Bitcoin

Forget bitcoin, how about video-game-time coin

December 12, 2017 Bitcoin 6 comments , ,

My step-son Karl started suiting up in snow gear this morning, even before eating breakfast, to go out and shovel the snow.  I managed to get some food into him first, and while he was in the kitchen, he noticed sadly that the dishwasher had not been run last night, so he wasn’t able to unload it for us!

He then proceeded to explain to me that if he does things that we (the adults in the house) like, then he has noticed that he gets more game (i.e. video-game) time.

The volume in video-game time futures may not be very high, but this coin, as unphysical as bitcoin, is a actively being traded in Markham, Ontario.  Kids understand the free market very well, long before they ever actively take any sort of economics!

Bitcoin may have high valuation, but has become unusable.

December 8, 2017 Bitcoin No comments , , , , , , , , , , , , ,

There have been disagreements in the bitcoin development community about how to deal with scaling.  These have resulted in a number of currency forks or proposed forks in the recent past, including

Here’s what I think would have to happen for a bitcoin fork to be successful:

  • It can get itself onto most of the exchanges.
  • It solves enough of the core bitcoin problems that people will actually start using it.
  • Wallets are ubiquitously available (web wallets, full node wallets, mobile, …).
  • It gets the Bitcoin Brand(TM), and all the marketing clout that brand carries.

There are a number of problems that bitcoin-core has right now:

  • The scaling is absolutely abhorrent.
  • Transactions with default wallet fees get stuck in limbo.  Those fees are no longer pennies or fractions of pennies, but are dollars.
  • A full node wallet requires a massive amount of space.
  • It uses a public ledger without a built in mixer, so isn’t really anonymous, especially when the exchanges that so many transactions are occurring at have extensive personal info (drivers licences, passports, …).
  • Massive energy cost to maintaining the network.

Long term I think many of these issues are disastrous, but the scaling and fees are the killer issues, and I mean that literally.  If a solution to those problems is not incorporated into bitcoin core, then people will be forced to completely abandon bitcoin, and it will be left entirely to speculators (and then proceed to crash, after which it may become usable again for a while.)

Here’s a recent example that illustrates this.  I tried to send $150 USD equivalent to the Scott Horton show, which is hands down the most informative foreign policy show in existence.  I’d previously sent him a $200 USD equivalent donation in bitcoin (and got a listen and think audio lifetime subscription in exchange!), but I thought a signed copy of his book would be awesome, so decided to send some more.

  • At the time I did this, the market price of bitcoin was around $15k USD/bitcoin, so this was about a 10mBTC (0.01 BTC) transaction.
  • The wallet that I used to send the coin (electrum, which doesn’t require a full node) included a default fee of 0.392 mBTC (0.000392 BTC = ~$5.88 USD).

After 19 hours, this transaction still has zero confirmations, and my wallet is now showing this transaction as “Low Fee” with a hazard sign:

A 4% fee on $150 is no longer enough to successfully yield a single bitcoin transaction confirmation after almost a full day!  At this rate, will my attempted send to the Scott Horton show ever go through?  Have I lost the bitcoin I attempted to send?(*)  I don’t think there is any way to bump up the fee on an existing transaction attempt to force it through (**).

Bitcoin has been portrayed as a low fee system that will replace extortionist money transfer systems like Western union, kill the banks that are in bed with governments, enable billions of unbanked access to world finances, and facilitate micro-transactions for small services.  It certainly hasn’t met with these expectations if somebody fully banked can’t even send $150.

The days of being able to sent tips with bitcoin for services that seem desirable appear to be in the past.  I happen to have a tips page on this blog.  I’ve renamed it to ‘cryptocurrency tips’ from ‘bitcoin tips’, since bitcoin now appears to be effectively non-functional.

(This doesn’t change the fact that a blog about math, physics, programming and random incoherent ramblings isn’t monetizable, so nobody will ever likely sent me enough bit or alt coin to even cover hosting fees, let alone the academic fees that have been associated with a lot of the content).

I have had at various points some altcoin wallets including:

  • dashcoin (was darkcoin)
  • litecoin
  • dogecoin
  • ethereum
  • monero

I currently only have dashcoin and litecoin wallets with non-zero contents (and haven’t fired up my litecoin wallet in a long time … it’s sitting on a VM unused with a token amount in it.)

These coin implementations have a range of features (privacy, transaction rates, low fees, ASIC resistance, …).  I don’t think any of them deal with blockchain archiving that will be required for continuous future use, and think that it is fundamentally broken that a full node wallet cannot download only a working portion of the blockchain (or grab other subsets on demand).  However, if the coin implementation doesn’t handle scaling and low fees, I think it is going to be doomed.  I’m not seeing signs that bitcoin core is taking those issues seriously.

 

Footnotes and edits.

(*)

This particular transaction has now disappeared from my electrum wallet, although it is still visible on the network.

It appears that whether or not a transaction truly expires also depends on all the possible mining clients.  To protect myself against the Scott Horton show being paid twice should I resubmit my transaction with a higher fee, I’d have to generate a new wallet, and transfer all my funds into that.

(**)

It appears there are mechanisms to reset fees for transaction if they aren’t confirming, but they are wallet specific.  The electrum 2.8 wallet software I was using did not have such a mechanism, and the transaction itself disappeared from the electrum history after about 24hrs.  I upgraded my wallet to electrum 3.0.2, and the transaction showed up again, after which I was able to initiate a ‘child pays for parent’ transaction sending an additional fee (0.00178749 == $28 USD, another 18% fee, bringing the total fees to over 22%) to force my initial donation through.

[The electrum “child pays for parent” processing leaves a lot to be desired.  After submission, that dummy transaction does not show in the transaction history, and there is no indication on the original transaction, that it has been made.  I only knew that it worked the next morning, when my original transaction had confirmations.]

The moral of the story is that bitcoin can’t be used for small transactions anymore.  If you send any or try to cash it in, you better make sure your wallet software is up to date, and setting fees high enough that the transaction will be processed.  In the case of my donation to the Scott Horton show, where I asked for his $50 and $100 donation perks (signed copy of his book, and a QR silver respectively), despite paying additional fees, I may have gotten the better deal in the transaction, as I get two tangible items for bitcoin that is getting hard to spend (even if you can find somewhere that accepts it).

I don’t think it’s a surprise that dashcoin (and probably other altcoins) have gone up relative to bitcoin 25% in the last day, since bitcoin has hit this peak.  A lot of the alt-coins can be spent and the fees aren’t exorbitant.  It remains to see how some of these altcoins will do under the network pressure recently imposed on bitcoin.

Failed purchases at overstock.com (trying to spend bitcoin)

November 5, 2017 Bitcoin, Incoherent ramblings No comments , , , , , , , ,

A couple years ago I bought a few bitcoin at fairly low rates compared to the current price, and thought I’d try to recoup my initial “investment” by spending some of it (since selling it back for money on an exchange appears to require a capital gains tax report in Canada).  Such purchases are easier said than done, at least here in Canada.

I found that Newegg advertises themselves as bitcoin capable, but it turns out that this is not offered for newegg.ca, and newegg.com restricts payment with bitcoin to certain types of purchases (and it seems like used phones on their marketplace do not qualify).  I found coincards.ca, but was not impressed by how much mark up they impose on every purchase (5%).  Despite Coincards calling this a “convenience fee”, I don’t feel that having to eat a 5% fee for every purchase is very convenient.

Before looking at Coincards and Newegg I had tried overstock.com as I knew from the Tom Woods show that the founder was enthusiastic about bitcoin.  The idea behind this company is that they buy excess stock from vendors and can then offer the items for less.  Some browsing of the prices on this site leave me unconvinced.  I think the savings are passed on to the company and very little to the consumer, however, they accept bitcoin, so I thought “what the hell” and did a (fairly sizeable) test purchase.

This didn’t work out very well.  Either because of current bitcoin network latencies, or perhaps due to the fees added by the wallet that I used, my transaction timed out after “network fee may have been too low message” after I had submitted my payment to the Coinbase dialog that came up in the Overstock cart checkout.  The transaction had been submitted from my wallet to the bitcoin network, but Coinbase tells me the transaction is timed out, and I’m left with the item still in my card, unpaid.

Basically, my payment was stuck in limbo.  Overstock has an online chat support option, which is very responsive, but the support rep I got just played pass the buck:

Bishop: Hi, my name is Bishop. How may I help you?
peeter.joot: I attempted to make a purchase with bitcoin, and got a message saying that the mining fee may have been too small.  I see the transaction processed from my wallet (with two confirmations so far), but the coinbase transaction window claims the transaction expired.
Bishop: Hello there.
peeter.joot: it presented me with a window to return to overstock.com, and there’s no sign of my transaction there in my cart.
Bishop: I’ll be glad to check and help you with this information.
Bishop: In this situation I recommend you to contact  Coinbase, please visit support.coinbase.com or, email support@coinbase.com. for further help.
Bishop: I know I have not resolved the issue for now and have only shared a best possible recommendation, but was I able to address your concerns for now?
Bishop: I don’t mean to rush you, however our chat will time out in the next one minute; please respond so that we can stay connected.
Bishop:
Thank you for contacting Overstock. Before you go, we invite you to check out the exclusive benefits of becoming a Club O Member. Club O allows you to earn rewards and save more with every Overstock.com purchase. It’s our way of saying ‘Thank You’ for shopping with us. Click  here to learn more!
Bishop has disconnected.
The email address for Coinbase that Bishop gave me bounced, but did at least point me to the Coinbase support forum.  This got me a response:

Hi and thanks for contacting Coinbase Support.

I was able to locate the order details using the info provided. I see that you have paid for an order, but it was marked as Expired. Overstock has been paid for it, if you send the below info to Overstock, they should be able to locate your order to fulfill or refund it as desired.

https://www.coinbase.com/orders/XN0KMJGU

Order Code: XN0KMJGU
Created: 2017-09-30 6:29 AM
Merchant: Overstock.com
Order Status: Expired Confirmed Has mispayments
Address: …
Order Amount (BTC): … BTC
Order Amount (Native): … USD
Custom Parameter: 200882508
Button: … on Overstock.com invoice ID 200882508.

If you have any further questions, please let us know.

Randy
Coinbase Support
I provided this info to one of the Overstock support reps, who kept telling me that there wasn’t anything that he could do, and that I had to contact Coinbase for support, despite the fact that I’d just given him the info that Coinbase just provided me.  I was honestly convinced that this support rep was a robot, because he wasn’t capable of understanding even the simplest things.  After he claimed that he wasn’t a robot (unconvincingly) I asked to talk to a manager, and he said he’d have a specialist deal with the issue.
Eventually, I got a response from somebody in the payments department:
By Caroline S. on 10/05/2017 08:55 AM

Hello ,

I’m writing today in response to your recent contact about your Bitcoin order XN0KMJGU . I am happy to help you today.

So when we see the expired tab , it indicates that the system had timed out and the funds did not come through . I can issue the refund back through Coinbase . We will need to refund $… USD so you could try and place the order again . I tried to refund to your wallet address that you provided in the chat but it would not take that address . Do you have an e-mail that we could refund to ?

Please let me know if there is anything else I can do for you with this or any other issue. Visit us again soon for great savings on our name-brand products.

I am so sorry that the order did not process through and appreciate your patience while we work through this issue.

Please respond back to this e-mail .

Sincerely,

Caroline S.
Pay Support

I was severely unimpressed that they weren’t able to simply finalize the transaction I’d attempted, but instead had to refund the bitcoin, so that I could try again.  They had some trouble doing so since I did not use a Coinbase wallet for my payment, but a private wallet.  In the end, I resurrected the Coinbase wallet I had once created (but hadn’t used), and they sent the refund there successfully.
After this hassle I gave up on the item I originally tried to purchase, but thought I’d try Overstock one more time, but this time used my Coinbase wallet with the Overstock Coinbase dialogue.  My hope was that Coinbase would know the transaction was submitted, even if the bitcoin network confirmations hadn’t occurred, and treat it as paid despite the network.
For my second purchase attempt I ordered a refurbished unlocked phone for my wife, and a bench grinder for myself.  The phone came within a couple days (left unattended on my doorstep by the courier!), and the grinder arrived by Canada Post in about a week.
After the adventure of cutting and sanding my wife’s microsim to nanosim size (you can find instructions for this on youtube, but make sure to download the letter size template, not A4, and print it in actual size, not the default), we discovered the hard way that Overstock had sent a phone that was locked to AT&T, and it even listed the phone on the packing slip at an “ATT” phone and not unlocked.  This made the phone unless as it wasn’t even possible to get past the SIM setup screen to the settings nor the home screen.  I had to contact Overstock four times (three using the contact form, and finally once more with their phone number).  I’d been promised call backs twice (1-2 business days), and those never materialized.  The last support person I dealt with (Nora) was helpful, and told me that if I could get the phone unlocked manually for <= $50 they’d refund me that amount.  Unfortunately, after a trip to the mall to the little shop that unlocked my android phone, I was told that they couldn’t unlock this type of phone locked to AT&T, and told me that I’d probably be charged at least $140 Canadian for somebody that could do.  That price was consistent with the unlocking fee on unlockriver.com, which was $110 USD, so I gave up on getting it unlocked myself.
Because the phone that I’d ordered was out of stock on Overstock by the time we discovered it was locked, they weren’t able to send me a properly unlocked replacement of the same type.  I should have asked for an upgrade to the next most similar model since the combined time that my wife and I spent with customer support and playing with the phone and with the Canadian phone carriers was horrendous, and probably added up to hundreds of dollars of time equivalent to salary.
Instead I was sent a packing slip to return the phone:

Thank you for contacting Overstock.com.

We believe that we have resolved your inquiry. However, if it has not been answered to your satisfaction, you may reopen it within the next 7 days.

By Nora A. on 11/03/2017 01:49 PM

Hello Peeter,

We’re sorry to hear that you need to return your … (Refurbished) because it arrive and it is locked with ATT. We recognize that returning an item can be inconvenient, and we want to make this process as easy as possible.

We will return this item at no cost to you. Please print the return shipping label attached to this email. If you cannot open the PDF file, visit http://get.adobe.com/reader to download a free Adobe PDF reader. If you still cannot access or print the label, please email us at international@overstock.com or call us at 00-1-(919)576-9926.

Once the label is printed, please use the following steps to return your item:

1. Print the label and affix it to the package.
2. Write the Return Merchandise Authorization(RMA) number … on the outside of the package large enough for it to easily be seen.
3. Take the package to your nearest Canada Post office.

It may take 5-7 business days after we receive your return to issue your refund. We will send you an email notification once we complete your return.

Thank you for your patience through this return process. If you have any other questions on this or any other issue, please reply to this email or call us at 00-1-919-576-9926.

You may also view our full Standard Return Policy by visiting this link: https://help.overstock.com/app/answers/detail/a_id/1

Sincerely,

Nora A.
Overstock Global Solutions Specialist

So, once again, my attempt to purchase something on Overstock has left me without the item, and a requirement to return it, and retry the transaction again should I desire.  I don’t think there’s much chance in hell that I’ll try such a purchase on Overstock again.  A 1/3 success rate just doesn’t inspire confidence, and their prices aren’t that great to start with.

Comparision of Canadian bitcoin exchanges

September 9, 2014 Bitcoin No comments , , , , , , , , , , , , , , , ,

 

I’ve made some small bitcoin purchases (an initial purchase at the decentral ATM, and a couple more at Quadriga CX.  I’ve noticed that there are often large splits between the buy and sell offers posted on the Quadriga trade page, which I suspect is due to low volumes.  Even factoring in the USD conversion costs their buy rates appear to higher than I’d expect comparing to the USD exchange prices.

Looking for options I’ve enumerated some of the features, limitations, and charges for the Canadian exchanges that I have stumbled upon.

Canadian exchanges

https://quickbt.com/ca/?

No Government ID/utility bill verification appears to be required.  They offer an interac online deposit, and I don’t see if they also impose a transaction fee.

Quickbt caps purchases at 0.2 BTC (about 50 CAD).

This “exchange” has a 10% transaction fee!  Like the decentral ATM on Spadina, this looks like a good way to make a very small initial bitcoin purchase, but not a good way to acquire any larger amount.

https://www.quadrigacx.com

Requires Government ID and utility bill verification for deposit.

No fee for interac online deposit.

0.25 % BTC fee for purchase.

No mining fee for transfer of purchased bitcoin into an external wallet.  I am not sure if the exchange covers the mining fee, or it just isn’t included (if so, perhaps that is why a transfer out seems slow).

https://www.vaultofsatoshi.com

Requires ID verification.

There is a $1.5 CAD fee for fiat deposit using interac online.

0.4 % per trade (higher than Quadriga CX’s 0.25%)

https://www.cavirtex.com

Requires ID verification.

Appears that you can set up direct deposit for cashing out bitcoin sales.

$1.5 CAD fee for interac online deposit.

Buy rates with this exchange appears to be lower than Quadriga CX.  I don’t know if they also impose a transaction fee for purchase or wallet transfer.

https://www.canadianbitcoins.com

Requires ID verification.

Looks like you can supply Canadian bank information for direct deposit after sale of bitcoin.

Buy/sell rates appears to be much higher than cavirtex.  For example when I looked the canadianbitcoins buy rate was $556 CAD when the cavirtex buy rate was $527 CAD.  This exchange also posts a very large split between buy and sell, with sell clocking in at the very low rate of $504 CAD (vs. their $556 CAD buy rate!)  I don’t intend to use this exchange.

https://www.cointrader.net

Requires ID verification.

While this is a Vancouver company, they don’t appear to have a CAD funding option.  They charge a $2 fee for interac online, but I suspect there are probably USD conversion costs too.

Comparison of samples rates

Using rates/bid/ask/volumes sampled at about 9:15am on Sept 9, 2014, we can get a bit of an idea of how the exchanges compare

https://www.quadrigacx.com

Last trade: $509.00 CAD Volume: 89.48651284 XBT Low: $503.65 CAD High: $523.52 CAD

Top buy order:
$510.93 CAD  0.15400000 XBT  $78.68 CAD

Top sell order:

$518.34 CAD  1.09959000 XBT  $569.96 CAD

https://www.cavirtex.com

BTC/CAD : 513.20
   DAILY             WEEKLY
HIGH  520.00 CAD  535.00 CAD
LOW   503.03 CAD  500.00 CAD
VOL   173.277 BTC 859.534 BTC

Top buy order:

09/09, 07:15   0.2500/0.2500  511.98704   128.00

Top sell order:

09/08, 14:55   4.3413/6.2000 513.29500   2228.37

last trade:

Sept. 9, 2014, 07:03 0.2218   113.83   513.19576

https://www.vaultofsatoshi.com

Last Price: 521.00000000   High: $530.50000000   Low: $514.50000001   24-hour Volume: 82.12   7 Day Volume: 465.50

top buy order:

521.00000000   0.03146457  16.39304
top sell order:
526.00000000   0.00382869  2.01389
Last Trade: 521.00000000 – 24 Hour Volume: 82.19054910
https://www.canadianbitcoins.com

BTC Buy Rate:  $541.74     BTC Sell Rate: $502.91

 

Observations

First off, notice that canadianbitcoins has uniformly poorer rates than any of the other Canadian exchanges.  It looks like they impose both buy and sell fees that are significant.

The best exchange for volume appears to be cavirtex.  I haven’t used that exchange, since I didn’t want to eat any fees for deposit, and haven’t made any purchases larger than $50 CAD (so their interac fee was significant in comparison).  It looks like it would be worth my while if I were to commit to making a larger one time deposit (say $200 CAD) in order to spread that transaction fee.

Both vaultofsatoshi and quadrigacx have larger splits between their top buy and sell bids.  Looks like those would both be better places to sell bitcoin if that was desired.  I happen to be buying bitcoin because I am assuming that there will be more and more places to spend it, and want to have some to play with.  I don’t have any intention of trying to play a day trading game with buy and sell, and suspect that this would require both trading skill that I don’t have, and larger amounts of cash than I am willing to loose.

A CAD bitcoin purchase from an exchange.

August 1, 2014 Bitcoin No comments , , , , , ,

 

I’d wanted to have some bitcoin for a while to experiment with, and recently made my first bitcoin purchase at the decentral bitcoin ATM.  However, at 5% exchange rate difference compared to an exchange (they use cavirtex as the exchange rate reference), the effective transaction fees are rather steep.  While it was an easy way to do things, especially for somebody with no concrete experience with bitcoin, it definitely looked like it was worth setting up an exchange account.

I recall looking into cavirtex, and didn’t like the look of the fees they had, so kept looking.  I found another Canadian exchange, www.quadrigacx.com (note: this is a referral link, which would give me a credit if you try out their service and make any purchases), and tried it out.  Like cavirtex, you have to provide anti-money-laundering information to fund the account (drivers license, utility bill with address, photo of you with your drivers license, and phone number).  They were very fast with the verification (within a couple of hours).  However, once my account was verified for funding, I had trouble actually funding it.  It turns out that their system currently doesn’t support the chrome browser (or didn’t for me).  I tried with firefox and was able to fund it using an online interac transaction.

I wanted to see what sort of fees I’d be hit with for a fund, purchase, transfer out cycle.  This was:

  • Initial funding with $51 CAD.  Neither Scotiabank, nor quadriga appeared to charge me any fees for this.
  • A bitcoin purchase of 0.07500000 XBT for $48.80.  Quadriga did have a transaction fee for this (in bitcoin, 0.000375 XBT).
  • A transfer out of my remaining bitcoin (0.07462500 XBT) to a blockchain.info wallet.  That transaction had a bitcoin transaction fee of 0.0001.  I’m not sure if quadriga or blockchain added that fee.

So, the total fees for this end to end transaction (fund, buy, bitcoin transfer) were 0.000475 XBT (BTC), a total of about 31 cents CAD at 598 CAD/XBT.  Not too bad, and definitely better than the ATM fees.

Quadriga’s website can use some UI improvements.  The transaction logs hides under account details and you can see that when you click your name, but I didn’t find that at all intuitive (after suggesting it to them as a future improvement they told me where to find it in the UI).  Their buy widget also doesn’t have an intuitive way to specify the funds amount in fiat currency.  Instead you have to specify the amount in XBT, and once you do that it shows you what that converts to in the fiat currency.  Slightly clumsy, but functional.

A first bitcoin purchase, at Decentral’s ATM

July 24, 2014 Bitcoin 1 comment , , , , , , ,

 

I went to the bitcoin ATM today at decentral, in Toronto, on 64 Spadina Ave just south of King St.  It has the following awesome sign:

photo

I love their self description “Coworking Space For Disruptive Technology Innovation”.  I didn’t think of taking any picture of the ATM, but it worked nicely.  Here’s what was required.

First step to make a purchase was entering my phone number.  The ATM sends a text message with a verification code to the phone, and you have to enter that into the ATM once it’s received.  I am not sure how this would have worked should the battery in my phone have been dead, something happens too easily on my ancient phone these days.

Once the verification code from your phone is entered, you feed in a printout of your wallet’s QR code.  Something like:

photo (1)

I deposited $100 and the transaction appeared to go smoothly.  The ATM sends a receipt text message to your phone with your wallet and the amount that was deposited.  My phone is not a smart phone, something that a bitcoin using generation probably takes for granted, so I wasn’t able to login to blockchain.info and see the new bitcoins in my wallet.  The nice guy (who’s name I have now forgotten) at decentral showed me with an app on my phone that the transaction was on the blockchain.

He was able to do that by scanning my QR code, which was interesting.  I am surprised about the non-anonymous nature of that blockchain peek.  So, it appears that if you advertise your wallet address (which appears to function like a public key) so that you can accept payments, then does that mean somebody could sum the deposits to that address from info available on the blockchain.  The work required to do that could be significant, but if anonymity is what you are looking for, some additional steps must be required.

Note that decentral’s ATM does not (at least currently) have any sort of ATM transaction fees, however you still take a hit on the transaction, since the exchange is at a rate 5% greater than the cavirtex CAD/BTC exchange rate (conversely, bitcoin sales at the ATM are at 5% less than this rate).  For example, my purchase using $100 CAD was at a buy rate of $681.47/BTC.  I see that the cavirtex rate ranged from $636 to $659 today.  This must mean that I bought when the ATM believed the cavirtex rate to be $649.

The best way to obtain bitcoin appears that it would be direct person to person transactions for work done, but I don’t currently have any services that I am trying to sell.  The decentral “nice guy” suggested that I could potentially do contract work for bitcoin.  Since much of my free time has been occupied by studies for the physics courses I have taken, that doesn’t leave much time for moonlighting.  Unfortunately, I don’t think there’s much market for the course notes that I have prepared for the courses I have taken.  I’ve made all of those available for free.  Somebody could tip me bitcoin if they find it useful, but chances of that are pretty slim.  The market for this level of physics material is pretty small.  For example, when I did the relativistic electrodynamics course, I think there were about 13 people in the course by the time it was done (offered once per year).

Some thoughts about bitcoin, money and anarchy

July 11, 2014 Bitcoin 2 comments , , , , , , ,

Recommended reading: Ellen Brown’s “Web of Debt”

You may think that you do not care to understand how debt based banking and associated currencies work. Many of us probably think of money as nothing more than a means to an end. The mechanism that allows governments and banks to create money does not seem important in day to day life. Provided we get our paycheck, in day to day life, we only care that we can use it to pay our bills, buy our groceries, provide clothes and shelter for our kids, entertain ourselves, and so forth.

To help explain both the mechanisms of debt based currencies, and some of the implications and history of the current system, I would recommend the book “Web of Debt” [1]. This book explains many subtle details of modern debt based monetary systems, and has a few elements

  • The mechanism that allows money to be created from debt.
  • A historical (and very unconventional) narrative of warfare from the viewpoint of banking manipulations.
  • A history of the United States “Fed”, its history, its backers and the sorts of manipulations that it allows.
  • A discussion of alternative currencies and possible solutions.

You will also find lots of details about how the world financial system got to be in such a mess. I found that learning the extent of this mess was almost physically painful, a response that makes it easy to understand why so many people put up with the status-quo. It is easier and more comfortable to just not know.

In the unconventional historical narrative in this text most warfare is framed as motivated by banking interests. That perspective is so different from conventional history that many people will probably it flat out unbelievable. The author did not help that believability by framing it as self evident. A more scholarly presentation as a thesis with supporting arguments and documentation would have helped lend that history more credence.

A number of possible alternative monetary schemes are considered. The most weight is put on nationalization of banks, with debt free creation of money used instead of government borrowing the money that they print from private banks. It seems implausible that enough people will learn the mechanics of our monetary system to force a grass roots movement that could wrest control of money creation from the private banking industry. If such a paradigm shift is unlikely, reform would probably require some of the smaller scale local monetary ideas catch on, or the invention of alternate currencies (this is where I think bitcoin would fit nicely).

There are a number of such alternative currencies discussed in this book. These include local (municipal) currencies, currencies based on barter and time expended to provide services. I do not think that many such specialized currencies will ever find wide spread acceptance. Something that is widely tradable in a variety of circumstances is required to break the widespread dependence on the current central banking system. This book does mention some electronic currencies, but I believe that it predates bitcoin slightly. Perhaps bitcoin and/or alt-coins will make it into a future edition.

Are these topics that would motivate the average Joe into learning how money is created and manipulated? Not likely.

Why do I think that this is worthwhile? I think that this is worth knowing because so much of your money is being spent without consent by the governments that are nominally but not functionally our representatives. It is very informative to gain some historical perspective of the abuses that are enabled by financial manipulation. When fifty percent of your hard earned money is stolen from you, and you face fines, imprisonment, and confiscation of property if you object to that stealing or how your resources are consumed, it is clearly worthwhile to understand some of the mechanics involved.

However, most people are content with the status-quo. Most people accept the delusion that we live in a functioning democracy. Most people go through their day to day lives believing in the stability of the financial system. A switch to a monetary system that deviates from our current central bank scheme has so many implications, they are hard to enumerate. Without some sort of catastrophic motivation the resistance to such a change would be extreme. If the history of the author is accepted, such a change is likely to starts wars.

What is money?

Money ought to be nothing more than a mechanism to facilitate exchange. Goods or services that have value to both the buyer and seller should be exchangeable either directly or using some form of currency. Currency in such a context is just something that has an agreed upon value that can be used to facilitate multiple party transaction where not all of the goods or services offered are of interest to all parties at the time of the transaction.

Does the currency have to have any intrinsic value? Except for coins, it has been a long time since the monies that we use had any sort of intrinsic value. Through our laws we have the strange situation that we authorize “special” institutions the power to create money on our behalf. That is either done directly by central banks or indirectly by regular banks when debt is issued, or still more indirectly by companies that issue tradable stocks. Banks essentially have the power to issue money because they give themselves this power by controlling the financing of the puppet politicians that write the laws that give them these powers. It is a truly bizarre system that we have grown up accustomed to, and due to that acclimatization, do not question in our day to day lives.

If money has no intrinsic value, what is it? Oxford dictionaries [2] includes the following definitions

  1. A current medium of exchange in the form of coins and banknotes; coins and banknotes collectively.
  2. The assets, property, and resources owned by someone or something; wealth
  3. Financial gain
  4. Payment for work; wages

The first definition is clearly dated. Most of the money that changes hands these days has no corresponding coin or banknotes associated with it. Paychecks are directly deposited into our bank account. We can pay our bills online, or write cheques that represent banknotes, but in the vast majority of cases never see any physical monies that represent either what we receive or distribute. For all intents and purposes our monies are electronic already, but the electronic transactions are in the control of special institutions that have been granted exclusive privilege to profit by handling these transactions.

The second definition has broader applicability, but has no connection to the concept that money is a mechanism of exchange.

The third definition describes stock market and debt based creation of money nicely, but is also not a very broad definition.

I happen to like Ron Hubbard’s definition of money [3], “Money is an idea backed by confidence”.

There is a level of abstraction in this definition that describes the utility of money as a mechanism for barter. Confidence that money will be accepted by all parties regardless of what exchange it happens to be used for at any point in time is what makes it valuable. The debt based “Fiat currencies” (a popular term used to describe our central bank created monies) have value because we all agree that they do, and have confidence that they can be used in future exchange. If that confidence is lost, the money becomes worthless.

Should we wish to use currencies that are not under any sort of third party control (i.e. financial institutions and governments), the main hurdle is the requirement that people using any alternate currency will be confident that such an alternative currency has value.

This is a bit of a catch 22 for the adoption of any new currency, including bitcoin. To give it value, people have to start using it.

My anarchist rant. Why I like the idea of bitcoin?

It seems to me that bitcoin or something like it could easily provide a currency that is both widely tradable, and is also not controlled by coercive, warmongering or generally abusive governments and their associated banking systems.

We live in a world where the products of your time and work are taken from you by force to be spent by authorities who know better than you how your money should be spent. We do not have the option of vetoing spending on things that we find morally objectionable or damaging. Ironically the only reason that the guys in blue with guns can haul you away for not paying your taxes is because you pay them implicitly with your taxes to do this job, like it or not. These are the same guys that routinely break the same rules they enforce.

When so many wars are funded by debt, imagine a world where we have the possibility of anonymous person to person transfers of money are possible without the intervention or even monitoring of third parties, and without those third parties taking a cut without providing any valuable service. Imagine a world where coercion and threats of governments are not possible, because we stop paying them to threaten us. Imagine a world where consent is required.

That is why I like the idea of bitcoin or a bitcoin like electronic currency. If it is ever accepted for widespread trade, it provides a decentralized infrastructure that allows for direct and anonymous person to person transfers. It could facilitate a paradigm shift to a more barter oriented and localized culture that bypasses government power, undercutting the institutions that we fund to keep us underfoot. It has the potential for eliminating warfare by eliminating the coercive collection of the monies that are used to finance it. It has the potential to eliminate the banking and financial scum that sucks the life out of the people that actually work for a living, and profits from keeping them underfoot.

I am surely a naive dreamer, but I wake up thinking that I have good dreams.

References

[1] Ellen Hodgson Brown. Web of debt: The shocking truth about our money system and how we can break free. Ellen Brown, 2008.

[2] Oxford dictionaries. Oxford dictionaries, money, 2014. URL http://www.oxforddictionaries.com/definition/english/money. [Online; accessed 11-July-2014].

[3] L. Ron Hubbard. Barter System. HCO PL 27 Nov 71, Barter System, 1971. URL http://www.b-org.demon.nl/scn/tech/admin-dic-1-4.txt. [Online; accessed 11-July-2014].

Acquiring bitcoin in Canada?

July 9, 2014 Bitcoin No comments ,

 

I tried out coinbase.com about a month ago, at which point, adding a credit card that had a Canadian credit card address didn’t work.  They have Canada in the country drop down, but only allow USA states to be entered in the “Select State” dropdown for “Add a Billing Address”.

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It initially looked to me that you could use it outside of Canada (if you use a credit card instead of a bank account), but that should also say “U. S. only” as the site is currently implemented.  This is my second time trying this site, which I’d heard mentioned on the ‘let’s talk bitcoin’ podcast.

I’d be interested to find out what bitcoin vendors are used by others in Canada?

Update:

I found the SE thread how-can-i-get-bitcoins-in-canada. This pointed me in a few different possible directions: