What the heck is Bitcoin, A Fad or Sign of the Future?

7/22/2019 What the heck is Bitcoin, A Fad or Sign of the Future?

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What the heck is Bitcoin? A passing fad, or a sign of new Future?

Russell M Baker Page 1of 10

Bitcoin, a wild internet experiment, the love child of cutting-edge technology and economic theory, and issomething that hardly anybody fully understands, yet it captured the imagination in global consciousness.Bitcoin is an anchoring vision of cashless, eMoney society. With that, media created the Bitcoin buzz, riding arollercoaster of speculation, now immensely trendy. Bill Gates called it a technological tour de force. Living inthis day & age, only thing constant is change, change in thinking, living or doing all things that we do. Withinthat change realm, Bitcoin, requiring us to recalibrate ourselves to that change. It is free-market's response to

central banks gone wild, yet it is not tied to any single nations economy, neither is it a contender in the race toreplace any national currency, nor it is pegged to any outside barometer. Bitcoin has the potential separatingmoney & states, parallel thinking like that of State & religion. It brought forth the fact that the bank depositorsput their faith and trust in conventional currency, only to see that faith shattered and trust abused for savings areconstantly losing its purchasing power. Right there Bitcoin embodies a new hope for the 21st century monetaryzeitgeist, Uber-money.

Given its newness, novelty & volatility, bitcoins have passionate fans ( & critics) - high-end Techies, privacy-enthusiasts, political anarchists & libertarians, autarchists and voluntaryists, even unsavory scammers, all flockto it with praise & adoration. They see for the first time in human history the people can gain true financialfreedom even though it embodies many of the open and virtually ungoverned principles of the internet itself.

Some feel Bitcoin will become the choice of tech-savvy new generation, for it is becoming too big to ban & jailfor. Implied message: stop blindly sticking to Roman era money, for it is regressive, mothers milk tobackwardness - embrace a 21stcentury upgrade. Then there are also a mega size critics in vested interest, whowant Bitcoin to remain uncrack-able until all diseases are curable, for their money depends on their notunderstanding it.

Bitcoin, (Sign: ; Code: BTC or XBT), is a revolutionary private, virtual currency, protocol (Software) meantfor developing an open Economy.Bitcoin(singular with an upper case letter B) used to label the protocol,software, community & other things, while bitcoins(with a lower case b) to label units of the currency. Bitcoinis a global techno-financial construct, an open source software, a digital currency, a protocol, a distributed &verifiable public ledger, a peer-to-peer (P2P) payment processing network, a triple-entry accounting system, a

store of wealth, a crypto-signature creation and verifiable device, a quasi-personal offshore bank account, adistributed timestamp server, a monetized networkand at the end it is internet itself, monetized. With thecryptography; the state, or any protection firm, is largely obsoleteall activity that can be reduced toinformation transfer will be completely out of the government, or anyones hands, other than the partiesinvolved. Wrapping all these ideas & technologies around a non-political currency, backed exclusively by code,made Bitcoin pregnant with expectations. Bitcoin being all these brings forth the question of where one aspectof it starts and where it ends, or what is overlapping & what is not? What is coders responsibility, what isMerchantsor even consumers? Anyone developing a Bitcoin client cannot be held responsible for the uses
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that the client is put to. The client is neutral, just as browsers are neutral. You can use a browser to commit acrime, but culpability for that criminal act cannot be passed to the people who code the browser (Mozilla,Google, and Microsoft). Interestingly Bitcoin proponents consider the system as part of Financial Commercewhich to them is indistinguishable from freedom of speech. And this Financial Commerce freedom and politicalfreedom (human rights) are indivisible, for it is two sides of the same coinyou cant have one without theother.

Bitcoin Primer: A new user canget started with Bitcoin without understanding the technical details. Once youhave installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address andyou can create more whenever you need one. You can disclose your Bitcoin addresses to your friends so thatthey can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addressesshould only be used once. Whenever the address listed in "Your address" receives a transaction, Bitcoinreplaces it with a new address. This is to encourage you to use a new address for every transaction, whichenhancesanonymity.All of the old addresses are still visible through: Settings -> Your Receiving Addresses. Atransaction log (with Addresses) & an Address shown below simply for readers look & feel:

Log:Address: 15VjRaDX9zpbA8LVnbrCAFzrVzN7ixHNsC.

Evidently digital currency is complex number systems & keys (technical details are beyond the scope of thiswriting). Bitcoin is digital and that is all there to it; but there are symbolic physical bitcoins illustrating digitals,available for purchasing what they call Casascius coins, and they are sold by Mike Caldwell through his Website,casascius.com.These coins contain a private key on a card embedded in the coin and sealed with a tamper-evident hologram.

Confused? You are not alone, the algorithms involved in Bitcoin production are far too complex for most non-crypto-nerds to grasp, it is kind of an odd combination of very advanced, PhD-level computer science,regarding encryption and record-keeping, wrapped around very basic level monetary understanding. Itscapitalization/ nomenclature make itboth a currency and a protocol. Its a new kind of money inbuilt within aninnovative payment network that uses peer-to-peer technology to operate outside prying eyes of regulator or anycentral authority or banks; managing transactions and the issuing of bitcoins, all are carried out collectively bythe network. Simply put, Bitcoin is an open source software, an algorithm-based mathematical constructa unitof measurement invented to quantify value. Its design is public, nobody owns it, and all users collectivelycontrol it rather than any central authority like a Bank or a government. That makes its integrity beyondreproach. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by anyprevious payment system. The way the basic bitcoin system works is both incredibly solid & sophisticated froma technical standpoint, yet inbuilt weakness in wrapping monetary dynamics may profoundly lower its scope &
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stated potential. Lack of techno-financial knowledge make Bitcoin capitalization process to vast plurality ofpeople difficult to fathom.

History bit:The whole thing started on October 31st, 2008 in the teeth of the global financial crisis, a man(could be a group of men) hitherto to unheard of called Satoshi Nakamoto posted the Mathematicalframework to an obscure cryptography listserv (metzdowd.com)describing the concept & design for a newdigital currency system, naming it: Bitcoin. The post, an elegant piece of software engineering and a scathing

indictment of the fiscal status quo, outsmarted the ingenuity of all the cryptographers combined. His brillianceafforded to those who can understand it. People around the world started calling him visionary, genius andpeerless cryptographer.His idea of this decentralized private, virtual currency, having no central server ortrusted parties, whereby Government cant debase it, Banks cant blow it, is kind of making a currency for apost-trust world. That milked global attention to Satoshi Nakamoto,conjectured to be fake by some. His onlineprofile mentioned, he lived in Japan; his email address was from a free German service, his English is with bothBritish & American style - it is clearly a pseudonym.

Anyway, on January 3rd2009 Nakamoto set in motion the first implementation of his concept of digital,crypto-currency and minted the first 50 Bitcoins. Though it sounds like an Internet meme, LOL cash; his creation gotoff the ground like wild-fire. He simply cracked a problem that had stumped cryptographers for decades. The

idea of digital moneyconvenient and untraceable, liberated from the oversight of Government regulators andBankshad been a hot topic since the birth of the Internet. It's maintained by a globally distributed peer-to-peernetwork running on open-source software.

Idea that Bitcoin software, protocol, peer-to-peer Crypto Currency could self-sustain without Politicians, theirappointees & Governmental agencies really what Bitcoin is all about. In close look there is a significantdifference between bitcoin and government-issued fiat currencies. Federal Reserve Bank of Dallas PresidentRichard Fisher calls the U.S. dollar a "faith-based currency." In other words, its value rests on the belief that thegovernment will not print so many Dollar notes that each one becomes nearly worthless. Bitcoins, like that ofworld's major currencies - Dollar, Euro, Yen, Franc, Pesos etc. carry no guarantees they can be redeemed forgold or some other commodity at a fixed price. Other significant difference from conventional currencies, it is

not legal tender for paying off debts & other obligations. Thus it's not clear to many why the world really needsthis grand experiment in virtual currency? Bitcoin is clearly blazing new trails here and lots of question-markhanging around it? Open-source software means all users have access to all of the source code all of the time.Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previouspayment systems. Figuring out the price of these, is all personal and subjective... dare I say priceless.

Economics: Those who understand Economics, particularly currency mechanism, know full well thatMoney ina sense is just a symbolic, mutually shared illusion. It gets acceptability for it is backed by commodity orsovereign government. Bitcoins is not backed by any underlying commodity or sovereign government. Theresnofull faith and creditclause behind them, but bitcoin is inflation-resistant because of constrained supply andcant easily be counterfeited either. Traditional currency thrives on two basic ideals: one is a currency that is as

stable, reliable, predictable, hedge-able and inert as possiblea universal constant of commerce. The otherideal is a currency that you can actively manage to produce certain economic effects like facilitating trade orother government policy goals. Bitcoin does not serve either of these functions. It is certainly not stable,reliable, predictable and inert. Nor it is a suitable platform for active economic management. In practice, thefirst ideal, or the Classical ideal of a stable and inert currency was most often realized through a gold standard

system. The second ideal, or Mercantilist ideal of an actively-managed currency is realized as todays floatingfiat currencies. In both cases, the base money supply is adjusted, on a daily basis, to attain the policy goal. In thecase of a gold standard system, the base money supply is adjusted via an automatic mechanism similar to acurrency board, such that the currencys value maintains its defined parity relationship withgold bullion.In the
https://www.casascius.com/https://www.casascius.com/http://en.wikipedia.org/wiki/Cryptocurrencyhttp://en.wikipedia.org/wiki/Cryptocurrencyhttp://www.theonion.com/articles/us-economy-grinds-to-halt-as-nation-realizes-money,2912/?ref=autohttp://www.theonion.com/articles/us-economy-grinds-to-halt-as-nation-realizes-money,2912/?ref=autohttp://www.forbes.com/sites/nathanlewis/2013/04/18/bitcoin-combines-ph-d-level-computer-science-with-sub-kindergarten-level-monetary-understanding/http://www.forbes.com/sites/nathanlewis/2013/04/18/bitcoin-combines-ph-d-level-computer-science-with-sub-kindergarten-level-monetary-understanding/http://www.forbes.com/sites/nathanlewis/2013/04/18/bitcoin-combines-ph-d-level-computer-science-with-sub-kindergarten-level-monetary-understanding/http://www.theonion.com/articles/us-economy-grinds-to-halt-as-nation-realizes-money,2912/?ref=autohttp://www.theonion.com/articles/us-economy-grinds-to-halt-as-nation-realizes-money,2912/?ref=autohttp://en.wikipedia.org/wiki/Cryptocurrencyhttp://en.wikipedia.org/wiki/Cryptocurrencyhttps://www.casascius.com/


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case of the floating fiat, the base money supply is adjusted on a daily basis to achieve whatever economy-fiddling monetary distortion goals the government & the currency managers care for. Then we all know moneyis merely a lubricant. It has no genuine intrinsic value. Problems arise when some areas of the economic engineare excessively or inadequately lubricated. But then how do you bring it to equilibriumthere is no magicswitch, for Economics is not a Science, it is merely a discipline.

Theory of Money & Credit, in Austrian school of Economics, jives with money & money-substitutesbe it fiat

credit, commodity, token, bank deposit, money certificate or whatever. And traditional legal tender lawsencourage the use of a particular currency through three main mechanisms: public receivability for taxes, courtenforcement for repayment of debt, and laws requiring use for spot transactions. So far they have not been animpediment to bitcoins gradual adoption as an alternative currency in parallel with the Dollar (& Euro, Yen,Yuan etc.), though no doubt that would change if domestic businesses began refusing dollar transactions enmasse. Then if you pick a commodity, say Goldis it money? Though it is increasingly asserting itself, it cantbe money due to legal tender laws. Now equate bitcoins as commodity money for it fits the regression theoremprecisely because of its unique properties. The value attached to it, is subjective & intrinsicin other words, noobjective reasoning is paramount here. Being composed of Protocol, Cryptography & Networking technology,Math, Accounting, money etc. - multiple areas are there to drive its value from. Yet the detractors compare thevalue of this intangible object of digital binary code to Peacocks tail with magnificent plumage, iridescent

colors; less polite circle even go step further calling it binary digits air-brushing in thin air. Withstanding itsvulnerability in its interface with national currencies, Bitcoin, as monetary instrument is gaining on legitimacyand acceptance through free and open market mechanism.

Currency stability factor: Bitcoin market price, withstanding its wild fluctuations, is showing promise: on Jan1, 2013 single Bitcoin was worth about $13.5; in early April, 2013 at $200, and on Nov 22, 2013 it topped$730; 54-fold high. That highlights it as a unique Asset class or investment vehicle devoid of traditionalcurrencies inflation risk. Then anybody who have the slightest sense of currency stability & broaderacceptability recognize that there must be some sort of ancillary hedging mechanism in place for Bitcoin tosucceed. Long before you know it, first Bitcoin Hedge-fund cropped-up in Malta. Predictious,the Dublin-basedprediction market unveiled Bitcoin Option Spreads enabling both long- and short-positions to be constructed on

this already extremely volatile 'asset'. Derivatives, Swaps, Future & Options, are now in better leveragedsituation to stabilize long-term Bitcoin market by positioning relevant bullish & bearish competing interest.Limited utility of these sophisticated financial instruments still is not enough to make it anything other thanspeculative. Critics still believe, Bitcoin is destined to have a binary outcomeall-or-nothing. In laymansterms, it is like lottery ticket, price you pay for it, is small risk, but its winning would have a sizable impact.
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That rekindles the question: is it a Bubble? Well, bubble or not, this virtual currency is a lot of coin in anyrealm. . . That being said, yes it is bubble in the same way as the Euro and Dollar are. They only have value inexchange, but have no inherent value. If everyone suddenly stopped accepting Dollars, Euros or bitcoins,"bubble" would burst and their value would drop to zero. But that is unlikely to happen; even in Somalia, wherethe government collapsed 20 years ago,Somali Shillings are still accepted as payment.

Money Supply: Years back Milton Friedman famously called for the abolition of the US Federal Reserve

(Central Bank), which he thought ought to be replaced by an automated system that would increase the moneysupply at a predetermined (3%) rate, meant to keep a lid on inflationary tendency. Some considered that built-inmechanism impractical, if not outright nonsense. Taking Miltonscontrol mechanism by heart, Bitcoin wascreated as a Monetary-cum-Techno-construct in digital space running the economic engine, and strictly stickingto minimal supply regimen. Some call bitcoins is the garlic to central planner vampires. That could be little toostrong, but the point is, the alternative is here and making its presence felt.

Then its deflationary bias encourages hoarding, and that creates a risk of its early demise. For 2013 it has anominal inflation rate of 12%. It is decreasingly inflationary (so de-inflationary). By 2017, rate will drop below5% and by 2021 it will drop below 2%. Yet some would say its inbuilt scarcity provides an assurance ofpurchasing power arguably safer than any other system yet conceived. Probably we need to let the decentralized

market test tell us what is the best money, or monies.

Competitive? Bitcoin has the massive potential to disrupt any traditional payment processor such as Amex,Visa, MC, PayPal, Amazon Payments, and Google Wallet. Because it is a vehicle without counterparty risk,which requires a web of trust to work, which comes at a price and imposes central control. This means it canoffer a service (transfer funds from A -> B) extremely fast with virtually no fees compared to the "state of theindustry" that hasn't invented a single new thing in 40 years, yet charges hefty fees.

In financial crisis time when normalness subsided in favor of flying cutlery; Bitcoin brought some sanity,however little, in the expectations that the laptop will become owners Cayman Island. Bitcoin is the beginning

of something, not the end. At the very least, Bitcoin is a powerful collective in conceptual theater, an act of

fiscal performance art, reminding us how much trust banks and governments demand of us just so we can usemoney that we already possess. Whether or not it transforms the financial system, Bitcoin has already becomesomething greater, its conscience.

This is it. Today this virtual money is going up & up; the first one ever to reach something like critical mass.Bitcoin enthusiasts are now across the globe, moving out from Techno-Geeky echo chamber to mainstream. Aglobal equal opportunity Monetarist Anonymous, immune to transaction fees or any national borders. Unlike(US Fed Chairman) Bernankes quantitative easing, Bitcoin developer Satoshi is more into supply constraints.
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The supply is controlled and predictable, the number of bitcoins increases in regular increments, governed by asimple algorithm, slowing and finally stopping at 21 million in the year 2140. As the time progresses more &more people are getting to know about it, more businesses are accepting it. How bitcoins works - like gold,bitcoins is both a currency and a commodity, are in limited supply, have to be minedin the parlance usingcomputers to rifle through an enormous Mathematical space for numbers that fit the algorithms requirement.To any average guy, this Bitcoin-mechanism is simply strings of numbers; and Bitcoin's design allows foranonymous ownership and transfers of value. Anyone (with a powerful PC) can mine bitcoins by downloading

software, known as thebitcoin client.So bitcoins are basically minted as a reward for contributing to thesmooth operation of the system. Validating a block yields 25 free bitcoins, which are currently worth $16,000.One alternate way to get it, is through bitcoin exchange web-sites like Slovenia based Bit-stamp.net, SanFrancisco basedCoinbase & the largest is Tokyo basedMt.Gox,where the currency is traded as a commodity.

Philosophicalunderpinning for Bitcoin-spirit is still evolving. Current line wraps around the nature of money &its system - forever stateless, ungoverned and uncontrolled (to some logical extent). Open-source projects arefree and open; Redmond and the rest are closed and controlling. So the philosophy behind Bitcoin is essentiallyto remain open and free of centralized control. The centralized global banking network has shown that it caneasily be used to propagate political ends. Right there separation of state & money rings and it attracts like goldrushcontour of global finance, free to trade and buy stuff even if stakeholders live in any rogue state.

Some Facts: Corruption is an integral part of human nature, so all of us care for assurance on systemicintegrity. Thats-why there is a need to address the transparency issue for non-techno skeptics - speaking ofprotocol, it doesnt matter who created this protocol,for it is not an application. There are multipleimplementations, all of them open source. Take for instance, the Web - does it matter that Tim Barners Leecame up with the idea? Can Tim Barners Lee somehow make it stop working or initiate a kill-switch? No.Because the Web isn't an application, it's a protocol and many implementations; just like Bitcoin. In close lookBitcoin is more than a protocol, a distributed database that keeps track of accounts in a shared ledger. Lookingat it purely as a currency actually narrows down its full spectrum. Being a protocol, a distributed peer to peernetwork, a payment processor, a way to fulfill contracts without counterparty risks, and that is how it enabledthe treatise as a currency or an investment vehicle. On its viability as currency: A bitcoin is divisible into 1/100

millionth of a coin. This is because of the way the protocol is built. The protocol can be updated, so that's nohard limit. It is free of issues of denomination and fungability.

Cryptography is well established and a fundamental technology used in online banking. But unlike fiat currencywith central banks and online banking; Bitcoin has been able to construct a currency and payment network withopen-source software using heavily peer reviewed cryptographic ciphers that removes the need to trust a centralauthority. Consequently, many people trust Bitcoin because it requires absolutely no trust of any third party.Bitcoin has the prospect to become one of the worlds hottest investments. It could also be a bubble bit inflatedby social media, loose capital in search of the newest new thing and perhaps by bank depositors unnerved byCyprus financial turmoil. It is essentially monetary policy determined by in-built clever algorithms.

For alternative crypto-currency, it is technically next to impossible for any government with a central bank anda mint to introduce Bitcoin-like system. However, rumors floating around that Canadian government is lookingfor Bitcoin like payment network for it would save them 4.5 billion dollars a year. Now all Bitcoin stuff that liesat the intersection of several important academic research areas, including cryptography, distributed computing,graph theory & otherfuture may bring up with something better than current imperfect internet, or say, abetter protocol and that's what generations to come would find useful. It is all about the idea realization.

Bitcoin payments are irreversible. Any transaction you issue with Bitcoin cannot be reversed, it can only berefunded by the person receiving the funds. That means you should take care to do business with people or
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organizations you know and trust. But don't worry, Bitcoin can detect typos and usually won't let you sendmoney to an invalid address.

Is it secure? Some say, Bitcoin itself is extraordinarily secure, more secure than typical bank account. Proof isin the pudding: it has stood there out in the open ready to be exploited by anybody who can, and it has not beenexploited, despite the fact that there is a very high incentive to do so. Typical transactions are secured if doneright. For larger amounts worth US$1000 or more, it makes sense to wait for 6 confirmations or more. Each

confirmation exponentiallydecreases the risk of a reversed transaction. But then how are you so sure Bitcoinclient downloaded over an HTTP link is an honest one, not doctored version served up by a hacker with amalicious intentionsthats security-hole need to be addressed.

Is it legal? Is it a con?' Well, there are Lawyers and Economists struggling to answer both the question. Thinkimmoveable force meets immovable object. The conundrum of stateless virtual currency is having its field dayto somehow gain legal or quasi-acceptance by sovereign states. The central idea behind virtual currencies is theefficiency of disregarding sovereign borders. In stark contrast, the central idea behind what makes a currencyreal is the legal regard for sovereign borders. The problem is that too many people in the Bitcoin market arealso thinking the old currency ways as if they are dealing with binary alternative! Understand this, Bitcoin is anew thing that cant be compatible with the old financial system. What gold was then, Bitcoin is nowfew

times high. Going legitessentially gives the state a handle to grab you with. 'Legit' means registered andregulated, doesnt it? Legit means submitting to control-freak regulation & get clearance on a dotted line. If youare still barking for a legit framework for Bitcoin, then you didnt get it. Perception that all money requiresome kind of legal relationship is going through test here.

Is it a Ponzi scheme? Depends how you look at it. In a Ponzi scheme, the founders persuade investors thattheyllbenefit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building aneconomy. A Ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters.Bitcoin has possible win-win outcomes. Early adopters profit from the rise in value. Late adopters, and indeed,society as a whole, benefit from the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.The fact that early adopters benefit more doesn't alone make anything a Ponzi scheme. All good investments in

successful companies have this quality.

On mining? Mining is the activity of performing a proof of work (a hard cryptographic problem) and onceperformed, attach the queued up transactions to the block. It provides an incentive for the miner to run theinfrastructure. However it also creates the infrastructure for everybody to use. Compared to traditional ways toprovide a transactional infrastructure (huge proprietary installations) it's an ingenious device running onenlightened self-interest. Mining essentially is a distributed consensus system that is used toconfirmwaitingtransactions by including them in the block chain. It enforces a chronological order in the block chain, protectsthe neutrality of the network, and allows different computers to agree on the state of the system. To beconfirmed, transactions must be packed in ablockthat fits very strict cryptographic rules that will be verified bythe network. These rules prevent previous blocks from being modified because doing so would invalidate all

following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual fromeasily adding new blocks consecutively in the block chain. This way, no individuals can control what isincluded in the block chain or replace parts of the block chain to roll back their own spends.

Underlying/backing? Bitcoins underlying is the strength of its cryptography, the soundness of the protocol andthe network concept. In short it is backed by mathematics. In parallel world, one may say, Dollar has nounderlying and backing either. More than 95% of the USD/EURO in circulation is purely virtual. It is notbacked by any underlying. It is backed by the US Government/European Union, which could be more
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manipulatable than mathematics. Regulating Bitcoin? You cannot regulate Bitcoin. That's technicallyimpossible. You can regulate exchanges, but then people just find less traceable means to exchange coins (likeripple). Anonymity? Bitcoin is not anonymous. As soon as you transfer coins to an address (technical) known toa would-be investigator, an investigation can identify exactly the path these coins took and start following thebreadcrumb of who handed the coins. It's difficult, but easier than tracking hard-cash exchanges.

Governmental crosshairs:Are there any government anywhere spontaneously encourage monetary duality?

No. Bitcoins and Banking systems are mutually antagonistic, having no abiding interest. The concept ofpeaceful coexistence is questionable. Bitcoin proponents argue, this crypto-currency exposes the fraud that isperpetuated by the state banking. Some would call current system, akin to performing surgery withoutanesthesia. Conversely if you are expecting for politicians and bankers to calmly disappear into the night, you'rein denial. Bitcoin is about preventing monetary tyranny. That is its raison dtre. Monetary tyranny can takemany ugly forms - deliberate inflation, persecutory capital controls, prearranged defaults within the bankingcartel, or even worse, blatant sovereign confiscation. Sadly, those threats are potential in almost any jurisdictionin the world today. States probably will come after Bitcoin, and hard for their money can only exist if there areno competition. Here is a worthwhile quote from Alan Greenspan: "(Under a fiat system), there is no way toprotect savings from confiscation through inflation, if there were, the government would have to make itsholding illegal, as was done in the case of gold."

Saying goes, when Economics turn serious, it becomes political. Right there, US Senate held hearings on Nov18-19, 2013 with a roster of conscientious public servants from the Treasury Department, Justice Department,Secret Service, Federal Reserve, Department of Homeland Security, Securities and Exchange Commission andso on, all offered veryrespectful remarks about virtual currencies and their innovative potential. BitcoinFoundation is sensitive to the fact that the political establishment are understandably paranoid, and so they areworking overtime for finding calm amid chaosearlier they met behind closed doors with federal officials inWashington. Federal agencies in attendance includes the Justice Department, the FBI, the Department ofHomeland Security, the IRS, the Secret Service and the Financial Crimes and Enforcement Division (FinCEN)of the Treasury Department, which convened the discussion. Bitcoin advocates warned that excessive regulationcould drive innovation in virtual currencies overseas. In political run-up the dichotomy between EU and U.S.

approaches to the virtual money becomes apparent when one looks at the uniformity of the EUe-Money andPayment Services.The EU tends to view futuristic payments as a framework opportunity rather than a target-rich environment for arrogant enforcement. Tax angle: Bitcoin income like any other income is subject toincome, sales, payroll, and capital gains tax. In August 2013 the German Finance Ministry characterized Bitcoinas aunit of account,usable inmultilateral clearing circles and subject to capital gains tax if held less than oneyear.

Para-State polemics:Neal Stephensons famous The Diamond Age was set some years after encryptedcurrencies and e-commerce removed most economic transactions into dark-nets beyond the governmentscapability of monitoring and regulating, thereby caused its tax bases to implode. And it followed the collapse ofmost nation-states. In the ensuing interregnum, the defunct nation-states were replaced by city-states and by

networked global civil societies called phyles or para-statein common parlance of special EconomicZones. The major phyles/para-state leased enclaves in most major city-states around the world, much as thehistoric Venetian merchant guilds leased Venetian quarters.Membership in the phyles was voluntary, and theprovision of the kinds of public services and social safety nets formerly associated with states was generally tiedto voluntary membership subscriptions of some sort. This is, incidentally, the model of service-provision insome unions like the Screen Actors Guild. Unemployment benefits and health insurance are covered by a

sliding scale premium, paid as a percentage of income when a member is working.
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Parallel polemics involving rich & famous are also entertaining. Replicating para-state enclave concept as areal-world model like a dark-net economies and resilient communities, was done by such thinkers as Daniel deUgarte and John Robb. In their reckoning, the hills are high, and the emperor is far away, so they are playing asthe newest player in their newest game - a social-construct, where urbanization, technology, capitalaccumulation etc. would create those enclaves, like Dubai, with their complex layering of territorial, legal andcommercial authority going hand in hand with the second great political trend of the age: devolution. Thisextreme idea to live in a virtual-state, coupled with virtual business that operate within virtual economy using a

virtual currencyyou may call it Bit-wealthy, the newest nouveau riche.

To talk about the downside, Bitcoin is the harbinger of lot of things. Its qualitative edge is well recognized, butwhat about quantitative aspects of ithow they relate to attack vectors and their countermeasures. Besides, theappeal of Bitcoin may come from the belief that it enables those who use it to step outside the shaky structuresof global finance. Cyber money may have many practical uses and provide an alternative to Government &Banks. But is it always something positive? The privacy of Bitcoin lends itself to criminal transactions likeonline drug sales, and as bitcoins have gained value, they've attracted hackers bent on stealing them. It can't be away out from history's intractable dilemmas for how Bitcoin will develop cannot be known.

Bitcoin embodies a kind of cyber-anarchism; the idea that the decentralized networks of the internet will enable

the ideal of freedom from government, which has eluded so many revolutionaries in the past, to be finallyrealized. For them the cyber-currency is governed by an incorruptible formula that - like the eternal formsenvisioned by Plato, immaterial abstract ideas standing outside of time, is untouched by human error and folly.The whole thing boils down to the breathless abstract. The trouble is that unlike the tranquil spiritual etherimagined by the ancient timer, cyber-space today is all too clearly a human artefact. A site of unceasingwarfare, abounding in Trojans, worms and viruses, vulnerable to attack and decay. It also needs scarceresources and energy to operate - the virtual realm of the internet is a projection of the human world with all itsconflicts. Practically it's a philosophy that shares the fatal illusion of anarchism in all its varieties, particularlythe notion that most human beings actually want freedom from government. Invading personal freedom in timesof crisis isn't always unpopularreality has been far from it. Throughout history, human beings have turned togovernments, and often to tyrants, for protection and security. The safety they are looking for may be just a

mirage, but that hasn't stopped them wanting it.

Academically speaking, anything may happen to Bitcoin, it itself may crash and fail, be supplanted by rivalvirtual currencies or else shut down by governments because it is succeeding too well. Whatever happens, thiswill surely not be the last attempt to find freedom in cyberspace. While the freedom Bitcoin promises is anillusion, it's one that will always have a grip on the human mind - the dream of finding some kind of talisman, abenevolent tyrant or a magical new technology, that can shelter us from power & crime, and also protect usfrom each other.

In conclusion, original Keynesian utopian hypothesis that free market will somehow cycle back & forth throughboom & burst, but 2008 crisis showed government cant simply step in to flatten the erratic economic curve, to

dampen the peaks & valleys to reduce the negative effectspoliticians with their authoritarian moral scoldcaucus, having their heavy foot on gas (money) pedal threw good money after bad, grand-standing on falsepromise without any clue for cause-n-effect; Economists & Bankers, withstanding with their past folly, couldonly prescribe ineffective corrective-patches; Social scientist-media writers-columnists were bewildered forthey knew-not what to do with it. That inevitably created space for alternative thinkingBitcoin occupied thatmental space with enormous chaos and energy. Its invisible figurehead, outspoken evangelists, and its feistydetractors all are making rounds for it can beharnessed for goodjust as it can beused for bad.
https://en.bitcoin.it/wiki/Donation-accepting_organizations_and_projectshttp://www.businessinsider.com/silk-road-seized-ross-ulbricht-arrested-2013-10http://www.businessinsider.com/silk-road-seized-ross-ulbricht-arrested-2013-10https://en.bitcoin.it/wiki/Donation-accepting_organizations_and_projects


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The Bitcoin ecosystem is dominated by speculation & hoarding, and it remains to be seen whether it cantransition to a currency that people use in everyday life. Bitcoin world also need to decide whether they want tocontinue remaining anonymous or go mainstream. They dont afford to behave long like impulsive teenagelovers who minimize the downside while maximize the reward, ignoring the reality. If it does go mainstream, itwill likely lose its most revolutionary aspects that the cyberpunk scene idealizes. But it can still act as a hedgeagainst the global monetary system, without replacing it, and its potential implications are about as easy topredict as the effect of the Internet during the days ofARPANET.If nothing else, Bitcoin makes for one hell of

a story and an interesting test case for the implications of digital currencies in the future.

When future historians debate the chickens-n-eggs genealogy of the Bitcoin advent, one question is inevitablewhether Technologists came to finance because of Economic devastation, or that financial crisis eruptedbecause Technologist invaded the financial space. There should be no illusion that the digital currency systemwere of any superior quality than to all preceding currency system. That, I believe is an unnecessary & uncalledfor argument, for civilization is a collective enrichment process.

Again for those who were late to the party, or feel left outdont despair!Through mining individual just getrewarded with the money that clearly have value. At its peak bitcoins would max out at 21 million unit (by2140), today less than 12 million is in circulation in a global economy that is 61 Trillion dollar strong & stillgrowing. Scale of economy matters - 12 million bitcoins with about $7.5 billion capitalization for todays 7.5

billion people cant be consumer moneyin any sense of the word. Its built-in structure also inhibiting fluideconomy or its given economic model, it is not enough to make big of a dent in that space however way youlook at it. Then you are bit-loaded or not, in global perspective Bitcoin is just more than flickers. Optimists maysay in ten years, Bitcoin would be spreading exponentially; conversely pessimists may term, Bitcoin is a joke,even with all those techno-usefulness, leave it where it belongs. The fact that no one knows which one it willbe, is as good a sign as any that it could change the world.

And now, here we are in a world of high technology, global business-street, main-street & mean-street, all areintrigued with the Bitcoin ideathis technology bit requires new thinking, for old business model wont cut toolong. And parallel could be drawn the same way that the pioneer providers of email did not correctly understandthe service they were selling for many years; new thinking will emerge, so that it reaches its full potential andbecomes ubiquitous. Politicians ought to be sensitive, power vested in them should not be used as a licensestilling the technological pulse of the time. Bitcoin is a puzzle to solve, not an excuse to deny the reality for oldmonopoly currency doesnt cover all sins.
http://en.wikipedia.org/wiki/Arpanethttp://en.wikipedia.org/wiki/Arpanethttp://en.wikipedia.org/wiki/Arpanethttp://en.wikipedia.org/wiki/Arpanet

What the heck is Bitcoin, A Fad or Sign of the Future?

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