence proves how quickly you have to go on the defensive with bitcoin. That is fascinating from a marketing perspective.

Also, what do you think anyone in the popular media will focus on with something like MtGox? The fact that they never actually traded magic cards, or that their name implies (and therefore proves) that they do or did at one time? The fact that magic takes skill and strategy, or that it is loosely associated with other weird groups like my little pony and that evil hacker syndicate 4chan?

gwern• 12 years ago

A. Actually, I have been investigating that (https://en.wikipedia.org/wiki/Talk:Mt.Gox#Possible_citogenes...) and McCaleb has told me that the domain was used briefly for such a service - but interestingly, it wasn't physical cards, but rather, their equivalents in the _Magic: The Gathering Online_ service.

kordless4• 12 years ago

The term "backing" indicates adding strength or support to something. Unlike the USD centralized pool of control backing, Bitcoin is backed by a distributed networked compute and store mechanism. That mechanism's infrastructure is provided by people who believe in the technology, including miners, full node wallet users, and exchanges.

Making ad hominem arguments against Bitcoin by discrediting Mt. Gox is flawed because they are only one part of the Bitcoin network. Mt. Gox can continue burning to the ground tomorrow but Bitcoin will keep on keeping on regardless because the general approach to Bitcoin is high distribution of every element of the network. Mt. Gox's problems have had a short term effect on the price of Bitcoin, but that simply will not continue because other exchanges will take its place.

There are plans in the works to build distributed exchanges. Technology takes time to build correctly. Bitcoin is no different in this regard.

gnaritas6• 12 years ago

Bitcoins (and others) aren't backed by a government.

No, they're backed by confidence in math, something much more reliable than confidence in government.

josephlord3• 12 years ago

That only assures their scarcity and verifiability, not their value or liquidity.

dllthomas7• 12 years ago

They're secured (not quite backed) by inability to do certain kinds of math. That's proven to be moderately reliable over the years (cryptosystems get weakened and replaced, but usually not compromised abruptly) but certainly catastrophic failure of a cryptosystem has happened more often since WWII than has catastrophic failure of the US Government.

All of that said, I'm not convinced government use (also not quite backing) is such a big deal - I've pointed several times now to the recent Economist article about the Somali Shilling retaining value decades after the issuing government collapsed.

adventured• 12 years ago

Shall we dig up all the folly of the past 200 years related to fiat? Do you suppose that discussion would be worth a continental? And would that conversation inflate as fast as Venezuela or Argentina's currencies? Would we need calculators during that conversation as though we were trying to purchase bread for 37 trillion ZWD like in Zimbabwe (and should we buy our high-powered presses from Germany's Giesecke & Devrient)?

kordless4• 12 years ago

This article is entertaining, interesting and relevant. Humans are exceptionally good at rationalizing their biases, especially if they involve trust, and interest is required to alter those biases in a positive way. The biggest challenge for cryptocurrencies today is raising interest and trust in the general population. We can best effect that by working hard to raise interest in cryptocurrencies in a positive way.

This is more commonly known as "marketing".

at-fates-hands2• 12 years ago

> The biggest challenge for cryptocurrencies today is raising interest and trust in the general population.

I would actually say its getting the general public informed. 75% of the US population are aging baby boomers. They can barely work an iphone, how the heck do you think they're ever going to accept cryptocurrency? Even with a ton of marketing, this is something that is completely foreign to 85% of the general population.

k-mcgrady2• 12 years ago

> "I would actually say its getting the general public informed. 75% of the US population are aging baby boomers. They can barely work an iphone, how the heck do you think they're ever going to accept cryptocurrency? Even with a ton of marketing, this is something that is completely foreign to 85% of the general population."

You're saying 75% of the US population cannot work an iPhone? Or 75% are baby boomers?? Just so you're more informed next time you make up stats, less than 15% of the US population would be considered baby boomers.

Source: http://quickfacts.census.gov/qfd/states/00000.html and http://en.wikipedia.org/wiki/Baby-Boom_Generation

gnaritas6• 12 years ago

Don't make up statistics to bolster your point, it detracts from it. Every number you mentioned is wrong.

kordless4• 12 years ago

I agree, but I think in practice it will be quite simple. Most people have phones which can be used as wallets. I already pay for my coffee at Peet's with my Nexus 5 using NFC. Assuming most drip into a spending wallet, and are OK with that spending wallet's security model, this leaves the challenge of implementing savings wallet security.

Banks are already set up to provide these services and when they decide to jump in, adoption will take off pretty quickly. Those services could come in the form of cash exchange at ATMs, wallet hosting, compromised savings wallet insurance (if they host your wallet), best practices around passwords/etc., loans, and cold storage security via fireproof lockboxes.

This will (obviously) require the banking industry to wrap their heads around these new models. How long that takes is anyone's guess.

dragontamer7• 12 years ago

Perhaps if there were legitimate complaints.

For example, the article claims that Cash is loved by Libertarians. As far as I'm aware, Libertarians would prefer privatized currencies, akin to the mid-1850s banking system. A centralized institution creating a centralized currency is much different from what the libertarians would like.

They miss the basics of the politics involved here. BTC (apparently) represents decentralization, freedom, etc. etc. At least according to libertarians.

The complaint about the lack of tracking and anonymity is also ironic, because BTC "marketing" has been filled with misinformation and lies. Fortunately, the article seems to take the correct stance. (BTCs are tracked, the ledger is public, it is far easier to be anonymous with Cash than it is with BTC).

Finally, there are systems in place because Cash has a 200+ year long history. It is impossible to ignore the "momentum" of cash. FBI has ways of tracking and marking bills. Secret Service actually keeps track of those Serial Numbers.

--------------------

Besides, BTC is but the first popular poof-of-work cryptocoin. I don't think BTC is perfect for many reasons... I think DOGE is going in a better direction.

The article fails to mention any of _my_ complaints. The extremely long transaction time (10 minutes minimum, if you are willing to trust a 1-block confirmation), the deflationary nature (block chain rewards halving every couple of years). The hard cap at 21 million (DOGE has no cap on coins fyi).

You know, the legitimate complaints about BTC, the ones that people are trying to solve with alt-coins.

hershel• 12 years ago

Bitcoin is not ready to be marketed to and trusted by the general population as a general currency, since it's so unstable, while i've seen ideas on how to solve this, they kill the currency's appeal as an investment tool, which would seriously hurt adoption.

MartinCron2• 12 years ago

There's a beautiful irony there, the best thing that bitcoin has going for it is the very same thing that's keeping it from being useful as an actual currency.

Maybe the speculative "hold to hoard/invest/speculate" thing is just a phase.

acconrad• 12 years ago

My issue with fluff pieces like this is that there are plenty of established tools in our lives that would not be available if they started out today. Acetaminophen (or Tylenol by it's brand name) is often touted as a drug that would never pass modern FDA regulations if it were introduced today due to it's issues with liver toxicity and link to Reye's Syndrome.

We make products and services with what we have available at the time, that doesn't necessarily mean that they are an indefinite solution, nor does it mean that we are going to hold our archaic solutions to the same standard we do with our new and improved solutions.

hapless21• 12 years ago

Tylenol should probably not be available over the counter. It has a narrow therapeutic index and safer, equally effective alternatives.

Consultant32452• 12 years ago

Conversely: everything should be available over the counter. If someone wants to kill themselves by destroying their liver with acetaminophen, that's their business.

Cass• 12 years ago

What are those safer, equally effective alternatives? Ibuprofen causes gastric ulcers, Diclofenac does too, Aspirin is an anticoagulant, and Metamizole can cause agranulocytosis. Also, the maximum recommended daily dose for Acetaminophen is somewhere around 3500 mg, which is seven extra strength Tylenol - hardly what I'd call a narrow therapeutic index.

beobab• 12 years ago

Sounds like a great idea. I'd love to get some of this "cash" stuff everyone keeps talking about.

almosnow• 12 years ago

Yeah, sounds like you could build a really cool civilization over that, I'm totally in. (Not sarcastic at all, I definitely enjoy the world and how it works.)

leobelle6• 12 years ago

Ever since POS hacks on Target and other retailers I've completely switched to cash only. Not only can't you be tracked, something I'm not sure I care about, but it reduces the chances of somebody stealing your card info.

And I only use wells fargo ATMs, because they have a nice green glowing card input, so you know nobody put a malicious card scanner on the ATM.

It's a complete reversal from a few years ago where I wouldn't carry cash and wouldn't go anywhere that was cash only. Going cash only also reduces the fees for stores where you buy things.

Cash is the way to go, despite all of our technology.

hahainternet9• 12 years ago

Sweet, now you have no insurance and you carry about significant quantities of money I'm sure you're much safer.

leobelle6• 12 years ago

Insurance against what? I don't carry boatloads of cash on me.

martin-adams2• 12 years ago

Personally I think I'd prefer to be attacked digitally and have some protection about unauthorised transactions from my credit card company. Identity fraud however is not pleasant.

But I would rather that than to be mugged at knife-point because people holding large amounts of cash is a quick win for criminals.

leobelle6• 12 years ago

Muggers don't have x-ray vision. They can't see that you don't have cash. They're going to mug you no matter what. I don't walk around with a ton of money. If I get mugged I lose a few bucks. If you get mugged you have to go cancel your cards and go without them until you get new ones or go to your bank and deal with all kinds of hassles.

dalore• 12 years ago

Someone steals your physical money, good luck finding them. ATM steals your money, you know where he lives. Complain to the bank, get your money back.

sdkmvx• 12 years ago

Many people are responding that you're making a mistake because cash is useful after having been stolen. Clearly this is true. But it is a mistake. Multiply the probability of being mugged in a year by the amount of money you carry. That's the expected loss over that year. Is your privacy worth that? If so, carry cash.

As for "chargeback insurance", I'd recommend taking responsibility for your own actions. If you buy crap from a merchant, that's between you and the merchant. Argue with him; don't buy more from him. The bank isn't a party to that argument. That should be enough to discourage such behavior. Additionally, they may have to pay the merchant and you. That's what the fees are for.

hoggle• 12 years ago

Cash is also great for when you want to lose that debt addiction. A good practice is to approximate your cash needs for a week and withdraw the according amount. If you really spend everything before the week is over, you will feel it. I did this 5 years ago and I've never been in debt since.

Cash == Freedom

keithgabryelski3• 12 years ago

go home bitcoin -- you're drunk.

bank notes are a very simple system, so simple it has been used for over a thousand years.

shitgoose2• 12 years ago

Gold has been around for over a thousand years. Bank notes that cannot be exchanged for gold at fixed rate are recent invention (1971).

lmm• 12 years ago

Gold was used to back currency for less than a hundred years (except in Britain). Pre-1800 banknotes were never pegged to gold.

(If you were talking about silver you might have a leg to stand on).

redblacktree3• 12 years ago

1971 puts it a little too close to the present. Individuals haven't been able to convert notes to hard currency since June 5, 1933, when legal tender laws were introduced.

That said, I still agree with the thrust of your argument, that we're in new territory with regard to unbacked paper money.

dualogy2• 12 years ago

Bank notes that cannot be exchanged for gold at fixed rate are recent invention

Keep in mind that the ostensibly "fixed" rates were adjusted time and again --- effectively they were floating rates, just not as real-time as today, but in very.. slow.. motion.

Also -- pretty sure they existed before at times and places from time to time. Probably never lasted well over 40 years before 1971 though. Brilliant move really, US, stuff the world with countless "redeemable" notes, then cancel redeemability :D

That said, there is no law of nature that dictates that state treasuries should forever remain vulnerable to runs on their vaults. Even if they never inflate the paper, just by honestly trying to maintain a fixed paper=gold exchangability, the populace / debtor countries will always pay taxes / debts in paper and otherwise exchange their excess paper for the treasury's gold, until it's all gone.

Countries and empires have gone through this time and again for centuries before "Nixon put an end to it" so to speak, and it didn't exactly crash the world (after a little bit of turbulence for a few years) or hamper economic growth or hinder technological innovation ever since. 43 years with some "financial crisis" regularly roughly every turn-of-decade (but those existed ever since "finance" as such began if we're honest)..

The fixed-rate regimes were always conned by governments/treasuries sooner or later, so a floating rate really seems the more honest alternative and look, it kinda-sorta 'evolved' to that end after all! Turns out, that paper can be redeemed in metal for those few who really do still care about it is more important to them than the exact rate ---a true gold-bug cares not about it's "fiat price"!--- and this way, the central banks can keep their own stuff which they're heavily into themselves and send people off to the mines and markets. Not such a bad deal for all, after all.

keithgabryelski3• 12 years ago

http://en.wikipedia.org/wiki/Banknote#Early_Chinese_paper_mo...

7th century Chinese bank notes.

busterarm3• 12 years ago

If anything it's cash that's drunk. It has multiple personalities and there's a huge problem with cloning.

Cryptocurrency is a reasonably-likely future of money, provided that cryptography itself doesn't somehow become irrelevant. From a counterfeiting perspective it's more secure than bank notes and adding a reliable physical component would make it functionally-indistinguishable from bank notes.

I'm just eagerly awaiting the day I can get paid for my work in Nuyen, chummer. I've got a hot new cyberdeck and some implants to pay for. Just remember the Golden Rule: Never make a deal with a dragon.

gnaritas6• 12 years ago

Simple != good.

keithgabryelski3• 12 years ago

Simple certainly is good. It requires technology to create the notes but none to transfer them.

There is goodness in this. Hey, the lights are out -- can I buy some water from you -- my family is thirsty -- no? sorry, not until the the intertubes are back on.

I'm not claiming that cash is somehow better in all ways to crypto-currency

yoha• 12 years ago

I don't think it will get popular. It needs too much infrastructure for emission and tracking. You will need to manually find a way to get to the right amount using such a restricted set of values [1]. Additionally, you cannot make backups and it is very easy for lose or destroy some of these "bills". It's a nice idea, but there is not a chance it will gain value. I don't think it's worth investing any real money in it.

[1] https://en.wikipedia.org/wiki/Change-making_problem

blueblob• 12 years ago

I wouldn't barter any of my cats for this. It is just easier to exchange kittens for services.

drcode• 12 years ago

I think you've got it wrong. The appeal of those pieces of paper is that they hold their value long term.

You can keep them in storage, and in 100 years they'll only have lost a mere 97% of their value.

polymatter3• 12 years ago

Thats assuming they don't rot in the process! Now Gold people can trust because that doesn't rot and can last 100 years in a damp jar. You'll never get the public away from the gold standard.

gamblor9562• 12 years ago

Currency is not meant to hold value; it is not an asset. Currency is a means of transacting. It needs only to hold its value in the short term and change value at a stable and predictable pace.

Cthulhu_• 12 years ago

These 'bills' do have a nice physical feel to them, though. Like bars of gold. It's not as fleeting as digital money. I can see it being used as a means of restricting your budget; after all, most digital money can be spent until it's gone. Adding a boundary like having to go to a conversion point (digital to cash) to get your daily or weekly budget may lead to less spending.

skizm• 12 years ago

US coin and bill denominations are designed to make the change making problem easy. You just take the most of the largest denomination without going over. Repeat till change is made. The outcome is always optimal given the set of US currency denominations.

https://en.wikipedia.org/wiki/Change-making_problem#Greedy_m...

hapless21• 12 years ago

Satire works when you hold folly up to ridicule. Central banking is possibly the greatest human invention since sanitation. The U.S. central banking system ranks among the finest of its kind.

Bitcoin handles 7 transactions a second on a good day, has no reliable institutional actors, and I can neither pay taxes nor satisfy court judgments with it. It is an impressive proof-of-concept for decentralized trust in cryptosystems, but it is hardly a currency.

spindritf2• 12 years ago

The article isn't ridiculing the central/fractional banking system. It's ridiculing the response to bitcoin.

hapless21• 12 years ago

For the satire to work, the parodied criticisms have to make sense when applied to central banking systems. But they don't.

When satire doesn't work, the author looks sillier than your target. I don't think this was a goal.

hawkharris• 12 years ago

As hapless said, the author's defense of Bitcoin is intertwined with a critique of the central banking system.

Consider lines like this one:

"...it would be hard to recommend that the average consumer or merchant becomes involved in what is still today a very buggy [central banking] system, filled with risk, inconvenience, high transaction costs, and possible disease transmission."

martindale• 12 years ago

Actually, you can pay the government in Bitcoin: http://www2.egovlink.com/press-release-bitcoin.cfm

Also, the ~7 transaction per second limit is completely artificial: https://github.com/bitcoin/bitcoin/blob/master/src/main.h#L3...

Institutional actors: http://allthingsd.com/20131212/bitcoins-biggest-bet-andreess...

hapless21• 12 years ago

To address these one by one:

1. My local government can choose to accept anything they want. The IRS, however, will want cash. They are not obligated to talk to your broker-of-choice about BTC.

2. Yes, "completely artificial." I just have to convince 51% of the distributed net to accept my patches, and then I can change any parameter I wish!

3. What does a VC investment have to do with anything?

oskarth• 12 years ago

Central banking is possibly the greatest human invention since sanitation. The U.S. central banking system ranks among the finest of its kind.

How did you come to that conclusion? Is this a common viewpoint?

EDIT: I am genuinely curious. It doesn't strike me as a great invention, but I could be wrong. I'd love to be convinced otherwise, for example by reasoned arguments of how things were before central banking and why things were so much better after and compared to all other alternatives, as well as what sets U.S. central banking system apart from the rest of the central banking systems in the world. Do you have any links to this type of reasoning?

hapless21• 12 years ago

I came to this conclusion after spending a significant fraction of my too-short lifespan studying how money works.

I am hardly an expert. But I (apparently) know a lot more than the average Joe. Seeing the rash of "end the fed" madness on the internet makes me very sad.

reqres6• 12 years ago

You can't talk about central banking authorities as a single type of homogenous system. There have been and are many different kinds of central banks over time and across borders. Each are run and incentivised very differently. Each operate with different levels of competency and available data. Each can be motivated radically differently - e.g. some are basically run by the government and are prone to political pressure whereas some are run by relatively independent committees (such as Canada, UK, New Zealand).

But Central Banks have the ability to make a huge difference in the quality of life/standard of living in a country depending on its competency and understanding of the economy. If you take the US as an example and compare the response to the 2 greatest financial crashes in the last century. The Fed in 1923 operated under poor information and took the exact wrong course to mitigate a financial crash by contracting monetary supply. Contrast with the Fed in 2008 to date (despite complaints) - its steps in producing massive quantitative easing was the exactly right thing to do. Given their likely responses, there are many more jobs and more economic output today than would have existed had we swapped the 1923 and 2008 federal reserve - I don't think many economists will disagree on that point.

With a decentralised currency like Bitcoin, my understanding is that monetary factors cannot be controlled. So you'd lose a very important tool when it comes to regulating the economy/applying course corrections over economic cycles.

ctdonath• 12 years ago

Satire works when most people get the joke and a few write scathing condemnations of why it's not funny.

nateabele2• 12 years ago

Central banking is possibly the greatest human invention since sanitation.

The greatest human invention since sanitation is that a tiny elite can control the value of money (and money over time)?

Is that a joke? Are you joking?

Edit: Really...? Really? You know the devaluation of currency over time and the resulting increase in the cost of goods disproportionately affects the poor and middle class, as well as retirement savers who's interest rates can't keep up, right?

Is that also a feature?

hapless21• 12 years ago

I am absolutely not joking, and the fact that the value of money can be controlled by a central authority is a feature not a bug.

kungfooguru4• 12 years ago

Inflation favors the debtors, meaning the poor and middle class.

sdegutis• 12 years ago

I've given up on being disillusioned with these kind of things anymore. It takes too much time and energy. You know what's an awesome substitute for it? Climbing a tree.

anigbrowl9• 12 years ago

Damn right it's a feature. Otherwise there'd be no incentive to invest, people would just hoard assets instead of putting them to productive use. There's a reason countries abandoned the gold standard: deflation and bank runs are harder problems to manage than inflation.

reqres6• 12 years ago

It's still early days of allowing independent (i.e. apolitical) monetary policy committees from controlling money supply/interest rates, but we are and have been in a unprecedented period of relatively low inflation for the past couple of decades. This is despite the greatest financial crash since the great depression.

I'd say there is good grounds for saying this is a great human invention - although probably not on a par with sanitation.

No the system isn't perfect - it is structurally flawed like all other systems - but it has worked well and the negative side-effects can be managed

glasz2• 12 years ago

nate, don't even try. they've been bought and paid for by the creature of jekyll island. just look at how well they're doing. they say they are educated, have great intellect, are smart, bring the human race forward with whatever startup they're working for.

greed, illusion and disinformatuon has sucked their common sense. one can't win against zombies.

edit: 4 downvotes on this. point proven.

antr7• 12 years ago

Let's not forget fractional reserve banking, and how this fuels investment. Bitcoin's current design can't do this. Maybe some other crypto-currency will win the war by having this monetary mechanism in mind.

nateabele2• 12 years ago

Let's not forget fractional reserve banking, and how this fuels investment.

s/investment/bubbles/

hapless21• 12 years ago

Nothing about bitcoin's design prevents fractional reserve banking. You just have to place an inordinate amount of trust in your BTC bank (perversely misnamed "exchanges")

Central banking and fractional reserve banking are orthogonal concepts. One could, in theory, accomplish one without the other. (but I do not see why one would wish to do so.)

jsmcgd• 12 years ago

I think you've missed the point which is to ridicule the criticism of crypto-currencies, not cash. Also the article talks about the properties of cash in general, not central banking.

agilebyte• 12 years ago

I do not know where you hail from but if you are a US taxpayer you can apparently pay the IRS using Bitcoin:

https://www.joinsnapcard.com/

More: http://pando.com/2014/01/15/pay-your-taxes-in-bitcoin-snapca...

gamblor9562• 12 years ago

No, you can pay a 3rd party that claims it will remit your bitcoin payment in the form of USD to the IRS. The IRS doesn't accept Bitcoin.

hrktb• 12 years ago

I don't think bitcoin is usable as a currency (because of the scarcity mainly) but if we had to judge every potential currency by whether institutionnal actors accept it we might never accept anythig as currency until the end of the world.

I would think of a currency as anything that has recognized value while being transferable.

Let's imagine starbucks prepaid point card get's accepted in some drugstore also, the. Some super markets, gas station, theaters, airports. It really explodes and you can start paying with them at millions of stores, and you are allowed to exchange them with other people via some procedure. The starbucks point system becomes a currency IMO. You'll never pay your taxes with it, but you can use them for exchange and commerce purpose.

jamoes7• 12 years ago

Central banking is possibly the greatest wealth confiscation technique since taxation.

FTFY

tbrownaw• 12 years ago

Central banking is possibly the greatest human invention since sanitation.

No, that's either packet switching, internal combustion, penicillin, or sliced bread.

lotsofmangos2• 12 years ago

I'd opt for the slinky.

logicallee• 12 years ago

My impression is that you completely misunderstood. (I only skimmed the article.)

The folly that is being held up to ridicule are the objections to bitcoin.

The means by which it is held up is to show that bills as a medium of exchange can be attacked just as strongly. People still use it. Nobody is going to make you go to the bank to give them $5 back, they use bills. And if you only have a $10 note, they'll make change for you.

This is directly what's being compared to bitcoin (for example) - by pointing out that whatever objections anyone might have against bitcoin (theft, etc), could be made - ridiculously - against paper currency.

The reason it is ridiculous is because the benefits of paper currency far outweigh the inconvenience stemming from using it.

Likewise, bitcoin can have tons of problems - but the benefits far outweigh them. That is the point being made.

"It is folly to criticize bitcoin".

fredgrott• 12 years ago

hmm, I do not think you understand currency..

For example, if we post on HN an offer to do something in return for something..what currency are we using and is that said currency some sort of fiat system?

SilasX2• 12 years ago

Are we looking at the same article? It's satirizing paper vs digital money -- the focus is on money transfer tech, not monetary policy. The central bank stuff is about two paragraphs out of thirty.

Also, whether bitcoin is a "true" currency is orthogonal to the (satirical) point of the article, which is that paper currency would look weird if it weren't the traditional way and we were going to it from digital money. Whether Bitcoin currently handles 1, 7, or a trillion transactions per second is irrelevant here.

lotsofmangos2• 12 years ago

The satire was not of money or central banking, it was of the public reaction to a new form of it.

Also, if you think that central banking is the greatest invention since sanitation, I think you may have your priorities slightly skewed, though that is only an opinion.

As to whether bitcoin is a currency. It is a currency when it is used as one. Sometimes it is and then it is a currency, mostly it is a speculative investment vehicle. This is why I think dogecoin is more of a currency than bitcoin at the moment.

igivanov• 12 years ago

"The U.S. central banking system ranks among the finest of its kind." I'll take it as a fine example of satire. The Fed officials' conflict of interest, the financial crisis, using it as a tool to achieve political goals internationally, you name it.

branchan• 12 years ago

You can't fault a relatively new cypto-currency for having limitations in terms of adoption rates. For now, it's still a proof of concept and improvements are constantly being made.

The article is not making fun of cash, but making fun of people who mock the concept of bitcoins.

cmapes• 12 years ago

slow clap I am genuinely impressed with how many people were trolled by your well-placed satirical comment.

stalcottsmith• 12 years ago

The U.S. central banking system ranks among the finest of its kind.

I agree...

Central banking is possibly the greatest human invention since sanitation.

This is a most deceptive and inherently political statement. Sanitation is a great invention for everyone. Central banking not so much.

Central banking and centralised control of the money supply serve to concentrate the greatest opportunity for skimming the surplus generated by vast productive populations into the hands a very few people to direct as they wish. Whether this process is controlled democratically or not (and in the US it most certainly is not) is not the point.

The way this is done in the US is no different in principle to the way it is done by elite in more obviously "corrupt" countries. In the US, it is more sophisticated and over the last century it has attained the patina of established respectability. In the US they have managed to set this system up without killing the goose that lays the golden eggs. (the surplus-producing population)

The skimming in the US is accomplished first through powerful central taxation which requires centralised record keeping and control of the banking sector. Secondly wealth and accumulated surplus is skimmed (redistributed upwards) through the control of credit extended by banks to generally expand and potentially to "contract" the money (credit) supply. Inflation generally rewards large debtors and punishes savers.

Skimming is also accomplished by helping to grow and trade in government debt (granting incredibly valuable concessions to favoured dealers), assisting in managing capital flows into and out of the country, extending vast credits to powerful interest groups (mostly bankers) thereby helping powerful private borrowers to lean on the public credit for private gain, and most importantly and tragically to make possible and in fact encourage wars of choice which are clearly to the benefit of private interests and clearly not of any benefit to the general public. Is it any wonder that the Fed was created by bankers and war financiers, for the benefit of bankers and war financiers? This goes back to Morgan and others and their intimate involvement in the financing of Britain and France and subsequent agitation for American entry into WWI.

Central banking is most convenient and necessary for anyone wishing to control or direct economic activity and hence the lives of others. That is why it appeals to statists of all persuasions who perceive it as powerful lever or tool they hope employ in their fantasies of control. Prominent early communists saw state-controlled central banking as an essential step for converting a capitalist system to a communist one. That is also why most "crazy libertarians" find their way to a stance opposing central banking. Central banking is anathema to Liberty. Jefferson killed the first Bank of the United States and exposed it as an agent of foreign interests. (The capital for the first bank was created by an early scam which had people talk down the debts of the continental congress and buy up the IOUs from the poor soldiers who fought for the revolution for a few pennies on the dollar, and then lobby successfully for the debts to be assumed and honored at face value by the new constitutional government. This was a similar scam to the way the oligarchs in Russia convinced newly enriched peasants to sell their shares in state assets for cheap.) Jackson killed the Second Bank of the United States for much the same reasons as Jefferson had a generation before. Seventy years later, a true, well documented conspiracy of financiers, gave the US its third central bank.

I agree with other posters, that one must look at the actions and histories of many different central banks in different countries to understand the nature of the beast. The US is only the most competent in obfuscating its nature, purpose and origin. It has "won" at the central banking game for almost 100 years. Your praise of the US's central bank comes at the zenith of its power. I suspect over the next 10 years, it will resemble its cousins in less competent regimes and juridictions more and more.

The US central bank, aka the Fed, is a brilliant creation. It is a brilliant creation of the fevered minds of oligarchs to defend and advance their oligarchy. It has lasted 100 years. I hope it will not last another 100. With Idiocracy increasingly fast upon us, the prospects for change are not good. Bitcoin to the moon.

kristianp• 12 years ago

Satire: "the use of humour, irony, exaggeration, or ridicule to expose and criticize people's stupidity or vices".

What is being held up to ridicule are the various criticisms of bitcoin, not central banking. For example the article quotes an economist saying that paper money is evil, satirising Krugman's article about bitcoin. Quite entertaining!

acd• 12 years ago

Don't forget the Egyptian Obelisk standing in the middle of the Vatican. Obelisks are a tribute to the Egyptian Sun god Ra, they are also a phallus symbol read Shaft of Baal. http://en.wikipedia.org/wiki/Obelisk Picture proof http://en.wikipedia.org/wiki/File:Vatican_Piazza_San_Pietro_...

Really tired of central banks and banks stealing 97% of the peoples wealth through inflation of FIAT currency backed by nothing than debt out of nothing. Here is a graph of median income vs GDP(average income), note that it diverges in the 1975, when by coincidence the dollar was decoupled from the gold by Nixon. http://lanekenworthy.net/2008/09/03/slow-income-growth-for-m...

raverbashing• 12 years ago

This is the premise behind the subreddit r/ActualMoney

Satire is an interesting way to analyze things, especially in this case.

Marazan• 12 years ago

No, the actual money subreddit is taking the piss out of Bitcoin.

williamcotton4• 12 years ago

Our currently existing currencies evolved over time. Central banking and fiat currency were institutions delivered by liberal democracies by the process of public debate.

They were not hair-brained ideas established by anonymous individuals engaged in private debate outside of the forums of democracy.

Look, I know all of you are very excited about these experimental economic and political systems, but please realize that the existing world that you are "suffering" under was mainly developed as a slow process of evolution.

Most extreme revolutionary ideas take a long time to work their way in to the existing societal structures and way of life. When they're quickly forced on to people, all fucking hell breaks loose.

So for fucks sake, get some balance and control your zealotry, people!

And read some history books! The future is built from the past no matter how long or hard of a process that seems to be. Go with the flow!

Engage with other people. Engage with the existing institutions. Even if it is a better idea, there are billions of people who rely on the current system in ways that you can't predict.

alexmat• 12 years ago

"The future is built from the past no matter how long or hard of a process that seems to be."

Observation of the past does not allow one to accurately predict the future. I recommend Karl Popper's classic, "The Poverty of Historicism", which expounds on the topic.

williamcotton4• 12 years ago

I'm not talking about predicting the future. I'm talking about the fact that you can't escape the past.

And you mean the same book that Popper dedicated "In memory of the countless men and women of all creeds or nations or races who fell victim to the fascist and communist belief in Inexorable Laws of Historical Destiny"?

Much like how everyone is trumpeting the "inexorable laws of historical destiny" of Bitcoin? Hmm?

Thank you for reminding me of this book, BTW, I had sort of forgotten about it! Unfortunately you seem to have misapplied its lessons but it is actually basically in support of the same sort of arguments I've been making about Bitcoin.

freework• 12 years ago

They were not hair-brained ideas established by anonymous individuals engaged in private debate outside of the forums of democracy

maybe not when they were founded, but thats definitely what the banking system has become in the year 2014...

teddyh• 12 years ago

I Can Barely Draw webcomic has recently had a number of comincs in the same vein as this, starting here:

http://www.icanbarelydraw.com/comic/2565

Eleutheria2• 12 years ago

The good.

Money is good, in any form. Banks are good, they help allocate resources in a capitalist economy. Central banks are good, they can help other banks in need.

The bad.

Fractional reserve banking is robbery. Inflation is robbery. Printing money is robbery.

The ugly.

Government, the fed, banksters, they are a maffia, a band of thugs writ large.

talmir• 12 years ago

This reminded me of the fact that I havent handled, or even touched, real paper money for at least a year now. Here in Iceland paper currencly is slowly being phased out, and has been for a few years.

the_watcher2• 12 years ago

Obviously hyperbolic and not a perfect comparison, but gets enough right to be pretty damn clever. The "hardware wallets" security flaws and anonymity facilitating criminals are particularly enjoyable.

The more policy-oriented economic points aren't nearly as strong, but overall, I thoroughly enjoyed it.

Just to be clear: I like Bitcoin a lot, but I don't think it will ever replace national currencies. I just enjoy pointing out the hypocrisy of a lot of bitcoin detractors.

Tloewald• 12 years ago

The article is idiotic and disingenuous. Paper money didn't attempt to replace coin in one fell swoop. Paper money evolved from letters of credit which make perfect sense, and bitcoin fundamentally relies on similar concepts anyway.

You can't buy something online by just anonymously transmitting credits into an account -- who gave us the money? what do they want? You fill in an order form, a bunch of stuff happens, you get a receipt and a product and money gets transferred at some point. Very little of that is the currency transaction. You needed to generate a letter that said I want X and I'll pay you Y, then you paid Y and sent confirmation of the money transfer, and so on.

The bitcoin bulls think that Credit Cards are a terrible way to buy things because they charge too much for what they do (and their security sucks). This may be true, but bitcoin is only solving the easiest part of the problem. Banks can already transfer money around cheaply and securely. Indeed even market transactions are so fast and inexpensive that high speed trading is now a huge economic force.

The fact is that credit cards (a) let you buy stuff on credit, (b) provide transactional support allowing commerce to proceed smoothly, and (c) already work. A credit card is merely automated checking with overdrafts, which is a direct descendant of the letter of credit (from which cash evolved), which is in fact a more fundamental method of trading than barter. (Tracking people's accounts is the reason writing was invented.)

justinzollars• 12 years ago

I'll take any unwanted bills. :)

jcslzr• 12 years ago

they say that is why they sink the Titanic, on board was all the powerful people that opposed the creation of the Fed, (I personally don't think an iceberg can do that), but anyway one year later the Fed was born.

GigabyteCoin• 12 years ago

That sounds like a tall tale if I have ever heard one.

MartinCron2• 12 years ago

I personally don't think an iceberg can do that

Oppose the creation of the Fed? Icebergs are very persuasive. You should stop listening to whatever conspiracy nonsense you're listening to and go talk with an iceberg instead.

Sheepshow4• 12 years ago

What a circle jerk.

raintrees• 12 years ago

I don't know if anyone remembers Bob Newhart standup shtik, but this article (abridged/down-sized) would fit right in there...

Bizarre Shadowy Paper-Based Payment System Being Rolled Out Worldwide

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