Curious title.
Just another ramble on a topic I can't hope to fit in to tweets.
It's just that there is no alternative language or voice against the situation the western world finds itself in at the moment.
Since the fall of the Berlin Wall, it's been assumed that the good guys won. That's us right? The cold war ended and glorious American style capitalism won out over corrupt terrible communism.
Well that's the history we're told. Having learned more about how the media treats those the establishment don't like over the years, I begin to wonder quite how horrible East Berlin and the old USSR actually were. Probably quite bad. But ... dare I suggest .. just as bad as the "good guys" that won?
We have a growing perceived threat of terrorism. Increasingly domestic. That is people radicalised and ready to carry out atrocious acts without ever needing to travel to some far off easily blamed country. The only language I see in the main media against that is quibbling over just how draconian the surveillance laws need to be to catch these evil people before another bomb goes off.
I have another idea.
Why aren't we asking what makes a terrorist act against our own people seem logical to some? I don't know, maybe it's an illegal Iraq war, the injustice of Guantanamo Bay, blind support for Israel and it's persecution of Palestine, countless innocents killed by ongoing drone strikes ... you know .. stuff like that. Maybe it's us doing that kind of stuff that gives people the beginning of an idea that the only way forward is to blow something up.
Worse. Maybe it's the fact there is no voice in the mainstream saying "Hey! Maybe it's this stuff that's creating terrorism against us?!", that makes it even MORE likely for someone to feel horribly aggrieved against America and it's allies. If there was a political voice arguing against the hypocrisy then it would remove a huge part of the incentive for someone to go and make a bomb. Why would you? Wouldn't you join the party protesting the injustice, that has it's voice heard in mainstream media and shout even louder instead?
Yeah yeah. Go for it. Call me a terrorist sympathiser or something. I'm not in anyway justifying terrorist acts. I'm simply saying American acts ARE terrorist acts, or at least can very easily be interpreted as terrorist acts, and it seems highly likely that being a terrorist to others is going to result in some terrorism being done in return.
What do we do? Remove our own liberties and rights as a reaction. Maintain that we (the western world) are not terrorists, even though we commit acts of murder that we would call terrorism by others.
It's just plain dumb. It's a self perpetuating spiral down. I know "think outside the box" makes people spit in hate. But we are in a very small box.
27 Apr 2013
17 Apr 2013
The 'Science' of Economics
Deep sigh.
This follows on from my "Why Krugman is an Idiot" post horribly well.
You're safe. You don't have to read that one. In it I criticise the start point of Krugman's thought experiment as distorted to fit his conclusions. There you go. That was easy!
Well take a look at this then ...
Got that? A chunk of missing NZ data for whatever reason, that's royally messed up a currently widely respected and followed piece of economic research.
Tell that to the families and friends of the suicides in Greece.
Just one huge deep sigh at how we are being led increasingly by stupidity instead of ability.
My father was an educational researcher. It's a messy hard to explain field. Fundamentally though a lot of it rests on data, analysis and research of whichever area is under the microscope. What he did well, and seems to have rubbed off on me. Is respect for source data.
It's the same from instruments, through good old record decks right up to modern audio systems. The quality of source data is vital. If that's deformed, mangled, distorted in any way at all, then there is no way in hell you are going to make up for it no matter how good the analysis is that follows.
If done properly, the life of the educational researcher is a test of skills in that respect. The source data is often a mix of quantitative and qualitative data. The funding for time spent on gathering it is often as little as humanly possible. Each scrap of data is like a tiny nugget of gold. One inept field researcher can demolish vast swathes of valid input.
Where am I going with this? Just that the art of good research and solid conclusion based on it seems to be slowly fading away from the world. Outside the world of the purely scientific, it seems anything goes as long as it pays. Well actually. Even within the world of the scientific. Look at climate change deniers and who funds their papers.
Just another facepalm night in a world full of fail.
This follows on from my "Why Krugman is an Idiot" post horribly well.
You're safe. You don't have to read that one. In it I criticise the start point of Krugman's thought experiment as distorted to fit his conclusions. There you go. That was easy!
Well take a look at this then ...
Got that? A chunk of missing NZ data for whatever reason, that's royally messed up a currently widely respected and followed piece of economic research.
Tell that to the families and friends of the suicides in Greece.
Just one huge deep sigh at how we are being led increasingly by stupidity instead of ability.
My father was an educational researcher. It's a messy hard to explain field. Fundamentally though a lot of it rests on data, analysis and research of whichever area is under the microscope. What he did well, and seems to have rubbed off on me. Is respect for source data.
It's the same from instruments, through good old record decks right up to modern audio systems. The quality of source data is vital. If that's deformed, mangled, distorted in any way at all, then there is no way in hell you are going to make up for it no matter how good the analysis is that follows.
If done properly, the life of the educational researcher is a test of skills in that respect. The source data is often a mix of quantitative and qualitative data. The funding for time spent on gathering it is often as little as humanly possible. Each scrap of data is like a tiny nugget of gold. One inept field researcher can demolish vast swathes of valid input.
Where am I going with this? Just that the art of good research and solid conclusion based on it seems to be slowly fading away from the world. Outside the world of the purely scientific, it seems anything goes as long as it pays. Well actually. Even within the world of the scientific. Look at climate change deniers and who funds their papers.
Just another facepalm night in a world full of fail.
16 Apr 2013
Boston
Not a good day.
I've paid some attention to twitter as the tragedy unfolds, but not much. Twitter on occasions like these becomes like a sleazy tabloid with no editor. The ultimate drive by a car crash and rubber neck scenario.
At times like these, I'd actually rather just wait and see what emerges as the services do the best they can. I'm not sure I want to see a competition for the most horrific photo and video footage.
Anyway. After pondering it for a while. My brain has wandered back to a post I made shortly after the Sandy Hook tragedy. The closing stretch of the Boston marathon this time was dedicated to support and memorial for the families of Sandy Hook.
My brain ponders the cruelty, and gravitates to my own suspicions. It seems to me to be some psycho making the point that the clamp down on gun ownership was wrong. By blowing people up instead. Effectively the NRA terrorising it's own public. Well not the NRA, but some gun loving psycho.
It's made slightly more plausible by a few extremes in the tweets I saw in defence of gun ownership after Sandy Hook. There really was a very militant angry reaction to any kind of gun control in America from some people out there. I wonder how crazy some of them are.
By now as well, I'd expect a terrorist group to have claimed such a media intensive attack as their work in the name of >whatever it might be<. But the Sandy Hook memorial section of the Boston marathon? That's a pretty strange target to not be connected at all.
I am of course jumping to conclusions as many others have tonight.
Not sure if I hope I'm wrong or not.
A bit sad that's what my mind leads me to suspect might be the cause.
---
24th April Update
Well. I was wrong. It seems religious fanaticism is more dangerous than people who threaten to kill anyone who tries to take their guns away. (Close call).
I've paid some attention to twitter as the tragedy unfolds, but not much. Twitter on occasions like these becomes like a sleazy tabloid with no editor. The ultimate drive by a car crash and rubber neck scenario.
At times like these, I'd actually rather just wait and see what emerges as the services do the best they can. I'm not sure I want to see a competition for the most horrific photo and video footage.
Anyway. After pondering it for a while. My brain has wandered back to a post I made shortly after the Sandy Hook tragedy. The closing stretch of the Boston marathon this time was dedicated to support and memorial for the families of Sandy Hook.
My brain ponders the cruelty, and gravitates to my own suspicions. It seems to me to be some psycho making the point that the clamp down on gun ownership was wrong. By blowing people up instead. Effectively the NRA terrorising it's own public. Well not the NRA, but some gun loving psycho.
It's made slightly more plausible by a few extremes in the tweets I saw in defence of gun ownership after Sandy Hook. There really was a very militant angry reaction to any kind of gun control in America from some people out there. I wonder how crazy some of them are.
By now as well, I'd expect a terrorist group to have claimed such a media intensive attack as their work in the name of >whatever it might be<. But the Sandy Hook memorial section of the Boston marathon? That's a pretty strange target to not be connected at all.
I am of course jumping to conclusions as many others have tonight.
Not sure if I hope I'm wrong or not.
A bit sad that's what my mind leads me to suspect might be the cause.
---
24th April Update
Well. I was wrong. It seems religious fanaticism is more dangerous than people who threaten to kill anyone who tries to take their guns away. (Close call).
13 Apr 2013
WTF Is Wrong With You People?
BITCOIN!
This time Bitcoin-24 down.
Previously MtGox.
People again moaning they have BTC tied up in there.
If you were mid transaction when it went down? Then fair enough, and I'm sorry for your horribly bad luck. If you parked all your money there? What are you? Some kind of idiot?
If you park your money on any website, in any currency, you take a risk! With Bitcoin you don't even need to! Install the client software. Use it. That's your transaction wallet. Install Armory just like I told you to weeks back. That's your easily restored even from a complete computer crash wallet.
Bitcoin is now getting bad press from idiot's parking money on a website when for 90% of the time there's no need to at all with bitcoin! You are your own bank with bitcoin! That's part of the whole appeal if you have the faintest clue what you're doing!
ARGH!
This time Bitcoin-24 down.
Previously MtGox.
People again moaning they have BTC tied up in there.
If you were mid transaction when it went down? Then fair enough, and I'm sorry for your horribly bad luck. If you parked all your money there? What are you? Some kind of idiot?
If you park your money on any website, in any currency, you take a risk! With Bitcoin you don't even need to! Install the client software. Use it. That's your transaction wallet. Install Armory just like I told you to weeks back. That's your easily restored even from a complete computer crash wallet.
Bitcoin is now getting bad press from idiot's parking money on a website when for 90% of the time there's no need to at all with bitcoin! You are your own bank with bitcoin! That's part of the whole appeal if you have the faintest clue what you're doing!
ARGH!
12 Apr 2013
Why Krugman Is An Idiot
Recently an article Krugman wrote in 1998 has been quoted and used as a reason to slate bitcoin.
Luckily, we don't even have to debate bitcoin this time. Krugman doesn't even understand babysitting.
Here's the basics of his article. Don't worry. You don't have to understand economics in great detail to see exactly why Krugman is talking out of his arse. It's pretty simple.
It claims to capture the essence of hoarding being a problem in an economic sense by comparing it to a baby sitting club using 1 hour coupons.
In Krugman's model. One couple (let's call them the Krugman's) decide to undermine the basis of the coupons and increase the value of them by hoarding them.
First problem. To hoard the coupons, the Krugman's spend months baby sitting and gathering vouchers. They never accept an offer for baby sitting in return. In effect, they are being rather generous.
After a couple of months, the baby sitting group meets up and notices the vouchers are running low. There is discussion. Everyone agree's the Krugman's are a bit weird, but they did get some baby sitting done, so it's no real problem. They buy another book of coupon's and carry on exchanging coupon's, some even seek out the Krugman's knowing they will never be asked to babysit in return.
There is no devaluation or economic point you can make out of any of this whatsoever for one very simple reason:
A one hour baby sitting coupon is worth one hour of babysitting. Hoarding it doesn't change anything. It's an hour of baby sitting. All the other coupons don't become worth more or less. Even supplying more to the people that do baby sitting doesn't change the value. Every voucher is still worth one hour of baby sitting no matter what the Krugman's do.
Any other conclusion is a severe distortion of reality. Why do you need to contrive a completely unrealistic situation to prove a point? Hmm... What kind of lunatic baby sitting club would declare a problem with supply of vouchers is causing the value of every voucher to change? Or to simply dissolve the baby sitting circle as an answer?
The Krugman's however are left with a vast pile of vouchers, now to cash in!!! Except ... you can only spend one voucher, per hour, per babysitter. So it's going to take them rather a long time to do it. The Krugman's have in fact taken on additional risk. What if the baby sitting pool vanishes before they can spend all the vouchers? What if the children grow up and don't even need them? ... In short ... The Krugman's are trying to manipulate a bubble and may get burned for it because they don't understand it. Are you listening Paul? I so wish I could know you read this one day.
All Krugman's efforts to demonstrate a problem with hoarding in baby sitting voucher's illustrates is that here is an economic "guru" who doesn't understand simple value and exchange.
It's a stupid model, a stupid analogy, ill thought out and deeply flawed as an example of anything except Krugman's own stupidity.
We don't even have to go on to apply his conclusions to bitcoin, because if he can't even get the economics of a baby sitting circle right, what's the point?
I've had people get back to me and say "No you don't get it. In Krugman's model, they can't get any more coupons, that's the whole point of his argument". To which I say. No. You don't get it. It is trivial for the group to get another book and issue coupons for baby sitting. That is what would happen in reality. To say "Well in Krugman's model they simply can't". Is just dumb. If Krugman wants to prove his point, he needs a real world example of what he's trying to argue where it's not trivially easy and reasonable for the group to just get more coupons.
If he can't find a model that actually fits what he wants to say. Just Maybe what he is saying is flawed as well? To love Krugman's reasoning on this one, you have to also love the fact that his conclusion may be just as contrived and unrealistic as his basic original model.
Yes I am aware of how thought experiments work. When it comes to mathematics, you can be quite fanciful if your end aim is admittedly a theoretical exercise only. For example: We know two men row a boat so fast. I wonder how fast 500 men could row the same boat? It is impossible of course to fit 500 men in the boat, but for the purposes of testing out your theories on how fast the boat might go, it'll do. When it comes to economics, it's not a scientifically testable or correct outcome from a thought experiment, so your start point needs to be pretty darn valid if there's going to be any faith in the conclusions you come to.
In the boat example, you might start off by asking how good are the rowers? How long do they have to sustain that speed? You define reasonable assumptions and the basics for later calculation. If you want to skew the results, you find two very slow rowers, or two very fast rowers and don't pay any attention to that fact in your conclusions. It's called selecting the data to suit the assumption. That's exactly what Krugman is guilty of here.
The perfect world:
"Yes Mr Krugman, I can see you have started from an excellent simple model with which I can find no major flaws whatsoever. I shall consider your final conclusions when applied to economics as a whole with a degree of belief".
Where we are:
"Mr Krugman? Why can't the group just buy more vouchers?"
"Because I said they can't."
"Could you have chosen an example where limit of supply was more realistic?"
"I don't care. This way I get to prove a problem with hoarding."
"Why babysitters?"
"Limited supply of a small number of vouchers!"
"But that's not at all realistic is it Mr Krugman? Gold would be a better example of limited supply wouldn't it? Why not make your argument using gold as a start point?"
<silence ... mutters something about hoarding examples not working so well for gold>
"So why does your final conclusion work out the way it does?"
"Because I said it does and it matches the original model."
"M'kay. Is this sounding a little circular in the logic department?"
<silence>
So no it's not okay to say Krugman's theory is valid even if he got baby-sitting dynamics wrong. Krugman chose an example to illustrate a principle he believed in. His example is deeply flawed. How much do you trust his principle now? You can't extend a theory from bullshit.
People listen to moron's like Krugman because they have money. Don't. People with money can also be incredibly stupid, as I have just demonstrated in one very short blog post.
On this one. Maybe we get a glimpse of how the great economists controlling our nation's think. They don't very much. They know how to play the numbers given to them in the game they know how to play. They lack a fundamental knowledge of how it all works when the wheels start falling off and basic supply and demand is the economic factor. They live in a world where a "one" is a billion. They no longer have any clue how the part's work that made the "one" possible.
-----
Postscript Diversion
Hey if we can contrive whatever we like out of a situation to prove the point we want to make? Here's my version. Just for the lulz. I'll even stick to the original impossible to replace idea.
We take it that the Krugman's have a significant share of the the impossible to replace vouchers as described above. The circle meets, there is no easy solution. If the Krugman's are excluded from the club then the vouchers can never be earned back in to circulation. Nobody wants to see value adjustment of existing vouchers, nor is there a simple and agreeable way to do it. Dissolving the circle and starting with new vouchers is impossible. These are the only baby vouchers that will ever exist, and each is quite clearly marked "One Hour". The circle meeting breaks up with little in the way of solutions, vowing to meet again next week and review the situation. A few days later, under cover of night, a small faction of baby sitting gun owners storm the Krugman's demanding the return of the vouchers.
Nobody is hurt, but arrests are made. Three of the father's in the baby sitting circle are now facing charges in custody. First the wives of those three, then a larger support group form a passive 24 hour resistance group that camps outside the Krugman's. Hurling abuse at them and demanding the vouchers back whenever they are seen outside the house.
Infuriated that the voucher hoarding plan hasn't worked and harassed by the support camp. The Krugman's light a bonfire one night and burn the vouchers they do have in full sight of the baby sitting support camp.
The cries of loss from the camp are unbearable. All hope is lost.
The remaining vouchers can't sustain even a small baby sitting circle and the group disbands. No baby sitting is ever possible in the town again for the rest of eternity. The Krugman's eventually leave town and try to join baby sitting circles in the next place they put down roots, only to find that they are excluded. Denied the joys of equitable baby sitting, the Krugman's argue bitterly and eventually divorce at great personal cost.
Meanwhile, over a period of decades, the town the Krugman's removed virtually all baby sitting vouchers from produces less and less children, and attracts less and less families with children. It gradually becomes a ghost town, eventually only populated by the childless over the age of 40. Such is the economic wasteland left by the Krugman's hoarding and burning of irreplaceable baby sitting vouchers.
News of the tragedy spreads across America, and soon all baby sitting circles have set an absolute upper limit on the number of vouchers any one couple can hold. It becomes known as "The Krugman Limit". Thus the rest of America is spared the horrors of baby sitting voucher hoarding and the tragic loss to humanity that results.
Well hey. You did say the vouchers were totally impossible to replace right? I like my version better than Krugman's anyway. It has social resistance, drama, fires and divorce in it. What's not to like?
Luckily, we don't even have to debate bitcoin this time. Krugman doesn't even understand babysitting.
Here's the basics of his article. Don't worry. You don't have to understand economics in great detail to see exactly why Krugman is talking out of his arse. It's pretty simple.
It claims to capture the essence of hoarding being a problem in an economic sense by comparing it to a baby sitting club using 1 hour coupons.
In Krugman's model. One couple (let's call them the Krugman's) decide to undermine the basis of the coupons and increase the value of them by hoarding them.
First problem. To hoard the coupons, the Krugman's spend months baby sitting and gathering vouchers. They never accept an offer for baby sitting in return. In effect, they are being rather generous.
After a couple of months, the baby sitting group meets up and notices the vouchers are running low. There is discussion. Everyone agree's the Krugman's are a bit weird, but they did get some baby sitting done, so it's no real problem. They buy another book of coupon's and carry on exchanging coupon's, some even seek out the Krugman's knowing they will never be asked to babysit in return.
There is no devaluation or economic point you can make out of any of this whatsoever for one very simple reason:
A one hour baby sitting coupon is worth one hour of babysitting. Hoarding it doesn't change anything. It's an hour of baby sitting. All the other coupons don't become worth more or less. Even supplying more to the people that do baby sitting doesn't change the value. Every voucher is still worth one hour of baby sitting no matter what the Krugman's do.
Any other conclusion is a severe distortion of reality. Why do you need to contrive a completely unrealistic situation to prove a point? Hmm... What kind of lunatic baby sitting club would declare a problem with supply of vouchers is causing the value of every voucher to change? Or to simply dissolve the baby sitting circle as an answer?
The Krugman's however are left with a vast pile of vouchers, now to cash in!!! Except ... you can only spend one voucher, per hour, per babysitter. So it's going to take them rather a long time to do it. The Krugman's have in fact taken on additional risk. What if the baby sitting pool vanishes before they can spend all the vouchers? What if the children grow up and don't even need them? ... In short ... The Krugman's are trying to manipulate a bubble and may get burned for it because they don't understand it. Are you listening Paul? I so wish I could know you read this one day.
All Krugman's efforts to demonstrate a problem with hoarding in baby sitting voucher's illustrates is that here is an economic "guru" who doesn't understand simple value and exchange.
It's a stupid model, a stupid analogy, ill thought out and deeply flawed as an example of anything except Krugman's own stupidity.
We don't even have to go on to apply his conclusions to bitcoin, because if he can't even get the economics of a baby sitting circle right, what's the point?
I've had people get back to me and say "No you don't get it. In Krugman's model, they can't get any more coupons, that's the whole point of his argument". To which I say. No. You don't get it. It is trivial for the group to get another book and issue coupons for baby sitting. That is what would happen in reality. To say "Well in Krugman's model they simply can't". Is just dumb. If Krugman wants to prove his point, he needs a real world example of what he's trying to argue where it's not trivially easy and reasonable for the group to just get more coupons.
If he can't find a model that actually fits what he wants to say. Just Maybe what he is saying is flawed as well? To love Krugman's reasoning on this one, you have to also love the fact that his conclusion may be just as contrived and unrealistic as his basic original model.
Yes I am aware of how thought experiments work. When it comes to mathematics, you can be quite fanciful if your end aim is admittedly a theoretical exercise only. For example: We know two men row a boat so fast. I wonder how fast 500 men could row the same boat? It is impossible of course to fit 500 men in the boat, but for the purposes of testing out your theories on how fast the boat might go, it'll do. When it comes to economics, it's not a scientifically testable or correct outcome from a thought experiment, so your start point needs to be pretty darn valid if there's going to be any faith in the conclusions you come to.
In the boat example, you might start off by asking how good are the rowers? How long do they have to sustain that speed? You define reasonable assumptions and the basics for later calculation. If you want to skew the results, you find two very slow rowers, or two very fast rowers and don't pay any attention to that fact in your conclusions. It's called selecting the data to suit the assumption. That's exactly what Krugman is guilty of here.
The perfect world:
"Yes Mr Krugman, I can see you have started from an excellent simple model with which I can find no major flaws whatsoever. I shall consider your final conclusions when applied to economics as a whole with a degree of belief".
Where we are:
"Mr Krugman? Why can't the group just buy more vouchers?"
"Because I said they can't."
"Could you have chosen an example where limit of supply was more realistic?"
"I don't care. This way I get to prove a problem with hoarding."
"Why babysitters?"
"Limited supply of a small number of vouchers!"
"But that's not at all realistic is it Mr Krugman? Gold would be a better example of limited supply wouldn't it? Why not make your argument using gold as a start point?"
<silence ... mutters something about hoarding examples not working so well for gold>
"So why does your final conclusion work out the way it does?"
"Because I said it does and it matches the original model."
"M'kay. Is this sounding a little circular in the logic department?"
<silence>
So no it's not okay to say Krugman's theory is valid even if he got baby-sitting dynamics wrong. Krugman chose an example to illustrate a principle he believed in. His example is deeply flawed. How much do you trust his principle now? You can't extend a theory from bullshit.
People listen to moron's like Krugman because they have money. Don't. People with money can also be incredibly stupid, as I have just demonstrated in one very short blog post.
On this one. Maybe we get a glimpse of how the great economists controlling our nation's think. They don't very much. They know how to play the numbers given to them in the game they know how to play. They lack a fundamental knowledge of how it all works when the wheels start falling off and basic supply and demand is the economic factor. They live in a world where a "one" is a billion. They no longer have any clue how the part's work that made the "one" possible.
-----
Postscript Diversion
Hey if we can contrive whatever we like out of a situation to prove the point we want to make? Here's my version. Just for the lulz. I'll even stick to the original impossible to replace idea.
We take it that the Krugman's have a significant share of the the impossible to replace vouchers as described above. The circle meets, there is no easy solution. If the Krugman's are excluded from the club then the vouchers can never be earned back in to circulation. Nobody wants to see value adjustment of existing vouchers, nor is there a simple and agreeable way to do it. Dissolving the circle and starting with new vouchers is impossible. These are the only baby vouchers that will ever exist, and each is quite clearly marked "One Hour". The circle meeting breaks up with little in the way of solutions, vowing to meet again next week and review the situation. A few days later, under cover of night, a small faction of baby sitting gun owners storm the Krugman's demanding the return of the vouchers.
Nobody is hurt, but arrests are made. Three of the father's in the baby sitting circle are now facing charges in custody. First the wives of those three, then a larger support group form a passive 24 hour resistance group that camps outside the Krugman's. Hurling abuse at them and demanding the vouchers back whenever they are seen outside the house.
Infuriated that the voucher hoarding plan hasn't worked and harassed by the support camp. The Krugman's light a bonfire one night and burn the vouchers they do have in full sight of the baby sitting support camp.
The cries of loss from the camp are unbearable. All hope is lost.
The remaining vouchers can't sustain even a small baby sitting circle and the group disbands. No baby sitting is ever possible in the town again for the rest of eternity. The Krugman's eventually leave town and try to join baby sitting circles in the next place they put down roots, only to find that they are excluded. Denied the joys of equitable baby sitting, the Krugman's argue bitterly and eventually divorce at great personal cost.
Meanwhile, over a period of decades, the town the Krugman's removed virtually all baby sitting vouchers from produces less and less children, and attracts less and less families with children. It gradually becomes a ghost town, eventually only populated by the childless over the age of 40. Such is the economic wasteland left by the Krugman's hoarding and burning of irreplaceable baby sitting vouchers.
News of the tragedy spreads across America, and soon all baby sitting circles have set an absolute upper limit on the number of vouchers any one couple can hold. It becomes known as "The Krugman Limit". Thus the rest of America is spared the horrors of baby sitting voucher hoarding and the tragic loss to humanity that results.
Well hey. You did say the vouchers were totally impossible to replace right? I like my version better than Krugman's anyway. It has social resistance, drama, fires and divorce in it. What's not to like?
11 Apr 2013
Oh good grief...
I've just seen this 'Ripple' + OpenCoin article go by.
Bangs head on desk.
A lot of people with more money than sense will probably jump in to it hoping it's the next bitcoin. If you figure out which bit they carefully are not mentioning though, you'll be thinking "But why?".
First lets buy in to Ripples. It's the same problem you have with bitcoin. Somehow you need an exchange, and you need some ripples, because ... they vanish every time you do a transaction. M'kay ... So ... I need my Dollars in there somehow, because it says I can do that, but not how. I'm presuming they have some clever idea how to get cash from an account in to the Ripples account. This worries me. Any bank backing for this by any chance?
Oh. And I need some Ripples. I can't just buy those on Ripple with my Dollars in there, because I need Ripples for a transaction. So I need to do that then ... O.o
Hey. I just realised. I'm entering all this information on a single website. Can I have my account stored locally? Well sort of. It's in browser javascript at the moment that does store all the information locally, but buried somewhere in your browser cache and plug in settings. That sounds super fun and not at all prone to go wrong whatsoever. Glad we cleared that up then. Good talk. The information must also get stored on all the servers that keep being mentioned. Apparently all kinds of people are eager to run validating nodes because (I kid you not), straight from Ripples own wiki:
Blinks. Uhm. Ok. Moving on!
Now I spend my Dollars on some Euro's. (This is the only good part about Ripples), through a distributed exchange. So if someone matches my offer, it gets filled. That's pretty clever stuff when you might only get part orders filled, and you're trusting that network transaction, because it doesn't seem to be being verified in anything like the same way as bitcoin. There's lag in bitcoin transaction for verification. Anyway ...
I've got my Euro's and lost a few Ripples. How do I get my Euro's out again?
You mean I need to find someone who will buy Euro's from a Ripples account and give me Euro's in my pocket? Wait what ...? Oh and it costs me some more Ripples to do it ... Nice.
Unless of course there's some bank stepping in behind this to say "Don't worry, we'll exchange Ripple Euro's for real Euro's at the exchange rate of x". I'm almost wondering if this is a part bank backed effort to kill bitcoin.
It's DOUBLE the bitcoin problem + tiny ripples vanishing?
The sad bit is, the same witless crew that just ran up a $260 bubble on Bitcoin will rush over to it, with no understanding of it. The anti-bitcoin foghorns will then declare Bitcoin 2 has arrived. And after a few months people will figure out that actually it's cheaper moving money in Bitcoin. What damage it'll do to bitcoin is any one's guess. Right now, laying low might be no bad move for BTC. It coped pretty well with a speculation bubble, but public opinion is determined to see it die. I'm not sure why. Frankenstein like "We don't understand it! Kill it!" going on.
Bangs head on desk.
A lot of people with more money than sense will probably jump in to it hoping it's the next bitcoin. If you figure out which bit they carefully are not mentioning though, you'll be thinking "But why?".
First lets buy in to Ripples. It's the same problem you have with bitcoin. Somehow you need an exchange, and you need some ripples, because ... they vanish every time you do a transaction. M'kay ... So ... I need my Dollars in there somehow, because it says I can do that, but not how. I'm presuming they have some clever idea how to get cash from an account in to the Ripples account. This worries me. Any bank backing for this by any chance?
Oh. And I need some Ripples. I can't just buy those on Ripple with my Dollars in there, because I need Ripples for a transaction. So I need to do that then ... O.o
Hey. I just realised. I'm entering all this information on a single website. Can I have my account stored locally? Well sort of. It's in browser javascript at the moment that does store all the information locally, but buried somewhere in your browser cache and plug in settings. That sounds super fun and not at all prone to go wrong whatsoever. Glad we cleared that up then. Good talk. The information must also get stored on all the servers that keep being mentioned. Apparently all kinds of people are eager to run validating nodes because (I kid you not), straight from Ripples own wiki:
"Who will run validating nodes?
Anyone, with a reputation, who wants to support the network will run a validating node."Blinks. Uhm. Ok. Moving on!
Now I spend my Dollars on some Euro's. (This is the only good part about Ripples), through a distributed exchange. So if someone matches my offer, it gets filled. That's pretty clever stuff when you might only get part orders filled, and you're trusting that network transaction, because it doesn't seem to be being verified in anything like the same way as bitcoin. There's lag in bitcoin transaction for verification. Anyway ...
I've got my Euro's and lost a few Ripples. How do I get my Euro's out again?
You mean I need to find someone who will buy Euro's from a Ripples account and give me Euro's in my pocket? Wait what ...? Oh and it costs me some more Ripples to do it ... Nice.
Unless of course there's some bank stepping in behind this to say "Don't worry, we'll exchange Ripple Euro's for real Euro's at the exchange rate of x". I'm almost wondering if this is a part bank backed effort to kill bitcoin.
It's DOUBLE the bitcoin problem + tiny ripples vanishing?
The sad bit is, the same witless crew that just ran up a $260 bubble on Bitcoin will rush over to it, with no understanding of it. The anti-bitcoin foghorns will then declare Bitcoin 2 has arrived. And after a few months people will figure out that actually it's cheaper moving money in Bitcoin. What damage it'll do to bitcoin is any one's guess. Right now, laying low might be no bad move for BTC. It coped pretty well with a speculation bubble, but public opinion is determined to see it die. I'm not sure why. Frankenstein like "We don't understand it! Kill it!" going on.
Hello Granddad!
I'm having fun watching traders sneer at bitcoin today because of it's fall from grace. Personally I think it's done remarkably well. I was expecting it to drop to the $50 - $60 level before climbing back up. I felt quite proud of the little currency that could when it refused to go under $100. That should be a fair chunk of the early "easy" money and speculators out of it.
Got to admit. I did get a smile out of seeing the speculators moaning to high heaven about MtGox going slow. People these days seem to think Google is search and that's it. There are other major exchanges, during the panic they all seemed to be working fine to me. Hey guys? Try logging in to a different exchange next time?
At the moment it's trying to level out at $170 (that bit written about 8 hours after the dump). I'm still smiling. That's not bad at all! It takes us back 4 or 5 days of the crazy speculators bitcoin bubble. Back to something looking like a more realistic current value. (I still think it's a bit high actually!)
Anyway!
Today it's "this is a joke of a currency" on Twitter, as after a few hours a few began to admit it wasn't about to reset to zero.
History lesson time!
America introduced the dollar back in 1792 and pegged it to the value of silver originally. So that's not the same as bitcoin. If you want a better equivalent to trying to introduce bitcoin, then you need to look at the rise of the paper dollar. That's where the system makes a leap of faith to a non precious metal backed physical thing.
So what happened then? Well between 1777 to 1788 they had a go at it, but it got counterfeited so often that it vanished again as worthless. Cough. Yeah. That happened to dollars. It didn't happen to bitcoin. Ooops!
In 1878 they tried again, this time with a bit more thought about "I promise to pay the bearer on demand", thus tying it in theory back to precious metal.
Here we go ...
Buying power of one U.S. dollar compared to 1774 USD
Year Equivalent buying power
1774 $1.00
1780 $0.59
1790 $0.89
1800 $0.64
1810 $0.66
1820 $0.69
1830 $0.88
1840 $0.94
1850 $1.03
1860 $0.97
1870 $0.62
1880 $0.79
1890 $0.89
1900 $0.96
1910 $0.85
1920 $0.39
1930 $0.47
1940 $0.56
1950 $0.33
1960 $0.26
1970 $0.20
1980 $0.10
1990 $0.06
2000 $0.05
2007 $0.04
2008 $0.04
2009 $0.04
2010 $0.035
2011 $0.034
As you can see, it's not been exactly rock solid stable even for a currency theoretically tied to gold. That early printing run seems to have put a dent in around 1780. I'm trying not to look at the bottom of that table. I would love to see the best data available for 1774 to say 1784. I'm willing to bet it didn't cruise in to existence with no jitters whatsoever, and that's for a currency where exchange would be very slow and difficult compared to bitcoin.
I don't think any currency has an easy time achieving acceptance. Guess all I'm saying is that the bitcoin haters are making comparisons with existing, established forms of exchange. Bitcoin is still very much in the initial uptake stage so volatility is going to be high to begin with.
What bugs me about the bitcoin haters is that they portray themselves as knowledgeable and trustworthy economic scholars. They then just dismiss a new economic phenomena happening right under their noses because they fail to understand it. I'm loving this as a unique chance to see raw finances in action. It's testing my abilities to predict support and resistance. It's not chopped to bits by HFT traders, manipulated by a central bank or played by whales. It's a lesson in raw non-manipulated supply and demand that we haven't seen for decades. Even if you think it's going to fail, it's still fascinating to watch and learn. It deserves that much recognition at least doesn't it?
Hey stupid traders on Twitter?! Bitcoin didn't die today. It is not tulips. You don't understand it.
I'm laughing at some of you guys. It's like watching granddad struggle to understand why on earth anyone would want a mobile phone.
Say hello to the financial guru's I call granddad. Please speak loudly and clearly and don't worry too much. Maybe granddad just doesn't need a mobile phone. So @zerohedge @chrisadamsmkts @ReformedBroker @MNYCx @MonetaAdvisors and many many more, we salute you granddads. And some of us laugh at you a bit as well.
"We're very skilled traders with a huge knowledge of complex sounding financial things and we make money on financial predictions ... except we can't understand bitcoin for what it is, or predict what it does".
The morning after the crash? Granddad has forgotten calling Bitcoin tulips for now. Granddad is now calling it a penny stock. Closer! Almost! Keep trying! Maybe admit you were wrong?
Got to admit. I did get a smile out of seeing the speculators moaning to high heaven about MtGox going slow. People these days seem to think Google is search and that's it. There are other major exchanges, during the panic they all seemed to be working fine to me. Hey guys? Try logging in to a different exchange next time?
At the moment it's trying to level out at $170 (that bit written about 8 hours after the dump). I'm still smiling. That's not bad at all! It takes us back 4 or 5 days of the crazy speculators bitcoin bubble. Back to something looking like a more realistic current value. (I still think it's a bit high actually!)
Anyway!
Today it's "this is a joke of a currency" on Twitter, as after a few hours a few began to admit it wasn't about to reset to zero.
History lesson time!
America introduced the dollar back in 1792 and pegged it to the value of silver originally. So that's not the same as bitcoin. If you want a better equivalent to trying to introduce bitcoin, then you need to look at the rise of the paper dollar. That's where the system makes a leap of faith to a non precious metal backed physical thing.
So what happened then? Well between 1777 to 1788 they had a go at it, but it got counterfeited so often that it vanished again as worthless. Cough. Yeah. That happened to dollars. It didn't happen to bitcoin. Ooops!
In 1878 they tried again, this time with a bit more thought about "I promise to pay the bearer on demand", thus tying it in theory back to precious metal.
Here we go ...
Buying power of one U.S. dollar compared to 1774 USD
Year Equivalent buying power
1774 $1.00
1780 $0.59
1790 $0.89
1800 $0.64
1810 $0.66
1820 $0.69
1830 $0.88
1840 $0.94
1850 $1.03
1860 $0.97
1870 $0.62
1880 $0.79
1890 $0.89
1900 $0.96
1910 $0.85
1920 $0.39
1930 $0.47
1940 $0.56
1950 $0.33
1960 $0.26
1970 $0.20
1980 $0.10
1990 $0.06
2000 $0.05
2007 $0.04
2008 $0.04
2009 $0.04
2010 $0.035
2011 $0.034
As you can see, it's not been exactly rock solid stable even for a currency theoretically tied to gold. That early printing run seems to have put a dent in around 1780. I'm trying not to look at the bottom of that table. I would love to see the best data available for 1774 to say 1784. I'm willing to bet it didn't cruise in to existence with no jitters whatsoever, and that's for a currency where exchange would be very slow and difficult compared to bitcoin.
I don't think any currency has an easy time achieving acceptance. Guess all I'm saying is that the bitcoin haters are making comparisons with existing, established forms of exchange. Bitcoin is still very much in the initial uptake stage so volatility is going to be high to begin with.
What bugs me about the bitcoin haters is that they portray themselves as knowledgeable and trustworthy economic scholars. They then just dismiss a new economic phenomena happening right under their noses because they fail to understand it. I'm loving this as a unique chance to see raw finances in action. It's testing my abilities to predict support and resistance. It's not chopped to bits by HFT traders, manipulated by a central bank or played by whales. It's a lesson in raw non-manipulated supply and demand that we haven't seen for decades. Even if you think it's going to fail, it's still fascinating to watch and learn. It deserves that much recognition at least doesn't it?
Hey stupid traders on Twitter?! Bitcoin didn't die today. It is not tulips. You don't understand it.
I'm laughing at some of you guys. It's like watching granddad struggle to understand why on earth anyone would want a mobile phone.
Say hello to the financial guru's I call granddad. Please speak loudly and clearly and don't worry too much. Maybe granddad just doesn't need a mobile phone. So @zerohedge @chrisadamsmkts @ReformedBroker @MNYCx @MonetaAdvisors and many many more, we salute you granddads. And some of us laugh at you a bit as well.
"We're very skilled traders with a huge knowledge of complex sounding financial things and we make money on financial predictions ... except we can't understand bitcoin for what it is, or predict what it does".
The morning after the crash? Granddad has forgotten calling Bitcoin tulips for now. Granddad is now calling it a penny stock. Closer! Almost! Keep trying! Maybe admit you were wrong?
10 Apr 2013
BTC Dynamics
I know! I know!
This one is about another misconception I see flying around, but also some of my own ponderings.
The idea is, that Bitcoin 2 will appear, render bitcoin obsolete, and the whole thing will just be a bunch of tulip bulbs.
What this viewpoint misses is that the BTC chart for the last few months has shot up like crazy, but if you look at the entire BTC history, you'll see a good two years of low level existence which had a bit of spike around June 2011, when adoption of the idea initially kicked off.
If you're an uninformed mainstream media commentator .. or any other kind, you also probably fail to realise the investment for many people, and some subtle economics of supply and demand in the processing power thrown at BTC.
Start with investment. A lot of people have sunk thousands of dollars / pounds in to "Mining Rigs". Even before the current crop of even faster ASIC custom chips are appearing, GPU mining became a thing. That's using a Graphics Card to compute the parts of the block instead of the ordinary main processor in your computer. What some people did, was build computers with as many of the best graphics cards they could in, and mine BTC for themselves with that. So what?
Here's your first economic curve to build in. By saying "best graphics card" it isn't always the fastest. The trade off is against electricity consumed. There's no point spending more on electricity than you mine in BTC. When BTC was in the $12 to $15 range, this was a huge issue. Many people will eventually have done the maths and turned off the miner to play games instead. The effect of the recent huge up for BTC, is that even scraping a hundredth of a percent from a block becomes worth the electricity again. So processing power and investment returns.
Investment? Yup. You might not believe it, but some folk are chucking in the region of tens of thousands of dollars in to systems now that can only mine bitcoins. You can't even run tetris on them. They do it very economically as well in terms of electricity consumption.
Why am I bothering to explain this? Because the investment in technology and time prior to this sudden surge is much larger than some people are considering. Any incompatible rival bitcoin system now will have to attract all that investment away from BTC for a very good reason.
Sure, that could still happen. All bets are off in BTC land. But there is a fair bit more to it than someone saying "Hey! Use this instead!" and everyone leaving.
The other reason for inertia in moving away from BTC, is that over the entire lifespan, it has already proven itself to be a reliable secure system. So far at least, any problems have been overcome and the system has proved itself as at least very robust. Ironically, the more computing power that gets thrown at it around the world, the more robust it becomes. Why change to a new system when this one is secure, works well, and more importantly, has personal investment in it?
Yet another reason for inertia is the simple "It has to be better" argument. There needs to be some compelling reason why an established system should be ditched. At the moment, LiteCoin is the main alternative to Bitcoin. If you dig in to LiteCoin, you find it's simply an adjustment to the parameters of bitcoin. It produces more coins, and they appear faster. But it trades off security. I've seen regular transactions in Bitcoin of around £15,000 or so. If I'm sat there, wondering how to transfer my £15,000, I'm going to go with Bitcoin. It doesn't really matter if it's a theoretical problem and in reality LiteCoin turns out to be as secure as bitcoin. It's certainly not more secure than bitcoin, so why trust it? LiteCoin is basically an attempt to make some cash out of the bitcoin idea for those who can't afford the processing power to mine bitcoin at the expense of a degree of security. I can't see it going far when the security of bitcoin is already constantly being questioned. But who knows? Maybe we end up with parallel crypto-currencies at the end of the day? Some say LiteCoin is the silver to BitCoin's gold. That looks like another flawed analogy to me. Bitcoin isn't gold.
So for MegaBitCoin to appear, it'll need to be substantially better somehow than bitcoin. That's going to take some doing. I'm not even sure how you'd approach a model of something to be better as a currency than bitcoin. I have a vague idea that it will be to do with transaction times, but (and it's a big but! (Sorry ladies!)), it can't sacrifice transaction time to security, and that level of care about transaction time involves having a huge volume of bitcoin transactions, far greater than where we are now.
Finally!!!! On that point!!! Honest!!! If MegaBTC appears, and it does have ultra fast verification of transaction on top of at least equally good security, and it does begin to attract users away from BTC, there's no reason to believe BTC would instantly die. A lot of people would be nervous of moving to an untested new system. It would seem more reasonable to expect a gradual wind down of BTC as people moved to MegaBTC, especially if BTC was still working perfectly well for the majority of users.
Then we come on to the nature of the curve :)
It's a wow of a spike isn't it? But unlike a forex chart, there's no obvious points to whack your Fibonacci scale on it. The moving averages are basically permanently in catch up and meaningless. In trader terms, there's no apparent support and resistance. Or is there?
You'll like this. This is brilliant. (Well to my twisted mind anyway).
Well actually, yes there is. There are plenty of BTC out there that were gained back when it was around $12 to $15. These people are not traders. To them at the moment, nirvana is unfolding. Remember, these guys don't have an accounts manager to answer to. They can decide to cash out with a big smile any time they want. Chances are, not many will while it's rocketing up as it is at the moment, but given a sudden peak and drop? A whole bunch of them will freak out and sell.
I'm predicting when that happens, BTC will drop by a fair whack. Not just the jitters in government clampdown whispers that caused the drop or whatever it is, but a wave of sells from the early adopters.
How far down it goes? Well reasonably we could say back down to $12. Except now we have people who have bought in to BTC from $50 up with big chunks of money (big in comparison to bitcoin), we have people with mining rigs invested in when BTC was just curving up from $30 and are feeling mighty smug. There is support on the way down, some of these guys will keep the faith, see a falling BTC and even buy back in to it assuming the basic integrity of the system remains intact.
I guess here is the chance that everybody really freaks out and BTC gets sold out to near enough $0 for it to vanish. There's no accounting for crowd mentality. That would be a shame and a waste if the basic mechanism was working fine. The world though has done stupider things before, and no doubt will again. But even with the $0.01 scenario, if the thing still works .. people are still going to use it. That in itself prevents a 0.01$ situation if even only a few million $ across the globe still want to use it. There is a bottom end in value for utility built in to bitcoin. I have no idea of it's value. But it's there as long as it reliably works.
It's going to be choppy! It's going to be fun! But when it does spike and drop? Watch for the BTC is DEAD! Foghorn's. If the integrity of BTC remains. They will still be wrong, and we should see a more reasonable curve back to actual value.
That's my theory anyway and I'm sticking to it.
This one is about another misconception I see flying around, but also some of my own ponderings.
The idea is, that Bitcoin 2 will appear, render bitcoin obsolete, and the whole thing will just be a bunch of tulip bulbs.
What this viewpoint misses is that the BTC chart for the last few months has shot up like crazy, but if you look at the entire BTC history, you'll see a good two years of low level existence which had a bit of spike around June 2011, when adoption of the idea initially kicked off.
If you're an uninformed mainstream media commentator .. or any other kind, you also probably fail to realise the investment for many people, and some subtle economics of supply and demand in the processing power thrown at BTC.
Start with investment. A lot of people have sunk thousands of dollars / pounds in to "Mining Rigs". Even before the current crop of even faster ASIC custom chips are appearing, GPU mining became a thing. That's using a Graphics Card to compute the parts of the block instead of the ordinary main processor in your computer. What some people did, was build computers with as many of the best graphics cards they could in, and mine BTC for themselves with that. So what?
Here's your first economic curve to build in. By saying "best graphics card" it isn't always the fastest. The trade off is against electricity consumed. There's no point spending more on electricity than you mine in BTC. When BTC was in the $12 to $15 range, this was a huge issue. Many people will eventually have done the maths and turned off the miner to play games instead. The effect of the recent huge up for BTC, is that even scraping a hundredth of a percent from a block becomes worth the electricity again. So processing power and investment returns.
Investment? Yup. You might not believe it, but some folk are chucking in the region of tens of thousands of dollars in to systems now that can only mine bitcoins. You can't even run tetris on them. They do it very economically as well in terms of electricity consumption.
Why am I bothering to explain this? Because the investment in technology and time prior to this sudden surge is much larger than some people are considering. Any incompatible rival bitcoin system now will have to attract all that investment away from BTC for a very good reason.
Sure, that could still happen. All bets are off in BTC land. But there is a fair bit more to it than someone saying "Hey! Use this instead!" and everyone leaving.
The other reason for inertia in moving away from BTC, is that over the entire lifespan, it has already proven itself to be a reliable secure system. So far at least, any problems have been overcome and the system has proved itself as at least very robust. Ironically, the more computing power that gets thrown at it around the world, the more robust it becomes. Why change to a new system when this one is secure, works well, and more importantly, has personal investment in it?
Yet another reason for inertia is the simple "It has to be better" argument. There needs to be some compelling reason why an established system should be ditched. At the moment, LiteCoin is the main alternative to Bitcoin. If you dig in to LiteCoin, you find it's simply an adjustment to the parameters of bitcoin. It produces more coins, and they appear faster. But it trades off security. I've seen regular transactions in Bitcoin of around £15,000 or so. If I'm sat there, wondering how to transfer my £15,000, I'm going to go with Bitcoin. It doesn't really matter if it's a theoretical problem and in reality LiteCoin turns out to be as secure as bitcoin. It's certainly not more secure than bitcoin, so why trust it? LiteCoin is basically an attempt to make some cash out of the bitcoin idea for those who can't afford the processing power to mine bitcoin at the expense of a degree of security. I can't see it going far when the security of bitcoin is already constantly being questioned. But who knows? Maybe we end up with parallel crypto-currencies at the end of the day? Some say LiteCoin is the silver to BitCoin's gold. That looks like another flawed analogy to me. Bitcoin isn't gold.
So for MegaBitCoin to appear, it'll need to be substantially better somehow than bitcoin. That's going to take some doing. I'm not even sure how you'd approach a model of something to be better as a currency than bitcoin. I have a vague idea that it will be to do with transaction times, but (and it's a big but! (Sorry ladies!)), it can't sacrifice transaction time to security, and that level of care about transaction time involves having a huge volume of bitcoin transactions, far greater than where we are now.
Finally!!!! On that point!!! Honest!!! If MegaBTC appears, and it does have ultra fast verification of transaction on top of at least equally good security, and it does begin to attract users away from BTC, there's no reason to believe BTC would instantly die. A lot of people would be nervous of moving to an untested new system. It would seem more reasonable to expect a gradual wind down of BTC as people moved to MegaBTC, especially if BTC was still working perfectly well for the majority of users.
Then we come on to the nature of the curve :)
It's a wow of a spike isn't it? But unlike a forex chart, there's no obvious points to whack your Fibonacci scale on it. The moving averages are basically permanently in catch up and meaningless. In trader terms, there's no apparent support and resistance. Or is there?
You'll like this. This is brilliant. (Well to my twisted mind anyway).
Well actually, yes there is. There are plenty of BTC out there that were gained back when it was around $12 to $15. These people are not traders. To them at the moment, nirvana is unfolding. Remember, these guys don't have an accounts manager to answer to. They can decide to cash out with a big smile any time they want. Chances are, not many will while it's rocketing up as it is at the moment, but given a sudden peak and drop? A whole bunch of them will freak out and sell.
I'm predicting when that happens, BTC will drop by a fair whack. Not just the jitters in government clampdown whispers that caused the drop or whatever it is, but a wave of sells from the early adopters.
How far down it goes? Well reasonably we could say back down to $12. Except now we have people who have bought in to BTC from $50 up with big chunks of money (big in comparison to bitcoin), we have people with mining rigs invested in when BTC was just curving up from $30 and are feeling mighty smug. There is support on the way down, some of these guys will keep the faith, see a falling BTC and even buy back in to it assuming the basic integrity of the system remains intact.
I guess here is the chance that everybody really freaks out and BTC gets sold out to near enough $0 for it to vanish. There's no accounting for crowd mentality. That would be a shame and a waste if the basic mechanism was working fine. The world though has done stupider things before, and no doubt will again. But even with the $0.01 scenario, if the thing still works .. people are still going to use it. That in itself prevents a 0.01$ situation if even only a few million $ across the globe still want to use it. There is a bottom end in value for utility built in to bitcoin. I have no idea of it's value. But it's there as long as it reliably works.
It's going to be choppy! It's going to be fun! But when it does spike and drop? Watch for the BTC is DEAD! Foghorn's. If the integrity of BTC remains. They will still be wrong, and we should see a more reasonable curve back to actual value.
That's my theory anyway and I'm sticking to it.
9 Apr 2013
Yeah. Again!
Maybe I should just call this the bitcoin blog.
Time to place myself firmly in the middle again. There are some on one side predicting bitcoin will die right back to $5 or even completely, on the other side are the hopeless optimists seeing it race to thousands of $ per BTC.
Me? I'm in the middle.
It is indeed on an entirely unsustainable ramp. That much I know. Well. I think I do. With every other commodity / share / currency that I know of. Yup. That's an unsustainable up-curve. A whole bunch of logic in me tells me this. But this is something a bit odd, in certainly unusual times. If anything faith in traditional currency and freedom of exchange is on an increasing dive. That is going to mean yet more cash pumped in to BTC. So the question really is, what's the sustainable level? I have no freaking idea. It could be $50/BTC it might end up being $5000/BTC or .... god only knows! Somewhere in this range of freaky is a level it will eventually settle down to. It seems unlikely at this point that the value will be $0. It seems to have achieved escape momentum. It has, or is beginning to achieve that holy grail of currency, acceptance as a means of transfer and value for it.
It's set against a bizarre backdrop. The money printing presses of the world just keep going, and the stock markets and forex charts look super healthy. Everything has a David Lynch like saccharine sprinkling to hide any evil that may lie below. To me ... and well ... I could be wrong here. It looks like an increasingly dangerous disconnect. The viewpoints are incredibly polarized. The government statistics look increasingly, how can I put this? Imaginative. I'm not an expert in all fields, but I know a few have thrown hands up in horror at reality vs US commercial property occupancy and employment figures, and here in the UK we have some numbers that really don't add up on employment as well.
Maybe it's always been like this, and I'm late to appreciate it. That is possible. But gut feeling tells me (all praise the truthiness!), that maybe it has always been a little bit true, but now we're taking it to epic proportions.
Hell no. On a limb on this one. I've watched the EURUSD long enough, and the whole deal is ... bizarre. When the Greece crisis was originally hitting, things sort of made sense. Hits to the Euro gave you chunks in shorts. I mean. It went down. Things have changed. The market's still don't like it if the Troika look like they've lost the plot, but other than that, as long as Ben keeps printing, and Troika keeps just about getting away with it, there's no danger here folks! Up we go!
Once again, it's a people in glass houses scenario. Yes BTC looks crazy at the moment, but the rise is actually just due to demand, there's no mystery reason beyond that. People are just willing to pay that much for BTC at the moment. That doesn't make it invincible. But then look at the stock markets, they seem to be on an ever rising up curve based on money printing and bail-outs or bail-ins. That doesn't seem all that sustainable either when just about every underlying economic indicator tells you there's a hard hitting recession going on outside the stock markets. So who's the fool at the moment? The BTC buyer or the perma bull on the markets? Both maybe?
It's not just an increasing disconnect in finances I'm picking up. It's social as well. Thatcher's death highlighted it strongly today. I was alive back when Costello was singing and I prayed people would listen to Spitting Image. I remember being a teenager. Swearing with friends that we'd book a minibus together and go piss on Thatcher's grave. If you weren't in the UK around that time at an age to appreciate the hack and slash job Maggie did on the UK, you'll no doubt think that's cruel, stupid and evil. But million's of us did and do still think like that. We all noticed she supported apartheid, we hated her for it. Our skin crawled as she declared Pinochet a friend of Britain. We knew she was destroying unions and industry out of pure ideological malice against them. We saw all the jobs vanish and even now, lack of production and manufacturing sector in the UK that resulted. We even got to see her install Rupert Murdoch. Possibly the most corrupt and corrosive media barron the world has ever known. It was him that got her re-elected. The Sun knew it. They even bragged.
I'm not glad she died.
I wish she'd never existed.
If I can?
Yes.
I'll keep the promise to my friends.
If I have caused harm to anyone as much as Thatcher did to a nation. You're welcome to piss on mine.
Meanwhile ... Those that credit Thatcher with easy wealth and massive growth in the finance industry, who worship her vicious direct style of leadership "she got things done". Can't understand why there were street parties the night she died. Strangely, these people also seem to own virtually every single newspaper, radio and television station. I can't think of a single world leader except for known established dictators who's death has inspired celebration. I'm certain Maggie will be buried in a very secure location, probably with CCTV monitoring, so I and many like me, won't ever get the chance to stay true to our promises of years ago. What level of social disconnect are we managing to achieve here? It's beyond strange. It's a society living in some kind of psychosis.
Time to place myself firmly in the middle again. There are some on one side predicting bitcoin will die right back to $5 or even completely, on the other side are the hopeless optimists seeing it race to thousands of $ per BTC.
Me? I'm in the middle.
It is indeed on an entirely unsustainable ramp. That much I know. Well. I think I do. With every other commodity / share / currency that I know of. Yup. That's an unsustainable up-curve. A whole bunch of logic in me tells me this. But this is something a bit odd, in certainly unusual times. If anything faith in traditional currency and freedom of exchange is on an increasing dive. That is going to mean yet more cash pumped in to BTC. So the question really is, what's the sustainable level? I have no freaking idea. It could be $50/BTC it might end up being $5000/BTC or .... god only knows! Somewhere in this range of freaky is a level it will eventually settle down to. It seems unlikely at this point that the value will be $0. It seems to have achieved escape momentum. It has, or is beginning to achieve that holy grail of currency, acceptance as a means of transfer and value for it.
It's set against a bizarre backdrop. The money printing presses of the world just keep going, and the stock markets and forex charts look super healthy. Everything has a David Lynch like saccharine sprinkling to hide any evil that may lie below. To me ... and well ... I could be wrong here. It looks like an increasingly dangerous disconnect. The viewpoints are incredibly polarized. The government statistics look increasingly, how can I put this? Imaginative. I'm not an expert in all fields, but I know a few have thrown hands up in horror at reality vs US commercial property occupancy and employment figures, and here in the UK we have some numbers that really don't add up on employment as well.
Maybe it's always been like this, and I'm late to appreciate it. That is possible. But gut feeling tells me (all praise the truthiness!), that maybe it has always been a little bit true, but now we're taking it to epic proportions.
Hell no. On a limb on this one. I've watched the EURUSD long enough, and the whole deal is ... bizarre. When the Greece crisis was originally hitting, things sort of made sense. Hits to the Euro gave you chunks in shorts. I mean. It went down. Things have changed. The market's still don't like it if the Troika look like they've lost the plot, but other than that, as long as Ben keeps printing, and Troika keeps just about getting away with it, there's no danger here folks! Up we go!
Once again, it's a people in glass houses scenario. Yes BTC looks crazy at the moment, but the rise is actually just due to demand, there's no mystery reason beyond that. People are just willing to pay that much for BTC at the moment. That doesn't make it invincible. But then look at the stock markets, they seem to be on an ever rising up curve based on money printing and bail-outs or bail-ins. That doesn't seem all that sustainable either when just about every underlying economic indicator tells you there's a hard hitting recession going on outside the stock markets. So who's the fool at the moment? The BTC buyer or the perma bull on the markets? Both maybe?
It's not just an increasing disconnect in finances I'm picking up. It's social as well. Thatcher's death highlighted it strongly today. I was alive back when Costello was singing and I prayed people would listen to Spitting Image. I remember being a teenager. Swearing with friends that we'd book a minibus together and go piss on Thatcher's grave. If you weren't in the UK around that time at an age to appreciate the hack and slash job Maggie did on the UK, you'll no doubt think that's cruel, stupid and evil. But million's of us did and do still think like that. We all noticed she supported apartheid, we hated her for it. Our skin crawled as she declared Pinochet a friend of Britain. We knew she was destroying unions and industry out of pure ideological malice against them. We saw all the jobs vanish and even now, lack of production and manufacturing sector in the UK that resulted. We even got to see her install Rupert Murdoch. Possibly the most corrupt and corrosive media barron the world has ever known. It was him that got her re-elected. The Sun knew it. They even bragged.
I'm not glad she died.
I wish she'd never existed.
If I can?
Yes.
I'll keep the promise to my friends.
If I have caused harm to anyone as much as Thatcher did to a nation. You're welcome to piss on mine.
Meanwhile ... Those that credit Thatcher with easy wealth and massive growth in the finance industry, who worship her vicious direct style of leadership "she got things done". Can't understand why there were street parties the night she died. Strangely, these people also seem to own virtually every single newspaper, radio and television station. I can't think of a single world leader except for known established dictators who's death has inspired celebration. I'm certain Maggie will be buried in a very secure location, probably with CCTV monitoring, so I and many like me, won't ever get the chance to stay true to our promises of years ago. What level of social disconnect are we managing to achieve here? It's beyond strange. It's a society living in some kind of psychosis.
6 Apr 2013
Yet another other bitcoin post
I've been thinking around the possible pitfalls of Bitcoin looking for weaknesses. The process has been helped by some other thoughtful folk out there asking questions which do indeed make you go "Hmm". Here we go!
"Taxation will be impossible"
It does seem different for sure, but it's not impossible. Car tax, council tax are easy. They either got paid or they didn't. There's even a slight advantage that it's harder to cheat on the bitcoin system. I can't turn up at the DVLA with fake notes (knowingly or not) to buy my car tax and get away with it in bitcoin.
The two head scratchers are income tax and VAT. Income tax paid at source by the employer out of the employee's pay packet is simple enough to record per transaction. If there's an audit all the transactions can be looked up and you can see the timestamp for each. For self employed it gets a little more tricky.
It would be relatively easy to simply not declare income and therefore avoid tax. It sounds like the first major pitfall of bitcoin, but actually, it's the exact same problem you have with cash at the moment. No better. No worse. However. With the current system, undeclared work and income is only traceable by unidentified increases in bank balance with a careful check (if the cash ever reaches a bank balance that's being checked for fraud). At least with bitcoin, if you take a random sample of clients for a self employed person and ask them to show the payment transactions, you can double check they paid someone something. If the self-employed persons records show a few blanks in receipt and declaration, then you know you've got some tax avoidance going on. It's different, but not impossible. It becomes more a case for whistle-blowers to say "I don't think this guy is paying his taxes! Here's my transaction!" and it's incredibly easy and cheap for a government taxation department to just look up the transaction and see if it got declared by the self-employed person. The nasty then is ... some git pretending they paid you something just to get you in to trouble. Ah ha. Yes. Well. We have a problem here. It is possible to dodge some income tax for the self employed, but it's even worse news when it comes to someone trying to get you in to trouble. A possible external solution would be a government registered pay account address. The customer pays that address, the supplier gets the payment via a simple "got it, recorded it, passed it on" transaction. The supplier is expected to pay up tax for the sum of transactions through that address at year end. There's a bit of a black hole here bitcoin fans. Ok so it's the exact same problem you have at the moment in reverse. But it's still a problem. Any answers out there?
VAT is a bit more strange. At the moment it's charged to the customer then paid by the merchant. With bitcoin it becomes an audit trail of transactions from the lead supplier down. Say the manufacturer produces 10 things and sells them for X to a merchant for sale. As a producer, it's very important to record that you're not just giving the stuff away for free for your own records, so that side works. The merchant then needs to be able to provide transaction key evidence for the sale of each of the 10 units. So for a simple commodity based example, audit trails are still entirely possible and checkable. It's again not impossible. It does require a rethink of how correct taxation can be checked, because the "I can see how much you have in your wallet (bank)" part is removed. But as already noted. That's not a terrifically good way of detecting fraud at the moment anyway. Witness the rise of secret off shore accounts to see how well the current system is doing.
So ... different .. yes. In some cases trivially easy to still tax people. For income and sales tax, a little more tricky, or at least different, but not impossible.
The self employed black hole is a problem, as are malicious claims. But that's because we're looking at it from the perspective of the current taxation system and it's development. It would still be possible for a government to raise significant taxes, and to adjust those taxes. The method and place where taxation occurs though would in some cases have to shift to allow traceability and indemnity under bitcoin. Taxation at point of sale as in tax on fuel at the moment seems to take focus rather than backdated taxation. It's a problem to be solved, but not an impossible one, and if anything it appears to be the small fry self employed who have most ability to dodge taxes instead of the multi-national company. You may think that's no bad thing overall.
"You can't artificially deflate it in the case of a crisis"
True. Here we're beginning to enter uncharted ground. Bitcoin claims to answer this by it's divisibility. If it came to it, 0.0000000001 bitcoins could be the equivalent to a 4 bedroom house. That doesn't matter so much if it's trivially easy to use 0.000000000000001 bitcoins to buy a loaf of bread anyway. You don't need the wheelbarrows full of cash scenario with runaway inflation either. If it took 400,000,000 bitcoins to buy a house, then 1,000 bitcoin would still get you a loaf of bread. But this is something of a theoretical answer to the real problem. If you have a rapid fluctuation in either inflation or deflation direction, the real value of however many bitcoin you have in your account changes.
This probably is a weak point of bitcoin. (Found one!). Bitcoin is a new and previously unknown and untested model. It is easily subdivided without needing trillions of bits of paper to buy a loaf of bread. So that bit is nice to know. However, bitcoin is designed to have an absolute limit of 21,000,000 bitcoins. That's it. That's all there will ever be. In hard traditional economic theory, that sounds like complete stupidity. It's normal to expect a degree of inflation with all known currency systems. How will that work even with trivial subdivision for a currency? No one knows. It's also unknown how much inflation and deflation is due to government and central bank intervention. Economists have views on it. But there's no right answer. Fluctuations in supply and demand will inevitably happen. How much damage that would do to a persons bitcoin wallet is unknown. How much damage it would do to a society using bitcoin as it's currency is wild speculation. This truly is a brand new, never before known adventure in economics.
But .... Once again you're back to comparing with the current known fiat systems. In the cases of gradual inflation or deflation, bitcoin seems well able to allow controlled variation in bitcoin value to compensate with zero cost and minimal harm to bitcoin holders. In the case of massive sudden changes in fluctuation ... well ... your start point is, that's horrible news for any currency and society. How could a government compensate? Quantitative easing isn't an option. You can take the view that's a fantastic thing, and the reality of the economic situation will be brutally dealt with (some people will go bust for bad bets). We flirt with that at the moment, but at the moment, money printing seems to make things worse for everyone outside of bond holders and banks. Nobody defaults, because nobody in a position of money and power wants to allow that to happen. The knock on effects are simply too horrible in the current rehypothicated debt scenarios. Instead we have a system where people are basically cast out of the system to save the major investors. Right up to increasing suicide rates, axing health care and welfare and the resultant homelessness and premature deaths that will result. No really. It's that simple. The current system is killing some of it's own population to preserve the status quo.
Here? You'll have to form your own considered view. Some will see a lack of artificial intervention as the best thing that could possibly happen for a reliable currency to exist, even if that does punish failure by some. Other's will think that's a nightmare scenario that can't possibly be tolerated.
Ok lets look at this another way...
Hyperinflation - Not going to happen under bitcoin. The supply of the currency is not only limited, but it's exact curve of supply is known and predictable over time. In classical terms, that makes hyperinflation .. well lets say .. highly unlikely unless there's another world war.
Hungary in 1946 is your prime example for hyperinflation. The trigger was the aftermath of the second world war. Great! Let's see how bitcoin would cope with that situation! You can't. Bitcoin is a global currency. That hasn't happened before. The purchasing power of bitcoin will be averaged across all the countries and people that adopt it. Hyperinflation in Hungary in 1946 would have resulted in a very weird case scenario. The relative value of bitcoin would have remained stable(ish) so it's hard to know what the overall effect to a global currency after WWII would have been without looking at gold. If you look at gold over that period then it looks pretty darn stable. We'll have to assume bitcoin would be similar because I can't think of a better comparison. So the result in Hungary itself may have been the goods and services costing less and less in terms of bitcoins until they were in the millionths of a bitcoin to buy a house. Yes. I know that sounds backwards. Your brain wants to flip it back to what actually happened which was increasing quantities of currency to buy the exact same thing. What that means in reality though, is that compared to the currency, everything actually seemed to get a lot cheaper. It's the supply of money that went bonkers, not the underlying barter and exchange of value in society. Except ... it wouldn't pan out like that. If everyone is apparently finding everything very cheap, people spend. Curiously, Hungary after WWII looks like it might have had a very weird time of it under bitcoin, but without the crazy money printing being required, new bank notes, new coinage, the economy may have recovered even faster than it did.
The thing is in cases like this, the actual real value of goods and services to the people that supply and use them remains fairly constant. It's almost back to barter. I did you 12 hours work, so I expect to be able to buy this sort of thing tomorrow with the money I gained from the work. You could easily still do that under bitcoin. Or at least it appears that way. In fact in the case of 1946 Hungary, it would seem bitcoin might have levelled out the fluctuations naturally. Nobody can know for sure. This is speculation on historical fact with an unknown new element. Curiously, the subdivision factor doesn't help here at all. The relative stability of value in a global currency is the deciding factor.
Bitcoin may actually help even out cases of extreme hyper inflation across countries as well as the lamented gold standard was supposed to have done. Except without external influences fiddling with it.
Bitcoin may seem anti-capitalist, but at it's heart, it's brutally set to allow supply and demand to find it's own value within it's spectrum in a very hard line capitalist way.
There's more .... I think I need to do yet another post in a few days time ...
But I'll leave you with this!
The main catch I can find in bitcoin, is that the current investors and those that profit from the fiat system we have in place will try and kill it. That's one huge chunk of power levelled against it. At which point does bitcoin become it's own valid currency immune to that because the same set of people have money in bitcoin? Who knows? It's a new one. I doubt we are anywhere near there yet even with the current high value, it's not mainstream yet. It's a promising alternative with practical application problems to overcome in it's current state. Only the degree of adoption will change that in to problems solved and accepted.
"Taxation will be impossible"
It does seem different for sure, but it's not impossible. Car tax, council tax are easy. They either got paid or they didn't. There's even a slight advantage that it's harder to cheat on the bitcoin system. I can't turn up at the DVLA with fake notes (knowingly or not) to buy my car tax and get away with it in bitcoin.
The two head scratchers are income tax and VAT. Income tax paid at source by the employer out of the employee's pay packet is simple enough to record per transaction. If there's an audit all the transactions can be looked up and you can see the timestamp for each. For self employed it gets a little more tricky.
It would be relatively easy to simply not declare income and therefore avoid tax. It sounds like the first major pitfall of bitcoin, but actually, it's the exact same problem you have with cash at the moment. No better. No worse. However. With the current system, undeclared work and income is only traceable by unidentified increases in bank balance with a careful check (if the cash ever reaches a bank balance that's being checked for fraud). At least with bitcoin, if you take a random sample of clients for a self employed person and ask them to show the payment transactions, you can double check they paid someone something. If the self-employed persons records show a few blanks in receipt and declaration, then you know you've got some tax avoidance going on. It's different, but not impossible. It becomes more a case for whistle-blowers to say "I don't think this guy is paying his taxes! Here's my transaction!" and it's incredibly easy and cheap for a government taxation department to just look up the transaction and see if it got declared by the self-employed person. The nasty then is ... some git pretending they paid you something just to get you in to trouble. Ah ha. Yes. Well. We have a problem here. It is possible to dodge some income tax for the self employed, but it's even worse news when it comes to someone trying to get you in to trouble. A possible external solution would be a government registered pay account address. The customer pays that address, the supplier gets the payment via a simple "got it, recorded it, passed it on" transaction. The supplier is expected to pay up tax for the sum of transactions through that address at year end. There's a bit of a black hole here bitcoin fans. Ok so it's the exact same problem you have at the moment in reverse. But it's still a problem. Any answers out there?
VAT is a bit more strange. At the moment it's charged to the customer then paid by the merchant. With bitcoin it becomes an audit trail of transactions from the lead supplier down. Say the manufacturer produces 10 things and sells them for X to a merchant for sale. As a producer, it's very important to record that you're not just giving the stuff away for free for your own records, so that side works. The merchant then needs to be able to provide transaction key evidence for the sale of each of the 10 units. So for a simple commodity based example, audit trails are still entirely possible and checkable. It's again not impossible. It does require a rethink of how correct taxation can be checked, because the "I can see how much you have in your wallet (bank)" part is removed. But as already noted. That's not a terrifically good way of detecting fraud at the moment anyway. Witness the rise of secret off shore accounts to see how well the current system is doing.
So ... different .. yes. In some cases trivially easy to still tax people. For income and sales tax, a little more tricky, or at least different, but not impossible.
The self employed black hole is a problem, as are malicious claims. But that's because we're looking at it from the perspective of the current taxation system and it's development. It would still be possible for a government to raise significant taxes, and to adjust those taxes. The method and place where taxation occurs though would in some cases have to shift to allow traceability and indemnity under bitcoin. Taxation at point of sale as in tax on fuel at the moment seems to take focus rather than backdated taxation. It's a problem to be solved, but not an impossible one, and if anything it appears to be the small fry self employed who have most ability to dodge taxes instead of the multi-national company. You may think that's no bad thing overall.
"You can't artificially deflate it in the case of a crisis"
True. Here we're beginning to enter uncharted ground. Bitcoin claims to answer this by it's divisibility. If it came to it, 0.0000000001 bitcoins could be the equivalent to a 4 bedroom house. That doesn't matter so much if it's trivially easy to use 0.000000000000001 bitcoins to buy a loaf of bread anyway. You don't need the wheelbarrows full of cash scenario with runaway inflation either. If it took 400,000,000 bitcoins to buy a house, then 1,000 bitcoin would still get you a loaf of bread. But this is something of a theoretical answer to the real problem. If you have a rapid fluctuation in either inflation or deflation direction, the real value of however many bitcoin you have in your account changes.
This probably is a weak point of bitcoin. (Found one!). Bitcoin is a new and previously unknown and untested model. It is easily subdivided without needing trillions of bits of paper to buy a loaf of bread. So that bit is nice to know. However, bitcoin is designed to have an absolute limit of 21,000,000 bitcoins. That's it. That's all there will ever be. In hard traditional economic theory, that sounds like complete stupidity. It's normal to expect a degree of inflation with all known currency systems. How will that work even with trivial subdivision for a currency? No one knows. It's also unknown how much inflation and deflation is due to government and central bank intervention. Economists have views on it. But there's no right answer. Fluctuations in supply and demand will inevitably happen. How much damage that would do to a persons bitcoin wallet is unknown. How much damage it would do to a society using bitcoin as it's currency is wild speculation. This truly is a brand new, never before known adventure in economics.
But .... Once again you're back to comparing with the current known fiat systems. In the cases of gradual inflation or deflation, bitcoin seems well able to allow controlled variation in bitcoin value to compensate with zero cost and minimal harm to bitcoin holders. In the case of massive sudden changes in fluctuation ... well ... your start point is, that's horrible news for any currency and society. How could a government compensate? Quantitative easing isn't an option. You can take the view that's a fantastic thing, and the reality of the economic situation will be brutally dealt with (some people will go bust for bad bets). We flirt with that at the moment, but at the moment, money printing seems to make things worse for everyone outside of bond holders and banks. Nobody defaults, because nobody in a position of money and power wants to allow that to happen. The knock on effects are simply too horrible in the current rehypothicated debt scenarios. Instead we have a system where people are basically cast out of the system to save the major investors. Right up to increasing suicide rates, axing health care and welfare and the resultant homelessness and premature deaths that will result. No really. It's that simple. The current system is killing some of it's own population to preserve the status quo.
Here? You'll have to form your own considered view. Some will see a lack of artificial intervention as the best thing that could possibly happen for a reliable currency to exist, even if that does punish failure by some. Other's will think that's a nightmare scenario that can't possibly be tolerated.
Ok lets look at this another way...
Hyperinflation - Not going to happen under bitcoin. The supply of the currency is not only limited, but it's exact curve of supply is known and predictable over time. In classical terms, that makes hyperinflation .. well lets say .. highly unlikely unless there's another world war.
Hungary in 1946 is your prime example for hyperinflation. The trigger was the aftermath of the second world war. Great! Let's see how bitcoin would cope with that situation! You can't. Bitcoin is a global currency. That hasn't happened before. The purchasing power of bitcoin will be averaged across all the countries and people that adopt it. Hyperinflation in Hungary in 1946 would have resulted in a very weird case scenario. The relative value of bitcoin would have remained stable(ish) so it's hard to know what the overall effect to a global currency after WWII would have been without looking at gold. If you look at gold over that period then it looks pretty darn stable. We'll have to assume bitcoin would be similar because I can't think of a better comparison. So the result in Hungary itself may have been the goods and services costing less and less in terms of bitcoins until they were in the millionths of a bitcoin to buy a house. Yes. I know that sounds backwards. Your brain wants to flip it back to what actually happened which was increasing quantities of currency to buy the exact same thing. What that means in reality though, is that compared to the currency, everything actually seemed to get a lot cheaper. It's the supply of money that went bonkers, not the underlying barter and exchange of value in society. Except ... it wouldn't pan out like that. If everyone is apparently finding everything very cheap, people spend. Curiously, Hungary after WWII looks like it might have had a very weird time of it under bitcoin, but without the crazy money printing being required, new bank notes, new coinage, the economy may have recovered even faster than it did.
The thing is in cases like this, the actual real value of goods and services to the people that supply and use them remains fairly constant. It's almost back to barter. I did you 12 hours work, so I expect to be able to buy this sort of thing tomorrow with the money I gained from the work. You could easily still do that under bitcoin. Or at least it appears that way. In fact in the case of 1946 Hungary, it would seem bitcoin might have levelled out the fluctuations naturally. Nobody can know for sure. This is speculation on historical fact with an unknown new element. Curiously, the subdivision factor doesn't help here at all. The relative stability of value in a global currency is the deciding factor.
Bitcoin may actually help even out cases of extreme hyper inflation across countries as well as the lamented gold standard was supposed to have done. Except without external influences fiddling with it.
Bitcoin may seem anti-capitalist, but at it's heart, it's brutally set to allow supply and demand to find it's own value within it's spectrum in a very hard line capitalist way.
There's more .... I think I need to do yet another post in a few days time ...
But I'll leave you with this!
The main catch I can find in bitcoin, is that the current investors and those that profit from the fiat system we have in place will try and kill it. That's one huge chunk of power levelled against it. At which point does bitcoin become it's own valid currency immune to that because the same set of people have money in bitcoin? Who knows? It's a new one. I doubt we are anywhere near there yet even with the current high value, it's not mainstream yet. It's a promising alternative with practical application problems to overcome in it's current state. Only the degree of adoption will change that in to problems solved and accepted.
4 Apr 2013
The "other" bitcoin post
Wow.
I've been busy most the day, glancing through my twitter timeline when I've had the chance and just ... WOW! Some of the misinformation and assumptions about bitcoin flying around are really quite spectacular! So I'm here again!
What I notice most is that most the criticisms fired at bitcoin are not only misinformed, but if you fire the exact same criticism back at fiat money in terms of £, $ or Euro. They actually stick and do damage.
"You want security? Buy gold or silver! Not Bitcoin!"
Fair enough in principle. Except for a few things. The first is one my own (hugs) 12 year old son came up with when I told him about the gold idea. "But there's not enough gold in the world is there? I heard it would all fit under the Eiffel tower". Proud Dad moment. Yup. For one thing. IF gold was underpinning all the cash in the world, there simply isn't enough of it at it's current value. But gold doesn't underpin the value of the cash in your pocket. Re-hypothicated debt does.
Let's go a little further here. Say I did actually really go for it. I buy a small bar of real solid gold. I even have it bored and tested to ensure it's not gold wrapped round some other heavy metal like some bars in the bullion banks. (You can't cheat like that with bitcoin) This is it ... the real deal. I have a lump of gold.
I can't use it to pay for anything much. I could in theory shave bits off it and attempt to trade it at my local supermarket for my shopping. I doubt it would work. This is the exact same criticism levelled at bitcoin. "But what can I do with it?" .. well actually, you can do more with Bitcoin in the world than you can with a lump of gold.
Even further on from that, the scams that gold has been involved in are many. There has been an attempt to make a virtual currency before backed by gold. It failed. There are groups that claimed to sell us ordinary folk gold backed securities, only to find they never had any real gold linked to the accounts at all. That also failed.
Bitcoin doesn't have that. You either have real genuine bitcoin in your wallet, or you have zero bitcoin in your wallet. There is no fake bitcoin wrapped in gold. There is no broker lying to you about gold backing. You either have it, or you don't.
"It's just like tulips!"
If you didn't know, around 1620-1630 tulip bulbs were acceptable currency in the Netherlands, and achieved quite a huge rate of return. However the person making this statement is only illustrating one thing. They have absolutely no idea about how bitcoin works. Yes. It's possible for any medium of currency to suffer a loss of confidence. That's why bitcoin is so popular now. There's a lack of confidence in the Euro (and increasingly in the dollar as the money press keeps churning out billions of dollars to sustain America). But tulips are a relatively easy plant to grow with infinite supply. Bitcoin is not very easy to grow and has a limit built in. Bitcoin was designed to be a secure and highly adaptable currency by a guy that had a pretty good grasp of currency and an excellent knowledge of cryptography and security, tulip bulbs are tulip bulbs.
"It's a ponzi scheme!"
How exactly? Show me on the map of the globe who benefits from a distributed network of currency transaction validation. Nobody. There is no "Bitcoin Inc." running the show. There is no bank or person pretending to be a bank involved. Yes, early adopters may get lucky on the uptake, but that's what you'd call good sense if you bought in to an unknown tech stock that suddenly took off like bitcoin has. Apparently, if it's on standard exchanges and involves fiat currency, it's ok to make a killing on a lucky buy in. If you do it with bitcoin? Well that's just not on. Probably because most of the market trader minds have utterly ignored bitcoin and now see a currency exchange graph kicking them up the backside that they wish they had been in on.
"Who would invest in such a volatile asset? It's a joke!"
Well quite frankly. See above. While some market traders are happy with slow and steady takings, a pretty huge chunk of the market just LOVES volatility when it's in a field they understand. You can short it, long it, generally make a killing in a short time frame. I don't see many market traders complaining about that kind of volatility. Besides. It would be fair to say that at the moment, BTC is searching for it's own sustainable level. Sure it might ramp way above it's sustainable level on news such as Cyprus bank losses. But that's exactly what Forex traders love about trading EURUSD. It ramps, it drops, it levels to an average .. that's how you make money. An entirely stable currency pair is a zero profit currency pair.
"Who would put money in to some hackers scheme?"
Well I've seen the original creator of Bitcoin described as "a hacker". But these days that term tends to extend to anyone with geek skills above average. I'm not actually aware of any hacking at all claimed against or by him. (I could be wrong here, but I've not seen any big flashing "HACKER" signs around bitcoin). Oh and btw. Bitcoin was not invented by Anonymous. O.o
Bitcoin is in fact an extremely elegant solution to security in transaction via cryptography. So much so that it actually beats the pants off fiat money. Transactions are final. They cannot be faked. There is no such thing as a fake bitcoin credit card. There is no fake gold bar bitcoin. There are no fake bitcoins in existence. This is the whole point of bitcoin. It's INCREDIBLY secure.
Better yet. Your bitcoins are not subject to being devalued by a government or central bank policy of money printing. They are not held by a bank that the Troika can plunder to save the bank at your expense. They are not held in a bank that the likes of Fred Goodwin can utterly destroy at insane expense to the tax payer. They are owned on a self verifying, global, digital network.
Oh and if you have the skill and knowledge. Here it is. The bitcoin source code. It's been around for a few years already, why don't you go ahead and see if you can spot the hacker code that's going to drain your account to zero? Nobody else has. Can you say there's anything like the same level of transparency about how your bank does business?
"It's not even backed up by anything real!"
Well I've got news for you. Neither is the £, $ or Euro. Currency is always based entirely on faith. Yes there are pledges on bank notes (that are utterly meaningless). Yes in theory the government and central bank will protect your monetary value, but in practise? Well actually no. Governments and central banks will happily devalue your currency. In Cyprus they'll even basically steal whatever currency you had in the bank to pay off debts. And even better, capital controls can be put in place that prevent you using your currency as you'd like to.
Confidence can be lost in your home currency, as is happening with the Euro. Countries can even indulge in exchange rate wars, deliberately reducing the overseas value of your cash to attempt to boost export demand at home.
No. Bitcoin isn't backed up by anything real except strong cryptography and trust in a system that can't be easily fiddled with and distorted by governments and banks. Trust is everything for currency. Bitcoin is strong on trust and validity. Far more so than traditional fiat currency.
This is one of the prime examples of accusing bitcoin of something only to find it's your traditional currency that has either the exact same problem or worse.
---
Once people begin to realise that bitcoin is a viable and incredibly secure system for storing and transferring wealth without bank intervention, it's only likely to take off even more than it has already.
With one provision. The established powers that be utterly loathe bitcoin. They can't control it. They can't rob it. They can't sieze your assets. That makes it attractive to users, and attractive to highly funded government black hat hackers. I strongly suspect Instawallet was taken out by government intervention today. I can't predict how nasty and low the attacks on it will stoop, or if they will dent confidence in bitcoin itself. I can predict though. That the basic security of bitcoin will carry on regardless.
And ... Like I said before "DO NOT PUT YOUR BITCOINS IN AN ONLINE WALLET". They are only as safe there as the website they are stored on. Store and backup your own wallet locally.
I'll take questions at @fluffkin on twitter if people want to know more, but please keep it to DM's. I don't really want my timeline flooded with it. Also, I'm no expert. I'm fairly well informed, and honest about my limits of knowledge. Apparently that puts me light years ahead of main stream media and paranoid market traders.
PS. You ain't seen nothing yet. Underlying the basic framework that is bitcoin you can see today are built in systems for safe escrow, where the third party never gets to hold your money. Micro-transaction payment channels for things such as payment for tiny data usage on roaming wifi network usage *as you drive by* that don't load the network unnecessarily. Bitcoin isn't just a wallet with highly secure systems in place (better than any bank in the UK currently offers). It's a system designed from the base to be a very good currency medium.
I've been busy most the day, glancing through my twitter timeline when I've had the chance and just ... WOW! Some of the misinformation and assumptions about bitcoin flying around are really quite spectacular! So I'm here again!
What I notice most is that most the criticisms fired at bitcoin are not only misinformed, but if you fire the exact same criticism back at fiat money in terms of £, $ or Euro. They actually stick and do damage.
"You want security? Buy gold or silver! Not Bitcoin!"
Fair enough in principle. Except for a few things. The first is one my own (hugs) 12 year old son came up with when I told him about the gold idea. "But there's not enough gold in the world is there? I heard it would all fit under the Eiffel tower". Proud Dad moment. Yup. For one thing. IF gold was underpinning all the cash in the world, there simply isn't enough of it at it's current value. But gold doesn't underpin the value of the cash in your pocket. Re-hypothicated debt does.
Let's go a little further here. Say I did actually really go for it. I buy a small bar of real solid gold. I even have it bored and tested to ensure it's not gold wrapped round some other heavy metal like some bars in the bullion banks. (You can't cheat like that with bitcoin) This is it ... the real deal. I have a lump of gold.
I can't use it to pay for anything much. I could in theory shave bits off it and attempt to trade it at my local supermarket for my shopping. I doubt it would work. This is the exact same criticism levelled at bitcoin. "But what can I do with it?" .. well actually, you can do more with Bitcoin in the world than you can with a lump of gold.
Even further on from that, the scams that gold has been involved in are many. There has been an attempt to make a virtual currency before backed by gold. It failed. There are groups that claimed to sell us ordinary folk gold backed securities, only to find they never had any real gold linked to the accounts at all. That also failed.
Bitcoin doesn't have that. You either have real genuine bitcoin in your wallet, or you have zero bitcoin in your wallet. There is no fake bitcoin wrapped in gold. There is no broker lying to you about gold backing. You either have it, or you don't.
"It's just like tulips!"
If you didn't know, around 1620-1630 tulip bulbs were acceptable currency in the Netherlands, and achieved quite a huge rate of return. However the person making this statement is only illustrating one thing. They have absolutely no idea about how bitcoin works. Yes. It's possible for any medium of currency to suffer a loss of confidence. That's why bitcoin is so popular now. There's a lack of confidence in the Euro (and increasingly in the dollar as the money press keeps churning out billions of dollars to sustain America). But tulips are a relatively easy plant to grow with infinite supply. Bitcoin is not very easy to grow and has a limit built in. Bitcoin was designed to be a secure and highly adaptable currency by a guy that had a pretty good grasp of currency and an excellent knowledge of cryptography and security, tulip bulbs are tulip bulbs.
"It's a ponzi scheme!"
How exactly? Show me on the map of the globe who benefits from a distributed network of currency transaction validation. Nobody. There is no "Bitcoin Inc." running the show. There is no bank or person pretending to be a bank involved. Yes, early adopters may get lucky on the uptake, but that's what you'd call good sense if you bought in to an unknown tech stock that suddenly took off like bitcoin has. Apparently, if it's on standard exchanges and involves fiat currency, it's ok to make a killing on a lucky buy in. If you do it with bitcoin? Well that's just not on. Probably because most of the market trader minds have utterly ignored bitcoin and now see a currency exchange graph kicking them up the backside that they wish they had been in on.
"Who would invest in such a volatile asset? It's a joke!"
Well quite frankly. See above. While some market traders are happy with slow and steady takings, a pretty huge chunk of the market just LOVES volatility when it's in a field they understand. You can short it, long it, generally make a killing in a short time frame. I don't see many market traders complaining about that kind of volatility. Besides. It would be fair to say that at the moment, BTC is searching for it's own sustainable level. Sure it might ramp way above it's sustainable level on news such as Cyprus bank losses. But that's exactly what Forex traders love about trading EURUSD. It ramps, it drops, it levels to an average .. that's how you make money. An entirely stable currency pair is a zero profit currency pair.
"Who would put money in to some hackers scheme?"
Well I've seen the original creator of Bitcoin described as "a hacker". But these days that term tends to extend to anyone with geek skills above average. I'm not actually aware of any hacking at all claimed against or by him. (I could be wrong here, but I've not seen any big flashing "HACKER" signs around bitcoin). Oh and btw. Bitcoin was not invented by Anonymous. O.o
Bitcoin is in fact an extremely elegant solution to security in transaction via cryptography. So much so that it actually beats the pants off fiat money. Transactions are final. They cannot be faked. There is no such thing as a fake bitcoin credit card. There is no fake gold bar bitcoin. There are no fake bitcoins in existence. This is the whole point of bitcoin. It's INCREDIBLY secure.
Better yet. Your bitcoins are not subject to being devalued by a government or central bank policy of money printing. They are not held by a bank that the Troika can plunder to save the bank at your expense. They are not held in a bank that the likes of Fred Goodwin can utterly destroy at insane expense to the tax payer. They are owned on a self verifying, global, digital network.
Oh and if you have the skill and knowledge. Here it is. The bitcoin source code. It's been around for a few years already, why don't you go ahead and see if you can spot the hacker code that's going to drain your account to zero? Nobody else has. Can you say there's anything like the same level of transparency about how your bank does business?
"It's not even backed up by anything real!"
Well I've got news for you. Neither is the £, $ or Euro. Currency is always based entirely on faith. Yes there are pledges on bank notes (that are utterly meaningless). Yes in theory the government and central bank will protect your monetary value, but in practise? Well actually no. Governments and central banks will happily devalue your currency. In Cyprus they'll even basically steal whatever currency you had in the bank to pay off debts. And even better, capital controls can be put in place that prevent you using your currency as you'd like to.
Confidence can be lost in your home currency, as is happening with the Euro. Countries can even indulge in exchange rate wars, deliberately reducing the overseas value of your cash to attempt to boost export demand at home.
No. Bitcoin isn't backed up by anything real except strong cryptography and trust in a system that can't be easily fiddled with and distorted by governments and banks. Trust is everything for currency. Bitcoin is strong on trust and validity. Far more so than traditional fiat currency.
This is one of the prime examples of accusing bitcoin of something only to find it's your traditional currency that has either the exact same problem or worse.
---
Once people begin to realise that bitcoin is a viable and incredibly secure system for storing and transferring wealth without bank intervention, it's only likely to take off even more than it has already.
With one provision. The established powers that be utterly loathe bitcoin. They can't control it. They can't rob it. They can't sieze your assets. That makes it attractive to users, and attractive to highly funded government black hat hackers. I strongly suspect Instawallet was taken out by government intervention today. I can't predict how nasty and low the attacks on it will stoop, or if they will dent confidence in bitcoin itself. I can predict though. That the basic security of bitcoin will carry on regardless.
And ... Like I said before "DO NOT PUT YOUR BITCOINS IN AN ONLINE WALLET". They are only as safe there as the website they are stored on. Store and backup your own wallet locally.
I'll take questions at @fluffkin on twitter if people want to know more, but please keep it to DM's. I don't really want my timeline flooded with it. Also, I'm no expert. I'm fairly well informed, and honest about my limits of knowledge. Apparently that puts me light years ahead of main stream media and paranoid market traders.
PS. You ain't seen nothing yet. Underlying the basic framework that is bitcoin you can see today are built in systems for safe escrow, where the third party never gets to hold your money. Micro-transaction payment channels for things such as payment for tiny data usage on roaming wifi network usage *as you drive by* that don't load the network unnecessarily. Bitcoin isn't just a wallet with highly secure systems in place (better than any bank in the UK currently offers). It's a system designed from the base to be a very good currency medium.
1 Apr 2013
The One About BitCoin
Twitter tells me a lot of people are interested in bitcoin. So I'll write this ...
First off. This is written April 2013. It'll be out of date fairly rapidly.
Oh wait, yes and this is aimed entirely at UK folk wondering about all this bitcoin fever.
Onwards!
There's a billion articles out there on "What is bitcoin?"
Briefly? Some mystical Japanese guy had this bizarre idea of how to make a digital currency that might have longevity a few years back. I think he's Japanese. Mythology and all that. Anyway.
It's proving to be secure over quite some time now. Bitcoin is money, pure and simple. If there was ever a target for hackers, bitcoin is it. Many have tried and failed. Mining pools seem to regularly DDOS each other in the pursuit of profit, but when it comes down to "Is my money safe in this thing?" .. Cryptographically speaking ... Yes. It looks like it is. In fact the entire thing is based around ensuring it's own integrity. Go read up on it. It's strange but fascinating!
The problem with bitcoin for UK residents is simply getting bitcoins. You can't use credit to buy bitcoin. This should tell you something. The bitcoin transfer is final and not subject to any kind of fraud or deception. Compared to a UK credit card? Pfft. You could pretend you'd pay for anything with that, and it might not be yours. So nobody will sell you bitcoin (BTC) on credit.
You can purchase via bank transfer on many sites, and if you stick to the legit, well used providers, that's certainly an option, but it's a barrier to casual interest. You can't just "stick £10 in" to BTC, because you'll probably get charged £3 for the pleasure in fees if you do it via bank transfer. That's not a problem at all if you're buying £500 worth, but it's not helpful for getting people to play with BTC as an alternative currency.
For the moment, you're left with LocalBitCoins.com as the most cost effective way of getting a few £ in to bitcoin. But ... Why would you?
First problem. Not a lot of services / products can be bought in the UK with BTC. It's slowly expanding as more people get used to the idea, but it's still new ground for retailers over here. In the USA it makes more sense because even though it's still not many, there is simply more stuff you can buy with it over there.
That might put you off. Try not to let it. It's a case of if more people had BTC and wanted to buy things in BTC, then more people would add it to the website as a payment option. It would barely cost them anything to add it as an option, in many cases the processing fees would be less than a credit card company, but it is a cost in hassle to change a website.
The other main reasons for wanting BTC are: CYPRUS aka. Where can I put my money where some idiot won't take a chunk that's safer than a mattress? Or ... Speculation. At the time of writing, 1 BTC is worth just over £65. It's increasing fast recently. You could just stick some money in to BTC and then sell it again back to £ when the rate rises ... assuming it does keep rising. Hey! Congrats! You just became a Forex trader!
What kind or rise? Well ... This kind ...
There's NO guarantee it will continue to do that!!! It might level out right now for all anyone knows, and it may even crash again like it has previously. That's the fun of it all. It's up to you to go and do your own digging and see what you think is plausible, and how much is risk.
But there's where we are. There's .. oh wait! Forgot the important bit!
My own personal recommendation for a secure bitcoin setup!
First off you need this beasty. That's the basic, bog standard, original bitcoin wallet. One thing it does is downloads the entire bitcoin chain, and this can take a couple of days depending on how you use your computer. (It's all part of the security). Basically you're downloading the entire condensed history of every single transaction that ever happened in bitcoin. Your copy HAS to match every other copy of that transaction history, and if you buy or sell and BTC? That will be recorded in the history, on every single computer that has bitcoin installed. Can we begin to see how this is a little bit secure yet?
The next thing I'd advise you to do is install this beasty! And run it. It gives you yet another wallet on top of the basic bitcoin wallet you already had. Why bother? Because Armory allows you to produce a paper backup record of your wallet that you can restore, with all your BTC still in it, even if your computer mangles every bit of data on the hardrive. Now THAT is one secure mattress! It's also where you start to think ... hang on ... this system is actually more secure for storing my money than my bank is ... and it costs virtually zero.
All you have to do then is remember once in a while to transfer any BTC in your basic bitcoin wallet to your Armory wallet where it's safe.
Why you'd go through all this to play with BTC? Is up to you. I'm just setting out the cheapest ways to get money in to BTC (you'll have no trouble at all cashing it out back to £, Euro or $ at the moment!), and the most secure way to keep it safe.
Andddddd I think I'm done. Mining for BTC is another issue entirely.
First off. This is written April 2013. It'll be out of date fairly rapidly.
Oh wait, yes and this is aimed entirely at UK folk wondering about all this bitcoin fever.
Onwards!
There's a billion articles out there on "What is bitcoin?"
Briefly? Some mystical Japanese guy had this bizarre idea of how to make a digital currency that might have longevity a few years back. I think he's Japanese. Mythology and all that. Anyway.
It's proving to be secure over quite some time now. Bitcoin is money, pure and simple. If there was ever a target for hackers, bitcoin is it. Many have tried and failed. Mining pools seem to regularly DDOS each other in the pursuit of profit, but when it comes down to "Is my money safe in this thing?" .. Cryptographically speaking ... Yes. It looks like it is. In fact the entire thing is based around ensuring it's own integrity. Go read up on it. It's strange but fascinating!
The problem with bitcoin for UK residents is simply getting bitcoins. You can't use credit to buy bitcoin. This should tell you something. The bitcoin transfer is final and not subject to any kind of fraud or deception. Compared to a UK credit card? Pfft. You could pretend you'd pay for anything with that, and it might not be yours. So nobody will sell you bitcoin (BTC) on credit.
You can purchase via bank transfer on many sites, and if you stick to the legit, well used providers, that's certainly an option, but it's a barrier to casual interest. You can't just "stick £10 in" to BTC, because you'll probably get charged £3 for the pleasure in fees if you do it via bank transfer. That's not a problem at all if you're buying £500 worth, but it's not helpful for getting people to play with BTC as an alternative currency.
For the moment, you're left with LocalBitCoins.com as the most cost effective way of getting a few £ in to bitcoin. But ... Why would you?
First problem. Not a lot of services / products can be bought in the UK with BTC. It's slowly expanding as more people get used to the idea, but it's still new ground for retailers over here. In the USA it makes more sense because even though it's still not many, there is simply more stuff you can buy with it over there.
That might put you off. Try not to let it. It's a case of if more people had BTC and wanted to buy things in BTC, then more people would add it to the website as a payment option. It would barely cost them anything to add it as an option, in many cases the processing fees would be less than a credit card company, but it is a cost in hassle to change a website.
The other main reasons for wanting BTC are: CYPRUS aka. Where can I put my money where some idiot won't take a chunk that's safer than a mattress? Or ... Speculation. At the time of writing, 1 BTC is worth just over £65. It's increasing fast recently. You could just stick some money in to BTC and then sell it again back to £ when the rate rises ... assuming it does keep rising. Hey! Congrats! You just became a Forex trader!
What kind or rise? Well ... This kind ...
There's NO guarantee it will continue to do that!!! It might level out right now for all anyone knows, and it may even crash again like it has previously. That's the fun of it all. It's up to you to go and do your own digging and see what you think is plausible, and how much is risk.
But there's where we are. There's .. oh wait! Forgot the important bit!
My own personal recommendation for a secure bitcoin setup!
First off you need this beasty. That's the basic, bog standard, original bitcoin wallet. One thing it does is downloads the entire bitcoin chain, and this can take a couple of days depending on how you use your computer. (It's all part of the security). Basically you're downloading the entire condensed history of every single transaction that ever happened in bitcoin. Your copy HAS to match every other copy of that transaction history, and if you buy or sell and BTC? That will be recorded in the history, on every single computer that has bitcoin installed. Can we begin to see how this is a little bit secure yet?
The next thing I'd advise you to do is install this beasty! And run it. It gives you yet another wallet on top of the basic bitcoin wallet you already had. Why bother? Because Armory allows you to produce a paper backup record of your wallet that you can restore, with all your BTC still in it, even if your computer mangles every bit of data on the hardrive. Now THAT is one secure mattress! It's also where you start to think ... hang on ... this system is actually more secure for storing my money than my bank is ... and it costs virtually zero.
All you have to do then is remember once in a while to transfer any BTC in your basic bitcoin wallet to your Armory wallet where it's safe.
Why you'd go through all this to play with BTC? Is up to you. I'm just setting out the cheapest ways to get money in to BTC (you'll have no trouble at all cashing it out back to £, Euro or $ at the moment!), and the most secure way to keep it safe.
Andddddd I think I'm done. Mining for BTC is another issue entirely.
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