Not so much edge as international firms. If they're going to be doing business with customers in the UK, US and Japan, they might as well accept the local currency.

Bitcoin seem like a funny concept, but isn't the idea behind them a waste of resources?
Bitcoins are generated through solving useless mathematical problems by means of brute force (and thus investing electric energy). If they would at least help in a way like serving research, or even offering a cheap alternative for distributed computing, I'd applaud the effort, but simply blowing energy isn't going to help anybody in my eyes.

A valid point, although IMHO it very much depends on what you value; while Bitcoin mining does not directly impact science, the thing being created can be of substantial value to people -- a currency with well defined inflationary/deflationary pressures (and wide distribution thereof), well defined boundaries, and not subject to the whims of a single institution, country, or group. And then there is the aspect of it being a viable online currency with viable micropayment structures, etc. -- something other systems sorely lack.

PayPal "wastes" a whole lot of cycles on all manner of things too, as do banks. And if we get right down to it, what else but a massive waste of resources is the minting of coins from raw metals and the printing of counterfeit-proof notes ? A penny is worth more in its constituent material than its face value. Same for dimes.

On the subject of wasted distributed computing -- people are breaking RSA challenges, looking for extraterrestrial signs of life, creating huge rainbow tables, etc. at considerable computing cost as well. It does not appear to be a waste to them, either. Maybe F@H should accept BitCoin donations and expand their own infrastructure, realizing an indirect benefit nonetheless :)

Not a single of these 'benefits' you mention requires or even actually hints at the current implementation of the system. You'd get the very same well defined currency development even from something as simple as a random draw, because effectively, that's what's happening right now, but that draw is overly complicated and wasteful as it is now. I'm not even sure that you could call the current system independent, as somebody has to define and set up the 'mining blocks'.

I really dislike PayPal, but I doubt that they really 'waste' much in the sense of waste resource wise. They apply (hefty) fees as they have additional cost (e.g. fraud protection, service personal, bank fees, conversion rates, tax, servers, security efforts, special software development, ...) and they are a company designed to generate revenue. I'm not too sure where you see them blow resources though.

It's a security concern, simple as that.
If you could guarantee that no subject would ever steal money or try to create fake money, we could even use stones instead ;)

Actually, all three qualify as scientific use ;)
Thanks for scoring my point :p

But therein lies the pudding. If you make it a random draw, somebody has to be trusted to draw fairly. And yes, the system has to have been designed, but that part is already done and public.
The current implementation very much reflects those benefits; you can predict the total supply of currency, you cannot unilaterally change it, precisely due to how the system is set up and how creating Coins requires compute power. As for being a viable online currency with viable micropayment -- you can't really argue that cryptography would be unnecessary for those two. Decentralized currency management is not an easy problem to solve, but maybe you have a better idea -- I for one would love to read the paper ! :-) This would be a fairly subjective assessment, naturally. From where I stand I would say running a currency or even "just" a payment processor requires resources either way. Making a somewhat fair, stable, and reliable currency is not an easy task at all; maybe there is a better way that does not rely on the current model of computation of BitCoin, but so far you can't see any of those outside of literature thought experiments that invariably choose to simplify many aspects. ... or eMails with IOUs in them :) Playing the devil's advocate, wasting cycles to brute force RSA or DES challenges set up for no other purpose than to be brute forced when the amount of work is known beforehand and the result is of no intrinsic value is scientific ? Seems like a waste of time and resources to me ! Searching for ET or generating better password-cracking-tables have similar value propositions from others. Point being that one can choose for oneself what one considers an important use of one's own resources. I kind of like the idea of a working cryptocurrency -- more than I like toiling away at inconsequential ET search or proving Moore's law right at RSA factoring :>

That's largely because the people running the exchange are, frankly, idiots. You do nothing except leave your computer on, and you get money. This has SCAM written all over it, frankly.

I am also concerned of the scam element of this thing. Do you have any more links to how this actually fits into the economy. You cannot just invent wealth (unless you're an investment bank, when they seem to be able to, but that's by 'accounting'/'fraud'). If you resolve a BitCoin against a dollar, what does the person that owned the dollar have now?

I'd enjoy some links on this matter to allay my fears, and increase my understanding of this.

EDIT: whoops, links in your first post. Reading them now.

EDIT 2: read the links. Definitely a scam. No money goes in, no goods or services generated - none can come out. This is a slant on a pyramid scheme in that the people that put into it are then rewarded by the other people putting into it and then think the currency is worth something. At the end of the day, it cannot resolve to anything. If you closed the BitCoin how much would then be resolved back into solid currency and paid out? I suspect none to negative.

What you're looking for is called futures. You can trade them if you want (it's a zero sum game, mostly), you'll likely loose a lot of money, but there's a level of definition there as far as a currency goes. I actually don't recommend the average person trade futures, but they make more sense than stock or Bitcoins.

Once again the forum ate my reply ... Wonder what is up with that :)

If you start considering BTC a currency, the view should change drastically. For a common US Dollar to be created, no money goes in, no goods or services are generated, none can come out.

If I own a BTC now and you get a new BTC tomorrow, I don't suddenly have more BTC then. A pyramid scheme, this is not.

There is a bootstrap problem of course -- the more people use BitCoin, the more useful it becomes. This is pretty much the same as the EUR or USD -- I cannot pay with Euro at a US gas station, so it is essentially worthless there. I can pay with USD at many a Mexico gas station, though.

If everybody on the BTC network decided in unison from one day to the next to "shut down" BTC then yes, the numbers don't mean much. This is akin to other currencies, too. There is no central flipswitch though. Everybody has to decide that they do not value BTC anymore at the same time.

I'd be interested to know why exactly you think it is a scam, and who stands to benefit (excepting currency exchange arbitration, which works the same as with any other currency -- the exchanges make their money on the transaction fees, not the value of the currency in question.)

This also serves as a response to DelusionsBeta. Exchange operators do not set the exchange rate. It is governed by what value people using BTC assign to BTC. "Leaving your computer on" is not exactly free, especially with a high-powered graphics-card doing calculations.

BTC may be doomed to fail -- I happen to think it is not. Either way it goes is not material to GoG's success though -- if they at some future point in time cannot get USD for BTC, they can flip a switch and disable BTC payments. I happen to think that the net positive for GoG would still vastly outweigh the risks.

I can get a bunch of goods and services for BTC right now -- and I can donate to a bunch of organizations (amongst them the EFF and the DosBox team -- so if you want to support DosBox development further, you can donate your "worthless" BTC to DosBox too. I am sure they'll appreciate them nonetheless).


We value things differently then. But yes, futures have a more traditional definition to them.

Thing is, you can't do micropayments with futures. And by the time you have set up a viable futures trading platform, you will be out considerable sums in fees to your banking organization of choice -- before even being able to realize a profit. You could probably trade BitCoin futures though :P

I'd like to address the idea that "You do nothing except leave your computer on, and you get money." This is a common assumption about Bitcoin that I've addressed many times.

There's this idea that the "goal" of using Bitcoin is to plug in your PC and generate as much coin as you can. I think this is because it's the first thing people hear about Bitcoin and it's the first thing they latch onto. But Bitcoin isn't really about generating coins. It's about being a currency. Yes, some people did get rich off Bitcoin in the first place, by generating a lot before it became popular. But as of today, 2011, it is not a "scam" because nobody stands to make money off it, except for trading on the normal fluctuation relative to other currencies, which is true of any currency.

I find the argument about Bitcoin not being backed by anything interesting. Note that it's only a valid argument if there is a crash. If Bitcoin becomes popular enough before that happens, then it will be backed by something: a lot of people will be selling goods for Bitcoin. Obviously that's not the case now, so we can't guarantee Bitcoin's success. But that doesn't make it a "scam". It makes it an experiment.

It's not just that it's a problem is there is a crash, it's that the system is more susceptible to a crash, and that the consequences of a crash are not a reduction in value, but completely wiping out the value. It is the equivalent of getting a ficitonal company to trade on the stockmarket, pumping the value a bit, then letting the market do the work.

Incidentally, I hope it's just a joke, but I found the signature interesting for one of the Bitcoin forum admins: http://www.bitcoin.org/smf/index.php?PHPSESSID=d48454bcaac53b38aa9b58507dbded00&action=profile;u=35

Hmm ... I suppose. I'm quite keen on the idea of Bitcoin, so I hope it doesn't crash. But I don't have any economic theory to back it up. I'm more interested from the crypto side (which I have investigated in detail and it is very cool). Wow, I ... don't know if that's a joke. Bitcoin people can tend to be somewhat anarchic. That appears to be a Bitcoin pyramid scheme.

You need to learn how money is generated and the things that are taken into account when new currency is issued; money does in fact "go in" when a currency is emitted, based on the national treasury/bank measurements, such as amount of coinage in circulation, amount of gold owned by the country (most common), amount of debt held by the state. This is why inflation exists in every economy.

The problem with BitCoin is that you can't assign it a real world value against a specific measurement, exactly because there isn't a central organization managing the specific currency.

That's not true. For one thing, inflation doesn't occur in bartering economies. And for another inflation isn't a byproduct of money being introduced, it's a byproduct of money being introduced quicker than the economic activity is increasing. You could very easily be in a situation where you're printing money and minting coin and still be in a deflationary situation.

In practice no economy of any consequence is so finely tuned as to not be dealing with at least some inflation or deflation at any given time.