Two words: deniable encryption.
Very interesting Wikipedia article. I’m not sure that applies to the concern about property taxes, but in any case that’s probably a relatively minor worry in comparison to completely secret rendering of all remote services - that would be HUGE.
I suppose that you could hide the digital money on an hidden partition of a hard drive. Then it would be impossible to audit how much money you have in your possession–even if the hard drive was confiscated.
Of course, you don’t want to lose your money if the hard drive is confiscated. That is why you should have it backed up to the cloud. You could store your money on your computer, and also store copies on your friends’ computers. Your friends would not be able to steal your money because it would be encrypted.
No, yeah, your money would be just a unique identifier somewhere, it wouldn’t have to be “stored” with you, just stored somewhere (or all over the place) in a way that only allows you to find/access and use it. There’s also perfect forward secrecy…
It’s now possible to integrate Bitcoin with your own applications, like web shops or other services. The application programming interface is only included in the SVN sources atm, so you’ll have to compile it yourself, ask someone to do it for you or wait for the next release which will be out soon.
Here’s a list of services that currently accept Bitcoin. Join us and make the FED history! 
It really helps if you can get web service providers or merchants accept BTC, as it will add to the value and stability of the currency. Starting to use a new currency gets exponentially easier as the number of people who already accept it increases.
BitCoin is a terrible currency really.
It is infatiory at least in the beginning and it has no alterantive use or value as anything else then money.
The reason it works and has actually been able to create value from “nothing” only proves how utterly rotten our current financial systems and government meddling in people lives is.
Given how the world looks today BitCoin is not actually creating value from nothing. Anonymous transactions provided through a decentralized system where no one can control or monitor anything has tremendous value today. Even with gold based digital currency you have the problem of one centralized authority and the existance of a physical commodity which even if the money authority is trusted is always voulnerable to state control and seizure.
But in a free world I don’t think there would be any demand for a service like BitCoin and it wouldn’t be able to obtain a value.
One concern with the system is its sheer complexity… and complexity is always the enemy of security. The other concern is that the author does not address the regression theorem… from whence do these coins obtain their value? I do not think an unbacked token/paper currency has ever existed without State assistance. So, for bitcoins to ever be used, they will require a reserve backing. This raises a rat’s nest of problems:
- Where will reserves be stored and secured?
- How will the reserves be audited?
- State-resistance goes right out the window since the answers to the previous two questions can never preclude State invasion (choose any two: auditing, security, existence of a State… you can’t have all three).
- How will bitcoins get their initial value? What if people want different kinds of backing? If a bitcoin is a bitcoin, then there is no way to have a variety of reserve backings, i.e. dollars or Yen or gold or silver, etc.
I’ve thought about this problem in some depth - I even designed my own currency system though it was unfortunately not as distributed as this bitcoin system and started prototyping it. But then I realized the “iron triangle” of State/security/auditing cannot be broken. Any money substitute must have real reserves as backing. But reserves must be audited or the money substitute is infinitely susceptible to inflation (issue of fiduciary media, that is, unbacked money substitutes). But if your reserves are audited, they are ever-vulnerable to State seizure. There is no “digital secession” option when it comes to money.
I think the path most likely to succeed is for someone to buy/open their own money transmission business then use some sort of anonymous digital currency token transfer system internally. while complying with all the know-your-customer (KYC) and other PATRIOT Act/OECD regs externally. By eliminating the needless internal bureaucracy for maintaining the communications networks, as much as a 50% reduction in operating costs may be able to be realized and this could form the competitive advantage for expanding the business model. If the model was designed from the outset to be open-source and extensible - somewhat like this bitcoin system - you could open the network to anonymous access once you’ve expanded enough to afford the lawyers and diversification of political risk by co-locating in many nations that would be necessary to survive the all-out war that the OECD financial establishment would launch against you once they realized what you were up to.
I’m highly skeptical of any other route.
Clayton -
P.S. I do know C++ but I wrote my prototype in Perl… C++ == yuck; 
P.S. I do know C++ but I wrote my prototype in Perl… C++ == yuck;
The proposition that C++ is yuck may be true. However, C++ as compared to Perl, C++ is superior. We need to rehabilitate C++ vis-a-vis Perl. What we need is a, Perl: The God that Failed book.
@gabriel: Oh, man, you’re begging for a flame-war…
Of course, C++ and Perl are not even in the same solution-space… but I absolutely love Perl. Unfortunately, Perl has lost its roots with Perl6, which I think is going to be a fork, I don’t think Perl5.x is ever going to be truly end-of-life’d, the code base is a large part of what makes Perl so powerful. Ruby and Python are Perl’s closest relatives but they both lack the “down-and-dirty” quality of Perl5 that I fell in love with.
Clayton -
@gabriel: Oh, man, you’re begging for a flame-war…
Of course, C++ and Perl are not even in the same solution-space… but I absolutely love Perl. Unfortunately, Perl has lost its roots with Perl6, which I think is going to be a fork, I don’t think Perl5.x is ever going to be truly end-of-life’d, the code base is a large part of what makes Perl so powerful. Ruby and Python are Perl’s closest relatives but they both lack the “down-and-dirty” quality of Perl5 that I fell in love with.
Clayton -
No worries, I’m just being inflammatory. I write C/C++ (C#, and some assembly) for a living, so I have a certain affection for them :). Now if there’s any “God that Failed” book that should be written about a programming language, it’s Ruby. Not a fan.
@gabriel: Agreed… but Ruby is so damn beautiful! It’s just too beautiful to be a really useful language, IMO. There are other beautiful languages out there (e.g. Haskell) but it is my view that the most successful languages have been those that have not lashed themselves to some abstract paradigm (except, perhaps, Lisp). C is the single most important and universal language because of the portability of C libraries and the wide array of hardware on which C compilers are available. It is syntactically straight-forward* and very minimalist (it’s generally possible to predict what the asm output of a particular C piece of C code will be… with optimizations disabled, that is). C++ is second-place but I don’t like the “bureaucratic” feel of C++. I like how easy it is to logically organize like things with like via the OOP paradigm - and the efficiency of C++ among OOP languages is insuperable. But real-world C++ code is often way, way, way over-architected. I don’t think C++ is itself to blame for this, I think it is the CS departments who keep pushing OOP as if OOP will solve your every problem and magically make all your code the bestest ever because it’s OOP!
Clayton -
*Yes, it can be obfuscated but I mean this from the point-of-view of remembering the syntax when coding… I have found C to be the easiest language to remember the syntax, I never have trouble when writing a switch statement, but ask me to write a templated class… and I’ll be reaching for my C++ reference books.
I take it you’re not a fan of the boost libraries, then? I totally agree with you concerning the ease of over-engineering that often occurs in C++ programs. It reminds me of a quote, I forget who said it: “With C you can easily shoot yourself in the foot. With C++ you can reuse the bullet.” I think the origin of the over-engineering problem is the lack of a fully-featured standard library. In many other OOP languages (java [shudder], C#), the programmer can glean the common and suggested design patterns and methodologies from the easily understood standard libraries. The C++ standard library is leaner (a strength), but very difficult to follow, due largely to its templated design. It’s almost that C++ is two languages: C with classes, and an extremly powerful but arcane template metaprogramming language.
I’m also a fan of Objective-C–I find it very sleek and elegant, but have not used it nearly as much as its brothers in the C family.
@gabriel: I’m not familiar with boost… I looked at their website and it appears to be a fairly nice set of libraries that give you most of the “nice-to-have” things that you get from modern scripting languages (Perl/Python/Ruby/etc.), such as regexes.
Clayton -
I think the way to look at it is that Bitcoins will be their own backing. Gold does not need a “reserve” to back it up because it backs itself up through its own natural scarcity, durability, and desirability by the market. Bitcoins are likewise engineered to be naturally scarce through mathematics, and they are their own reserve. Barring a digital equivalent to gold alchemy, their value comes from their usefulness in the market and their demand by the market.
Which both are currently zero or nearly zero. Never in the history of the world has there been a fiat money created from scratch. Even governments must initially back their paper money with accepted money in order to get people to use it. Only once the old money has been driven from the marketplace can the government engage in fiat inflation. Cf Mises’s regression theorem.
Clayton -
There definitely is demand and the currency does have considerable value. Bitcoins are currently worth more than half a cent each and their value is steadily increasing. There are plenty of people eagerly waiting to both buy and sell bitcoins at https://bitcoinmarket.com/ . You can buy and sell them with US dollars or with Pecunix digital gold currency.
Damn, quote feature is broken, too.
I agree, there’s a catch 22 in the beginning. However, Bitcoin is not really like a fiat currency; it is entirely voluntary, and no central agency can decide to double the money supply at whim. The model is also designed to encourage use by rewarding early adopters. Usefulness in the market is increasing. You can use bitcoins to donate to the Canadian Hayek Institute, pay for an online MMO, or pay for Link2VOIP services. Thereby, demand is slowly but surely increasing.
Also, there are several currency exchanges currently operating which are serving as a form of “backing” by providing liquidity in and out of Bitcoins. You are able to exchange your bitcoins into USD, Pecunix, Liberty Dollars, or whatever else the exchanges decide to accept. This is operating independently of the currency itself and is part of the growing ecosystem.
It’s a fad.
Clayton -
Clayton, ever heard of d2jsp? The third biggest forum on the internetz, and home of the “forum gold” virtual game currency, which is fiat money from scratch, and extremely popular at that.
I had never heard of it. I looked at the site and your characterization is simply wrong. The “forum gold” enables the exchange of other already valued items, that is, game pieces from popular games like Diablo or WoW. The fg currency is no counter-example to Mises’s regression theorem. If anything, it only goes to reaffirm it.
Clayton -