I hear there's 500 years (or a million even!) of Bitcoin Coal left!
If the computing cycles were doing useful work, then maybe, in BC's case they are decidedly not doing useful work (at least not the mining part, which is what generates "more" BCs).

Natural scarcity is actually a property that you don't want a currency to have if you want that currency to remain stable. This is because if the currency is sufficiently scarce that its supply can't keep up proportionally to the size of the economy that uses the currency for trade, then the currency is inherently deflationary. This means that the relative value of a given amount of the currency will increase (often significantly) over time, the result being that people will stop using the currency for trade or investment, but will instead start hoarding it (planning to exchange it for goods at a later date once the value has increased significantly). Of course, once the value increases enough then you'll have large amounts of people trying to exchange the currency they've hoarded for goods, and as a result the value of the currency will plummet as the market becomes saturated with people trying to get rid of it. Basically a deflationary currency turns into a commodity for speculation, and the instability associated with that makes it utterly unsuitable for use as currency.

Relative to this, the artificial scarcity of fiat currencies is actually a benefit, as the ability to produce more currency as needed ensures that the value of the currency remains relatively stable, even as an economy grows significantly. Of course, fiat currencies can also be horribly mismanaged and result in hyperinflation, but this ultimately makes fiat currency something that can work well or work horribly, depending on how well it's managed, in contrast to inherently scarce currencies which are pretty much guaranteed to work horribly and instead become commodities for speculation.

ok, seeing as no-one else has said it, I'll crack:

http://www.theregister.co.uk/2011/06/19/bitcoin_values_collapse_again/

Told you guys, prone to complete wipeout.

I'd say it's pretty close to the end of the line for this particular scheme. Anyone who hasn't admitted to themselves that it was developed for abuse by now will never admit it.

Another one will be along shortly, it'll feature all the same tells and push all the same hot buttons folks have, avoiding centralized control or taxes, us vs. the big bad government, the government doesn't want you to know about this, we need to fight to keep this legal (implying the government is just chafing at the bit to outlaw it), and probably a dozen others I'm neglecting just now.

Investment runs directly contrary to what one wants in a currency. It's very hard to make any money on an investment which is basically stable. Sure you can, but you really don't want a currency to be changing in value the way that a stock does.

People get around that via arbitrage, but basically currency is for buying and selling, not an investment of itself.

Scarce metals really depend upon what you're talking about. Gold has very little intrinsic value and most of the pricing comes from the shiny factor and people wanting something because of fears of inflation. The fears are justified, but the reaction isn't.

Doesn't apply to virtual goods, there's an artificial scarcity and a production curve which benefits the early adopters disproportionately. This isn't like getting in early on a new stock where you could be out money if you lose, hence the greater amount of benefit from ownership.

This is a "currency" which was designed to have the bulk of the currency added up front for less expense than the later bitcoins. Meaning that at worst the early individuals lose basically nothing and at best they end up with yachts on the back of the people foolish enough to buy in.

They could just as easily have designed a more gentle rate of introduction for new coins to make it less of a scam.

It's pump and dump, people demand it because they've been sold on it, not because there's any legitimate need or demand. At this stage it's speculation.

I don't think that there's anything inherently wrong with speculation rather than investment, but I do think that individuals that are going to engage in it had better understand the risks.

Gold has minimal industrial value compared with other metals. Silver for instance is used far more extensively, to the point where nearly all the silver mined in a given year is used either in jewelery or industrially.

Gold, for the most part just sits there staring at you. There are some industrial uses, but the main use is still because it's pretty. Prior to the recent run up, gold was selling for what like 20% of the current value. I'm pretty sure that there haven't been any industrial applications which have caused the spike.

Bitcoins have none of the characteristics of a successful currency, which is the point. I can't pay my taxes with them, I can't pay my debt with them. USD are a fiat currency, but I'm guaranteed to be able to pay my taxes with them and to be able to service my debt with them. Because of that I can also trade them in a stable way for other currencies, most if not all of which have similar abilities.

Bitcoins are extremely precarious by nature, nobody really knows what sort of bugs might be in there and it's of questionable legality in the US as the US Federal government is the only party with legal authorization to print and mint money in the US.

As far as I know we don't recognize currency from non-states in the US.

I don't see the precarious nature. It's just mathematics and well thought through. Especially the amount of bitcoins is limited, like gold, a big advantage over paper money. Also it's difficult/impossible to fabricate fake bitcoins.

The legal aspect, well is probably the real weak spot of bitcoins/ of everything. However, how could you forbid me transmitting some numbers to somebody else (should be covered by freedom of speech)? Since we all agree that money anyway can be everything, how can you forbid something as virtual as this?

My proposal, instead of bitcoins let's use gold again. :)

I'm going to confess it right away, I'm lazy. Would you happen to have a link to the technical specification of both bit coin creation and transfer?

That 'just numbers' approach is an old one and doesn't really work. Soon as you can clearly determine a sense behind these numbers, you're going to get into trouble. Try justifying the transmission of child porn, top secret material, or even just copyrighted material through being numbers (because it IS just numbers, since computers only 'talk' binary). Or, better yet, don't try it. It would get you into legal trouble.

I'd say it's pretty precarious when someone selling $1000 worth of bitcoins causes their trading value to drop to almost nothing within a day.

Yes I know other currencies are weak to mass selling, but it's usually a quite high number, not something one single person might amass.

Also as the trojan thing showed, it's quite easy to get your coins stolen and due to the nature of the system there's no way to trace where it went, that's kind of a weak spot, considering most people's approach to computer security.

And even if Gog were to take up payment in bitcoins, I'm fairly certain they'd like to accept payment in a sort of stable currency where they have an idea how much to charge for a game, rather than having the exchange rate be radically different by the time they wake up.

I believe these weaknesses are not bitcoin specific but could happen to all currencies.

The price dropped because the activity on the market is extremely low, because bitcoins are very rarely used, if at all. But if no transaction happened during this price drop then not even real harm has been done.

Yes, the trojan horse crime can happen to bitcoins too, but also for normal online banking. Also there, a hacker attack can (and frequently is) be used to spy on your credentials.

Gog should not use bitcoins since it's not a fluid enough currency yet. It's too experimental. Maybe in 10 years... but not now. However there is nothing except the legal aspect that speaks directly against the use of bitcoins.

I'am also lazy, so I will not google it for you. ;)

I believe I said so. All currency is weak to this, but as I said it would usually take more than $1000 worth of selling, which is what seemed to happen according to the previously linked article. (yes I am aware The Register isn't the most credible source of information, but still provides a base level of information)

Yup, even with required private keys or RSA tokens or such it's possible to get hacked, but quite often the customer isn't the one losing the money. The bank needs to cover it in a deal of cases.

And working in IT support, I've seen how careless people can and most often is about their computers. I'll start considering a purely data based currency as a viable thing the day we as a species evolve a proper brain for the majority. Far off. I've had people get their laptops stolen and been upset that A) Getting your machine stolen is in fact not covered by warrenty and B) getting downright angry that I'm not able to recover their data from the laptop which they'd neglected doing any backups of but now it's gone they want it.

To me and a bunch of people, that's logic. But to a lot of users, it seems once computers are involved we've crossed into the realm of magic where EVERYTHING is possible, logic has no place in it. And while that's the general thought I don't want anything to do with a purely bits and bytes based economy.

Actually, our currency laws are not that strict. Way back before the foundation of the country, each state, sometimes even individual cities or banks, had their own printed currency. When the country did finally form, we did agree on a common currency (mainly for interstate transactions), but we never made alternative currencies illegal. The Liberty dollar, BerkShares, Ithaca Hours, LETS credit... these are all examples of modern alternative currencies available within the US that are both completely legal and not sponsored/supported by the state at all.

Alternative currencies are not illegal, but they're not legal tender. The concept of "legal tender" is something of a fine point, because it gets into contracts and debts; certain, but not all, transactions may be settled by offering "legal tender" in payment.

The basic use case for legal tender is this: if I owe you a debt, I may pay that debt in whatever money is legal tender. You cannot refuse my legal tender and then demand that I pay in anything else (Bitcoins, silver Liberties, Confederate dollars, a pound of flesh, etc.).

Sales are a different case, because the theory behind them is that no debt exists: goods and money change hands, and that is that. A merchant who demands payment for his goods in Bitcoins or whatever is within his rights, since he is free to refuse to do business with me if I offer only dollars in payment.

However, stability and non-scarcity (not scarcity; the notion that a currency should be artificially scarce is foolish, unhistorical, and the worst kind of quack economics) are the true characteristics of useful money, legal tender or otherwise. Bitcoins have already failed on both counts.

That last bit I don't understand. Gold was used for a long time as a payment/currency and the really nice thing about it was, that you could not produce it, while paper money tended to end in hyper-inflations or just becoming completely zero-valued. So what's exactly so foolish, unhistorical and quack economics about backing up a currency with a strictly limited resource?

And stability? Many paper moneys have failed too, just look at the Reichsmark of germany in the 1920s. Obviously there is no perfect currency.

I think it is much too early to condemn bitcoins. They are yet widespread and they will surely not solve all problems but I don't see any reason whatsorever why they should be less secure or less stable or less convertible than any other currency, once they are used more often and are accepted. The biggest difference to dollars I see in the non-existing influence of the government on the creation of new bitcoins and on the difficulty/impossibility to create fake bitcoins, the biggest drawback that you actually need internet and servers for each transaction. That's why I would prefer if we would use gold again instead.

I don't like bitcoins since I haven't yet understood the mathematical concept behind and I distrust anything I don't understand. Also there is no immediate need for me to use another currency that only a few people else use. And I fully understand that Gog doesn't want to use bitcoins either. But there might come the day, when people just use a currency that is not controlled by a central bank, but only by a mathematical concept. Why not!

Dammit, I'm going to invent a currency. It will be called EncryptoChips! They will be unhackable, decentralised, basically just like bitcoins. The key difference - This time, I'll be the one to give half that sodding currency to myself, as opposed to the evil con-artists at BitCoin. Then I'll do the easy work of pumping it, recruiting evangelist followers to promote it, getting a bit of media hype. Then while that's running I'll bleed my half out the market, should take about 1 year. That will net me a few million, then I'll just let things take their course. Maybe it will last, maybe it won't, I'll have my cash.

Why can people not see that this is what they did?

It's not quite correct to say that gold was used as currency, but rather that gold was often used to produce coins which we then used as currency. However, when this was done the face value of the coins was typically set a little higher than the actual value of the gold in the coins. Additionally, these currencies would begin to fail when the value of gold increased resulting in the gold in the coins being worth more than the face value of the coins (at this point people would stop using the coins as currency and start just melting them down for the gold). New coins would have to be minted that once again had a gold content a bit below the face value of the coin. Basically stability of the currency had to be maintained by ensuring that new coins could be minted and issued as needed (in other words that there wasn't inherent scarcity).