Online Gambling Site Bets On Bitcoin To Avoid U.S. Laws 347
SomePgmr writes with a story about an online gambling site planning to use Bitcoin to sidestep U.S. regulations that effectively ban online gambling. From the article: "Michael Hajduk had sunk one year and about $20,000 into developing his online poker site, Infiniti Poker, when the U.S. online gambling market imploded. On April 15, 2011, a day now known in the industry as Black Friday, the U.S. Department of Justice shut down the three biggest poker sites accessible to players in the U.S., indicting 11 people on charges of bank fraud, money laundering, and illegal gambling. ... Infiniti Poker ... plans to accept Bitcoin when it launches later this month. The online currency may allow American gamblers to avoid running afoul of complex U.S. laws that prevent businesses from knowingly accepting money transfers for Internet gambling purposes. 'Because we're using Bitcoin, we're not using U.S. banks — it's all peer-to-peer,' Hajduk says. 'I don't believe we'll be doing anything wrong.'"
Sweet (Score:4, Informative)
It'll be nice to have an established poker site taking Bitcoins. Not that I want to disparage the current bitcoin poker sites (I like seals with clubs) but they just don't have the polish and finish to which I've become accustomed.
So... It's an Arcade (Score:5, Informative)
The fact that said worthless tokens can be exchanged for things with monetary value is, apparently, non sequitur.
Re:So... It's an Arcade (Score:4, Interesting)
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Pachinko balls are just a type of token, like Chips used in a casino.
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Sounds like a dumb idea, until you realize that Chuck E. Cheese and similar businesses have, for decades, been using a similar tactic to avoid running afoul of gambling laws: You're not playing for gifts or money, you're playing for worthless tokens!
I doubt the Feds would allow Japanese style Pachinko gambling, where one business sells/buys the steel balls and another has the gaming machines.
Maybe you could do something online, with a non-US company selling/buying Entertainment Bucks and online casinos accepting/paying out with the same.
The Feds would probably call it all money laundering and make your life hell.
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In most states, the machine a Chuck E. Cheese, and other places, ARE regulated like gambling. You know thos crane machine? the need to meet a criteria of winning.
Lets say, for this example they must have the odds of 1:10.
form 9 out of 10 tries, there isn't enough force in the grip to win.
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No, Chuck E. Cheese and similar businesses (like carnival midways) run games that are (at least theoretically) games of skill rather than games of chance - because it's the latter than run afoul of the gambling laws. What you're playing for is irrelevant.
Doomed to fail (Score:5, Interesting)
Not too long after Black Friday I had the same idea of using Bitcoin currency instead of real moolah. A site called Betcoin [betco.in] had already done this using the jpoker/jspoker [pokersource.info] library. I frequented the site for a while and even went back to it months later. In both cases the volume of people on the site was extremely low and the amount of bitcoin compared to real USD value was paltry even in comparison to the Full Tilt Poker $0.25/$0.50 tables. There just wasn't enough money in circulation on the site and not many people wanted to stake their futures on the volatile Bitcoin currency in the poker world. Plus, anyone that did any decent research just found various overseas and Indian-owned online casinos (harder for the US Gov to prosecute Indian territory casinos in Canada) and could exchange money by select Visa merchants, cash proxy sites, or by money order.
It's all good bro! (Score:2)
Tell that to the US Federal Marshal, FBI, CIA ('I' stands for "It's National" not 'International'), and every other ATF-related or unrelated agency that every existed when they come knocking at your door with handcuffs. With 15 years defending yourself, maybe, just maybe, you'll get out before 2030.
Bitcoin forever, oorah.
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Hajduk says. 'I don't believe we'll be doing anything wrong.'
Then, why does he call himself "Hajduk"?
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The I stands for Intelligence in CIA.
Famous last words. (Score:2)
Please place sociopolitical ramblings under this. (Score:5, Insightful)
Of course the government has to outlaw gambling. It is dangerous and addictive, encourages crime and exploits the poor. Except the state lotteries, of course - those are somehow none of the above.
I predict the future (Score:5, Funny)
I don't believe we'll be doing anything wrong
shortly to become
I didn't believe we were doing anything wrong
im guessing Goldman Sachs probably already does (Score:3)
have a whole department gaming the bitcoin system.
funny how gambling is illegal -- unless you do it with other peoples money
I think this is the one useful app. for the things (Score:3)
I think BitCoins were poorly designed (from an economic standpoint), and will never be a serious form of payment for anyone NOT wanting to engage in currency speculation on the volatile rate, but for gambling, they totally make sense. That is, as long as they realize that their BitCoin exchange rate will be an additional element of their bet.
Karma (Score:2)
indicting 11 people on charges of bank fraud, money laundering, and illegal gambling
Gambling period runs a very high profit margin, to try and increase that through illegal means is just well... messed up. The use of bitcoin shows that the owners of these websites will do just about anything for even potentially earning a buck.
Bitcoin is not the problem. (Score:2)
Something I don't understand...Please enlighten (Score:2)
How does betting my money on the results of a card deal any different than gambling on a stock market? It's all gambling...why is stock market ok, but not cards?
Even betting on currency fluctuations is gambling...And if you want to see about criminal activity due to gambling...Look at the BANKS...
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Control and regulation.
And the stock market isn't gambling like gamin is gambling. The fact that you don't understand the differences tells me you haven't read anything beyond headlines on this issue.
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Here is the difference between investment and gambling. When you gamble, you win or lose money arbitrarily. There is no net gain in value from a gambling transaction, only a transfer of wealth. When you factor in transaction costs, gambling becomes a deadweight loss to society. Gambling is a negative-sum game. Investment, by contrast, is expected to be a positive sum game, and to create wealth. The ideal investment will be Pareto efficient -- something that can never happen with gambling. This is why
Money Laundering... (Score:2)
Money laundering doesn't have to be done with money. Any exchange of value used to obfuscate verboten activity is per-se money laundering
Transferring a bag of coconuts from the trunk of one car to the trunk of another, representing an exchange of value, when done to obfuscate illegal activity, is money laundering.
That's US law, and it's the law in a bunch of other countries too.
"It can't be money laundering if it's not money"
Yeah, enjoy prison, guy.
--
BMO
HAHA, you sure arew doing something wrong (Score:2)
Casinos seldom use cash. Some never use cash. It's all tokens called chips.
The fact that you can turn bitcoins into dollars means that, yes, the US regulates it.
You should really have a lawyer look into the governments view of token when gambling.
Ever wonder what prostitute don't take a token that can be exchanges elsewhere as cash. A place that also sells tokens?
Cause it's still illegal.
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The fact that you can turn bitcoins into dollars means that, yes, the US regulates it.
You can turn practically every currency on this planet into dollars. Now ask all of the sovereign governments whether the US regulates them.
Reality: The US regulates YOU, the US citizen. For all intents and purposes, you live behind an economic iron curtain. Have fun traveling around the globe. But when the DoJ wants your ass, its theirs. Read your Thirteenth Amendment and weep.
/. readers anti-bitcoin (Score:3, Insightful)
Re:Another idiot buying into the bitcoin scam. (Score:5, Funny)
And good job. Base your business off a virtual currency with ZERO backing and no control whatsoever.
And it's worse than US Dollars exactly how now?
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Is the US going away tomorrow? No.
Are they going away next year? No.
Are they going away in 5-10 years? No.
Is "A. Random H@X0R" going away tomorrow? Who?
Are they going away next year? Who?
Are they gone in 5-10 years? Who?
Essentially currency is based on trust.
For anyone who's not a complete, gullible rube, Bitcoin fails the "smell test" there.
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> Is the US going away tomorrow? No.
> Are they going away next year? No.
> Are they going away in 5-10 years? No.
So is there evidence that we should know 5-10 years in advance when the US government IS going to fall?
You can put your trust where you want, I don't expect anything is so set in stone. Not that they wont go away, and not that they wont fall apart to the point that their own currency becomes untrusted and worthless....it could very well happen, and it could happen in less than 5 years.
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Is the US going away tomorrow? No. Are they going away next year? No. Are they going away in 5-10 years? No.
Is the US going to print 80 billion dollars more next month? Yes.
Is the US going to print 80 billion dollars more the month after that? Yes.
Is the US going to print 80 billion dollars more the month after that? Yes.
Is the US going to print 80 billion dollars more the month after that? Yes.
It's not the 'going away' part that's the concern.
Re:Another idiot buying into the bitcoin scam. (Score:5, Informative)
Is the US going away tomorrow? No.
Is the US government and banks going to continue to manipulate the US dollar for the foreseeable future? Yes.
Is "A. Random H@X0R" going away tomorrow? It doesn't matter. Bitcoin is a decentralized currency. Bitcoin is not dependent upon "A. Random H@X0R" for it to be trusted.
Where does the trust in bitcoin come from? Well if you don't know anything about bitcoin, you probably shouldn;t trust it. If you know something about computer science and theory of computability, you'd know that bitcoins are actually much harder to acquire than a government issued currency, and is therefore much harder to manipulate (e.g. like gold). A trillion US dollars can be created virtually with a keyboard stroke. The only thing stopping this from happening is the people in charge. What stops a trillion bitcoins from being instantly created is the laws of physics and math.
A lot of currencies have collapsed from rampant inflation exactly because the people in charge could *not* be trusted.
Some people trust government officials more than the laws of physics and math. I personally don't.
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Re:Another idiot buying into the bitcoin scam. (Score:4, Insightful)
Its not terribly useful in the real world?
I mean honestly, can I buy food with it? Gas? How many merchants within 50 miles of my home (DC area) are currently accepting bitcoins? What about amazon, or ebay / paypal? Newegg?
Sure, I could transfer it to other people, but its also a pretty volatile currency. I have no reason to believe the value sent will reflect anything near the value once I exchange it into dollars, if I can even perform the exchange (since it requires Bitcoin exchanges or a willing purchaser).
Its kind of like trying to transfer money by trading stock: sure, it sort of works, but who really wants that kind of volatility? What supermarket would ever want to do that?
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And how many accept euros?
Silk road accepts it, so if you don't have a better connection for drugs, there you go. That one site is believed to do about $92,000 US a month in business...all bitcoins.
Its also useful for some services.
As for volitility....well its been in existance for all of a couple of years now... but on a day to day basis...its pretty stable. I have been watching it on and off for a while and...while it does fluxuate, it does so slowly.
So who wants it? Maybe people who care about more than
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It's not a bad idea to be prepared when a category 5 hurricane is barreling towards your city.
The storm is dynamic and may change course or fizzle out.
Yes, there are costs with boarding up windows, moving to safer areas, etc. This is preparation for the physical safety of yourself, family and property.
Why not do the same when a financial storm is looming?
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The US dollar has backing and control. It couldn't be a globe currency without it.
Slashdot and economics. Never has there been a group of people this confident about a subject they know nothing about.
Re:Another idiot buying into the bitcoin scam. (Score:5, Funny)
And plutonium. (Score:5, Insightful)
Re:And plutonium. (Score:4, Insightful)
Or the depleted uranium.
Re:And plutonium. (Score:5, Funny)
D.U. is typically sent to people for free. At a high velocity : )
Re:Another idiot buying into the bitcoin scam. (Score:5, Insightful)
Re:Another idiot buying into the bitcoin scam. (Score:4, Insightful)
The US backs its currency with a fleet of nuclear-powered aircraft carriers. That's far better backing than land or gold.
Re:Another idiot buying into the bitcoin scam. (Score:4, Insightful)
The value of the dollar is what you can buy with said dollar in the united states which barring a bit of inflation here and there(some inflation is a good thing) is about the same as it was last year or the year before.
If you're talking about the currency exchange rate, that value is set by the currency exchange market and is therefor bound by no sense of reality or sanity whatsoever in much the same way as stocks. The Australian dollar was trading at about 93 cents to the US dollar right before Lehman brothers and two months after it was sitting at 58 cents. Our economy barely had a hiccup and the US one was in the toilet, but the value of the US dollar rose dramatically. The most important factor causing the US dollar to drop has dick all to do with quantitative easing or the trillion dollar coin(which actually won't affect inflation at all since the effect on the money supply is essentially zero), mostly it has to do with the fact that the US economy is in the toilet and US interest rates are near zero, with interest rates being the bigger factor.
Re:Another idiot buying into the bitcoin scam. (Score:4, Insightful)
The value of the dollar is what you can buy with said dollar in the united states which barring a bit of inflation here and there(some inflation is a good thing) is about the same as it was last year or the year before.
Barring a bit of inflation here and there? Seriously, what? Do you know what's happened and how much currency debasement there has been in the last five years? No inflation is ever a good thing. It massages the egos of humans into believing that their investments are going up and paint over that everything else is as well.
Our economy barely had a hiccup and the US one was in the toilet, but the value of the US dollar rose dramatically.
Comparing the price of one currency to another when they are all being debased is a fallacy. Over the last five years it is pretty clear that dollar has declined markedly in value. In case you hadn't noticed there are a lot of dollars around. Everyone has them and that doesn't make it terribly valuable.
Re:Another idiot buying into the bitcoin scam. (Score:5, Interesting)
The dollar has value because it can pay a dollars worth of taxes.
When Germany jumped into the eurozone, adoption of the euro was extremely slow until the year that Germany required all taxes be paid in euros, and in that year almost everyone converted.
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The dollar has value because it can pay a dollars worth of taxes.
If that were the case, wouldn't the tax rate affect the value of the dollar? Does the tax rate affect the value of the dollar?
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No.
Re:Another idiot buying into the bitcoin scam. (Score:4, Interesting)
No, but the taxation often provides the tipping point.
A national currency is marked by 2 things: that you can (or must) pay your taxes with it, and that the employees of that government (most especially the military) accept it in payment. As long as both of those are true, even with serious inflation, the national currency has value.
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When the dollar was backed with gold, it meant if the dollar crashed, you could always exchange it for X amount of gold (whatever that's worth). As long as gold was worth something, then that propped up the dollar.
Not always. When FDR needed to print vast sums of money (by the standards of the day) to pay for his social programs, he outlawed ownership of gold by US citizens, to prevent exactl that! Eventually the French called him on it, threatening to redeem vast amounts of US dollars for their gold, even if US citizens couldn't. Shortly thereafter, the dolar was "revalued", and the existing currency was suddenly redeemable for far less gold.
There's never been a form of currency that the government didn't hstoric
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Re:Another idiot buying into the bitcoin scam. (Score:4, Informative)
Only if a debt is created actually. I can offer to sell anything I own for barter, gold, bitcoins, or even euros, and I can, quite legally, refuse any currenct, including US currency...so long as no debt is created. Should a debt be created, then I would have to accept some amount of US currency to settle it (though I am still not required to exclusively accept it).
Re:Another idiot buying into the bitcoin scam. (Score:4, Interesting)
should the debtor offer you legal tender and you refuse, then you attempt to collect the debt at a later time the debtor can (and will if they are smart) raise your refusal to accept payment as a defense to your subsequent attempt to collect payment.
Re:Another idiot buying into the bitcoin scam. (Score:5, Informative)
The Rentenmark was backed by land.
Re:Another idiot buying into the bitcoin scam. (Score:5, Informative)
That isn't what backing means. Every single reply to my post has the same issue. Backing does not mean "the issuing authority has assets they can sell" and it doesn't mean "the issuing authority can force me to use their tokens through the barrel of a gun".
To say a currency is backed by something has a very specific meaning, which is that there is an asset literally "behind" the currency. The currency itself is merely a proxy for the backing material, one can be exchanged for the other at a specific rate. The gold standard meant you could, at least in theory, go to a bank or the government, hand in some currency and walk out with gold bars.
So given this clear definition it's meaningless to say a currency is backed by "the authority to tax". That authority might incentivize a large population to obtain these tokens and thus give them some value - but that isn't backing. It's taxation. It's also wrong to say a currency is backed by the ability to sell something like land - OK, so the government sells some land it owns. What does it sell that land for? Oh, right, it sells the land for dollars. So if I lose confidence in the dollar and want to hand them in, in return for the asset that backs them, the government selling land and giving me back more dollars doesn't help. I'd need the actual land itself and there'd need to be an actual somewhat fixed exchange rate between dollars and land. But there isn't.
If you want to argue that dollars have value because the US government taxes its citizens in that way, go right ahead. That argument doesn't lead to "Bitcoins are worthless because no government taxes in them" though. Bitcoins obviously aren't worthless because they started out having no value when they were first created, and obtained value over time as people learned about them. The system is an existence proof that you'd be wrong.
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currency has value because its backed by a human society. real human society is a lot more solid than a voluntary internet standard that can impode at a moment's notice. real society isn't going to implode at a moment's notice. well, it can, if an asteroid or epidemic hits. but then nobody will care about your debts and obligations (and assets). but if a voluntary internet standard implodes there will still be guys expecting you to pay your bills
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So I pay for a product - someone signs over a certain amount of Bitcoin to my private key - and I receive the product (the ability to do the same to someone else). So I'm sorry, what's the scam, again? It's all there, in black and white mathematics.
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They pay you today's $50 worth of bitcoins. How confident are you that that will be $50 worth of bitcoins tomorrow?
Youre essentially bartering with stock; if that floats your boat go for it.
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How confident are you that that will be $50 worth of bitcoins tomorrow?
Well, his customers came to his website because they wanted to gamble, didn't they?
Re:Another idiot buying into the bitcoin scam. (Score:5, Interesting)
Proving Bitcoins have value is trivial - there are exchanges where they are traded against other currencies for non-trivial prices, so they clearly have value. What more proof could you demand?
Yes, you can charge back with credit cards. This is great for the credit card companies who then lose the incentive to make their systems more secure, because merchants (ie, the poker companies) lose the money. With Bitcoin you cannot, so the deck is metaphorically stacked in favor of the merchant vs the punter. It's a little better than the reverse because most merchants at least have reputations they want to protect and aren't going anywhere, unlike buyers who can disappear in an instant. But Bitcoin does have ways to offer buyer protection - it's discussed in the very first page of the white paper describing the systems design. The protocol allows for dispute mediators who can decide who gets the money (buyer or seller) but who cannot steal the money themselves.
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You give them your cash. They give you poker chips. You ask for cash back for your poker chips. They say, "what pocker chips?".
What do you do?
It's a problem that has nothing to do with BitCoin, and everything with trust. If you get scammed once, well, you don't go there again, and eventually they run out of people to scam. It's more profitable to maintain a running business so that you get repeat customers. Especially in something as lucrative as gambling. Especially when you're the only player on the marke
Re:Another idiot buying into the bitcoin scam. (Score:5, Insightful)
No control? That's an interesting way to look at it. Bitcoin is controlled by the consensus system that underlies it, if you decide you want to violate the rules then you are split off automatically into a parallel universe where whatever you do won't be recognized by your trading partners. That is a much stronger form of control than traditional currencies have. To change the rules requires the economic majority to upgrade (and thus force everyone else to upgrade with them, so trade can continue). It's pretty democratic, in that sense.
Contrast this to, eg, the US dollar, where control has been deliberately passed to a quasi-private branch of government known as the central bank. Its unelected leader pulls the levers of monetary policy in an attempt to plan the economy.
So both types of currency are controlled, just in different ways.
Re:Another idiot buying into the bitcoin scam. (Score:5, Informative)
I don't get it. What do you have against Bitcoin? Has it killed your dog or something?
Your post is a stream of non-sequiturs. Yes, the primary exchange was hacked ... once ... and it resulted in a minor loss that the exchange covered from their own profits. Users did not lose any money. Yes, very tiny ad-hoc "one man and his dream" exchanges have also been hacked, but hardly anyone used them, so again, impact was very minimal. Do you think US banks never get hacked or robbed? Think again [krebsonsecurity.com].
Many US banks have unbelievably woeful security that results in accounts being routinely emptied. Consumer accounts are insured by the government but business and organizational accounts aren't, yet many of them are protected by nothing more than a password or secret question/answer. That's absurd. Now nothing stops you under-protecting your Bitcoins, but at least you can upgrade to more security if you want. You're not at the mercy of your local bank.
What on earth makes you think that starting a "virtual business is more trivial than a physical business"? Did you step out of a timewarp from the 70s? Do you think competing with Amazon is inherently easier than competing with your local supermarket? Exchanges, as you note, rely heavily on their users trust in their security (as do all financial institutions). That's what stops them "simply reforming under a new identity". They'd be starting from zero and have no advantage over anyone else. And FYI financial regulations do apply to Bitcoin exchanges as they would any other online currency exchange. That's one reason the big ones all demand government issued ID in the same way a bank would.
Feel free to laugh at people who are using a next-generation financial system. It's been many years and Bitcoin is still around and doing fine, so I doubt anyone will care.
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It ahs no protections and its a pyurmid.
It also coulod never support a middle class. Byt it's nature it favors on group over others.
It's like if everyone had a printing press the printed dollars, that kinda of worked. But if you bought 1000's of dollars in equipment, then your printing press works more.
Which then leads to complete separation of actual work and money.
It also remove people who can not afford the technology to support it from the equation. I'm not sure how you are going to pay a maid who doesn
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I don't "have anything against" Bitcoin.
I simply am not gullible enough to trust it. It's primary revenue generation platform is a pyramid scheme. And it's clearing system is an unregulated free-for-all and an absolute quagmire with no protections at all.
And look at what I've written. If a bank gets hacked or robbed, you still have your money. You're federally insured.
You get your bitcoins scammed or stolen? Your recourse is...what?
Yes. It's been many years. As for Bitcoin doing fine. Being a cleari
Re:Another idiot buying into the bitcoin scam. (Score:4, Interesting)
Yep! This'll stop the government from coming after you! Not!
It should, actually.
Otherwise, the government could come after anyone who plays Monopoly, too. Or anyone who plays poker with virtual gold coins in an MMORPG.
Re:Another idiot (Score:5, Informative)
There is more to online gambling law than that.
There are different laws for making bets, taking bets, facilitating payments (this is what usually gets prosecuted), accepting advertising for gambling, displaying advertising for gambling, and even differences in regulation between types of gambling (sports betting, gambling machines, card games, etc.)
Then there are issues with corruption (throwing the game), and money laundering. For better or worse, organized crime loves gambling because it is easy to casually shift funds from one account to another without a paper trail.
On top of that, the government wants their cut in tax revenue.
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Not really. In a normal casino, the casino itself trades the money for the chips (or Monopoly money in this example) and they also exchange them back to real currency.
There is a difference here. The user is not giving the casino real money, and the casino Is not giving the user back real money. All echanges of money to and from bitcoin happen on the users end without the involvement of the casino.
The US would have to, effectively, say that BitCoin is real currency in order to prosecute. Maybe they will,
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I seriously doubt a casino could operate in alabama simply by only accepting and giving away jewelry or other valuables instead of dollars.
the point for this is simply that usa can't order credit card processors to stop payments to this casino. but he would do well to stay the fuck out of USA if he accepts american gamblers in his casino knowingly.
and I doubt him being the first bitcoin casino either.
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well,
in case an exchange is converting dollars into bitcoin and that is used for gambling and then exchanged back, the government could slap all parties involved with money laundering charges.
so none of the parties would do well to stay the fuck out of USA and the stupidest thing to do would be to be usa based and go on businessweek saying that you have a loophole because another party exchanges your tokens.
next up someone claiming that you don't have to pay taxes if you bill your clients in bitcoins.
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(obviously meant that all parties involved should stay out of usa - the loophole is only that the exchanges can claim they don't know what the tokens/bitcoins are used for and as such they can't be easily ordered to stop transfers to these casinos, however there's already plenty of other ways to move real money to an overseas casino if you want to play)
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next up someone claiming that you don't have to pay taxes if you bill your clients in bit coins.
No, I think this is different. You still would need to report your bitcoin winnings on your taxes in equivalent dollar amounts. The same is true for bartering. Say I run a lawn service and you own a hair salon. If we barter that you cut my hair ($20 value) and I mow your lawn ($20 value) we're each supposed to report a $20 income on our taxes (and if you live in a state with a sales tax, collect the sales taxes due on those $20 transactions and remit them to the state). Very few people actually do, but
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People who go to gambling site don't mind risks. At least you don't necessarily lose on btc, unlike other gambling services.
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The big issue with gambling sites is that you have no way to confirm the risks.
I could create a poker site to use an algorithmic that favors the house. How would you know? I can have my friends playing at tables and when they are logged in, it tilts the deal into their favor.
These, and other, cheats only require temporary and slight changes to have a bigger long term impact. You can also use social engineering.
Bitcoins aren't a scam, but they do suck (Score:2)
BitCoins aren't really a scam. They are a perfectly valid currency, by any definition of the word. Few currencies these days are backed by anything, so that's not much of a criteria. And the supply of BitCoins is very tightly controlled; it's just done with an algorithm instead of a central bank.
However, the expansion curve was designed by somebody with utterly no understanding of economics, and the built-in deflation inherent that would come with expansion in BitCoin use guarantees they'll never become
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This argument is both very common and wrong. So I'd like to address it here.
Firstly, let's put aside the appeal to authority. Conventional economic theory/monetary policy h
I didn't say Inflation led to Depression. (Score:4, Informative)
1) I didn't appeal to authority.
That would have required me mentioning an authority. I said that the designer had no understanding of economics. Not that he/she was ignorant of the writings of this or that particular set of economists or economic theory.
2) I didn't say deflation led to depression.
What I did say is that the use of BitCoins was going to be constrained by their inherently deflationary nature. As in, if acceptance of BitCoins rises, deflation will occur as demand increases. Expectation of that deflation encourages hoarding, which discourages their use, and therefore, acceptance. Geek Translation: BitCoins are stuck in a Deflation/Acceptance/Supply race condition.
3) Credit IS the lifeblood of modern economies.
Improvements in productivity, technology, agriculture, lifestyle, etc., all require access to capital. There are three ways to accrue capital:
A) Save until you can buy it. While this sounds all wholesome and good, it makes, say, the expansion of a business, the research necessary to bring a new drug to market, or the purchase of an automobile required to transport yourself to a better job rather difficult. Puts you in kind of a Chicken and Egg problem without credit. (I can't make money until I buy/build X, but I can't buy/build X until I have money.) Therefore capital spending of all kinds would be reduced drastically.
B) Borrow it. Bonds, banks, your buddy down the street, whatever.
C) Acquire investors. Wow, is that expensive. Even the most brain-addled MBA can explain that selling a portion of your business is usually the most expensive way to raise money. There's a reason that companies rarely execute stock offerings past their IPO... You only sell stock to either execute an IPO (so your other investors can bail) or to raise money you cannot raise by borrowing it.
Just because a bunch of bankers lent out more money than they should have to unworthy borrowers at unsustainable rates does not mean credit is a bad thing.
$hit... typo in reply topic (Score:2)
I meant to type: "I didn't say Deflation led to Depression"
Damn Slashdot's lack of an edit button!
Re:I didn't say Inflation led to Depression. (Score:5, Insightful)
Sorry, but your entire post is wrong from top to bottom. Don't take it personally, it isn't like they teach this stuff properly in schools.
First, you did appeal to authority, and continue to do so. That you didn't do it in a way that is obvious to you is your problem, and yours alone. I will give you a hint: economics is not a science. There is no proof, there is no truth. If you take physics as your standard for avoiding self-delusion, economics doesn't have theories either. Citing "economics" as a source is automatically an appeal to the prestige of a collection of untested speculation.
Second, you ignore velocity and divisibility. If we assume that the hoarding hypothesis is correct, then you end up in a situation where deflation is forestalled, but acceptance is not. I'm going to skip my angry rant about people not understanding the dynamic equilibrium, but the short version is that virtually everything in your experience is the product of a balance of opposing forces. To the extent that hoarding can raise the exchange rate, the exchange rate tempts people to divest their funds. Acceptance is a product of utility and familiarity. Utility is very high and getting higher every day, while familiarity is very low, but also growing fast.
Third, you appear to have weak grasp on the distinction between money and wealth, and also on the Janus nature of credit and debt. I'm not sure how useful it would be to try explaining how much of your third section is wrong. From your point of view, your analysis appears to be completely correct, but it isn't, because your mind is wrong. In our current system, borrowing money is really damn cheap because most of the cost of your borrowing is paid for by other people (mostly through currency inflation). If you ignore the external costs, then yes, borrowing is the cheapest way to go.
Capital is wealth, you cannot borrow it unless someone has already produced it and is willing to lend it to you. You cannot buy it unless it has already been created and someone is willing to sell it to you. You can, however, create it yourself, but specialization says that your efforts are likely to be better spent doing whatever it is that you do well instead.
Money on the other hand, is merely a system for accounting and exchange. Since it is ruled not by laws of the universe, but by laws of men, it does whatever we say it does. We can create and destroy it at will. And by "we", I mean special people. You and I don't got a vote. Bitcoin is an attempt to more closely approach the platonic ideal of money-ness, and part of that is by deciding up front the answers to the questions "how much money?", "who gets it?" and "when?".
Bitcoin is an agreement among men, made real through software. We agree to follow certain rules, and give up any chance at special privilege, in return, we know that everyone else also has to follow the same rules, and are prevented from ever trying to claim special privileges for themselves (like the ability to shave a bit off of other people's money to make new money for themselves).
I tend to come off a bit harshly, but I hope this post was educational rather than offensive. I hope you (and everyone else) will ponder carefully on what is real, and what is imaginary.
A coherent (and polite) response (Score:4, Interesting)
Firstly, if you didn't mean to be offensive, perhaps you should have avoided directly insulting my intelligence and education.
I had a much longer rant planned, but then I realized you misunderstand the nature of my objection to the economic understanding of the BtC designers. (And, to be fair to you, I didn't mention it in my original post.) I have no problem with the idea of an electronic currency of fixed, limited, pre-determined, supply. While unsuited as a national currency, (there's a reason every single modern economy uses fiat currency; though some economies do it better than others) it can, nonetheless, be a very useful tool, and the idea is certainly a worthy experiment in technology and economics. I merely believe that the particular expansion curve chosen was a stupid one. I believe that it ramped up too quickly, leveled off too soon, and the long-term increase in the supply is too low. A better-chosen curve would have struck a better balance between staving off deflation and inflation. (It started too quickly, and then became deflationary/economic growth limiting.) They were too optimistic about the uptake of BtC's, and did absolutely nothing to account for any kind of significant long-term growth in their use after the "intro" phase was complete. This is why the value of BtC's has been so unstable and deflating so much.
Now, on to my (now) shorter rant:
While a large portion of economics is indeed a large pile of untested bullshit, the same could be said about any branch of science. Just as we do not seriously question classic Newtonian mechanics as a useful model for predicting the behavior of masses, nobody seriously doubts things like the fundamental relationship of Supply and Demand (used as a general model.) Conversely, there are many unproven branches of physics (i.e. String Theory) for which the evidence is little stronger than the abstract theories produced by the egg-headed economist of your choice. We CAN do economic experiments to test theories (such experiments are done all the time at the micro level, and are also done at the macro level by central banks, although the results of those experiments take much longer and the results aren't usually very clear-cut.)
I ignore divisibility for the simple reason that I do not argue (as many BitCoin skeptics do) that BitCoins are illiquid simply due to the relatively high value of 1BtC. I know that is incorrect.
I ignore velocity (which is certainly a legitimate means of expanding an economy without increasing the supply of currency the economy is denominated in) because BitCoins have given us no reason to believe that their velocity will be higher than any other currency, (and reasons to think it would be lower, namely the lack of a functioning credit market.) and there is an upper bound to how much of an increase is possible. As a side-note, since the supply curve has leveled off too quickly, and will continue to get even flatter, almost ANY economic growth (over the small value of the BtC expansion curve) will have to come through velocity increases... that rather limits the total size of the economy, and therefore BtC adoption. The ability to adjust the money supply based on the current and expected size of the economy is why every modern economy uses fiat currency, although, as earlier mentioned, some do it better than others.
I don't know if you are one of the people that believe this (I'd like to think you aren't), but large increases in the value of a currency are NOT a good sign if you want it to be a viable currency. Increases ARE good if you are investing in said currency. A currency is most useful when it is STABLE, and, barring that, reasonably predictable and not severely deflating. That is, if you want a credit market at all. (Inflation of a steady doubling per year could theoretically be baked into interest rates, you can't do that with a currency deflating by a similar proportion, like BtC's did last year.) And the current intra-day volatility of several percent make it utt
Re:Inaccurate Bitcoin Diatribe (Score:3)
Bitcoin uses a global distributed transaction history and account book, known as the "block chain" (because it is a series of blocks of transactions). There are many copies of the transaction history - each user of the official client gets one. Therefore it is more secure against accidental loss or forgery than a typical bank database. Transactions have to be cryptographically signed by the account owner, or they get rejected. There also has to be enough balance in that account number, or they also get
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Its' a scam becasue by it's nature, it can not be a large economic currency but people who are doing it consistently push it as the next thing, and everyone should get in.
You also have no legal protections with bitcoin.
coming 7/19/2013: (Score:2)
blah blah blah
blah blah blah
you don't have to pay taxes because it's unconstitutional, but the IRS doesn't want you to know that.
blah blah blah
Wesley [forbes.com], they let you have internet access there?
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Oh. I never denied that it wasn't crony capitalism.
I'm just making the point that Bitcoin is a scam. Top to bottom, with greed being its only TRULY cohesive force.
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Greed, huh? You know what happens to things that are based on greed, right? They grow..
Re:Another idiot buying into the bitcoin scam. (Score:5, Funny)
Re:Unrelated, but still (Score:5, Insightful)
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How do you know* this?
* Please note that I am using the word "know", not "think".
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Because I saw Jesus and his brother Juan at the track in Miami, and when they lost all their money betting on Castro's Little Bastard to place, Jesus cried like a baby.
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It is selectively illegal. Games of chance are only illegal for those not associated with the government (in most areas). Investment/insurance gambling is legal but regulated enough that you need to be rich to be the "house" (on the good end).
Amazingly, casino games give house odds of 0.1%-20% per roll/hand. But PowerBall games give more than 50% house odds. Make the better ones illegal or limited in availability. And when they are there, tax the crap out of them and make them advertise gambling addict
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> Can anyone remind me as to why gambling is illegal?
To ensure a never-ending supply of new daytraders to supply Wall Street's liquidity needs?
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Can anyone remind me as to why gambling is illegal?
it doesn't provide industrial meaningful benefit, so it's free game for the government to tax to hell(and to build monopolies on, just another way of taxing to hell) since there's no productivity involved in it in the first place. it doesn't create eggs for anyones omelet, it produces no milk, it produces no steel girders to be used in building butchering facilities.
you could argue any entertainment to go into this category though.. and largely it's all taxed to hell anyways, whilst some other fields are ac
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Such as?
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Gambling doesn't cause broken fingers, loan sharks do.
And if you make gambling illegal, do you seriously think that loan sharks go away? Gambling will still happen, it's just that now it's all illegal, and so all lenders are finger-breaking loan sharks - and their victims have no recourse, since they would be confessing to a crime if they were to go to the police.
The war on gambling is about as societally useful as the war on drugs (and about as successful). The only sane approach is legalization and regula
Re:Rulers, not rules (Score:5, Insightful)
-I'm just sayin'
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whoops, the above is me, just to put my reputation a bit on the line so it's not thinking the above anon is a paid shill.
Dragon's Tale, an mmo/casino hybrid, has already been doing this for two years. As does seals with clubs(an eu betting site, sealswithclubs.eu).
If you're looking for hold'em style poker, Seals is awesome.
However Dragon's tales(http://www.dragons.tl/) is a bit unique in that it has a LOT of different styles of games. There's the standard "luck" based games, some slot machine style, some complex paytables with various interesting things. Coconut trees are roulette style red/black odds. But they also have quite a few games of skill, which means there are behaviors you can learn about the game to improve your odds, and price adjusts to reflect the average level of play. So if you're good and careful with betting, making money there on a regular basis is possible. I'll also point out they have a rakeback policy that goes up as you play, which they also use to encourage older players to teach younger ones (in the form of the house giving a small part of its share to mentors).
All in all, bitcoin has proven itself to be quite versatile for online gambling. And at $14USD per btc, you can't really say bitcoin is a failed experiment. :P Stop on by dragons or seals if you doubt and i'll show you around. Both have free options (seals does hourly free tournaments, and dragon's offers free seed money through various activities)
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While I agree that Poker is a game of skill, it's not for the reasons you mention.
Let's take a casino game such as Let it Ride. In that game, you also make choices as the hand progresses. There is also skill involved, but it's entirely a game a of chance in reality.
The difference is that poker players play against each other, and not against the house. The house just takes a cut, called the Rake.
Gambling comes in a lot of forms, though. For instance, sports betting requires skill as well, and informati