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Wednesday, May 25, 2011

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Nexus Burbclave

I've been intrigued by what I've seen on bitcoin, but I'm not entirely convinced that it will work as Open Sim currency for one important reason... scarcity. The algorithm behind the bit coin ensures that there will never be more than 21 million bit coins in circulation. As the demand for the currency rises relative to the supply the value of that currency versus currencies such as the US Dollar will rise. On the surface this seems awesome, particularly to those that got in early. But here is the rub...

Suppose that for some reason the US Dollar became incredibly rare, and incredibly valuable (yes, I realize this is a stretch, but please bear with me). In fact the dollar has become so rare and sought after that 1 USD will buy you a house. That sounds pretty sweet on the surface, but if 1USD will buy you a house, what do you use to pay for that latte from the cafe, and what did you have to do to get that dollar in the first place?

There is a sweet spot for currency valuation. Too high, and the asset becomes less liquid. Too low and you run into the wheel barrows of currency for bread problem. I think a 21 million unit circulation cap is going to make it hard to maintain that sweet spot, and the currency is going to become illiquid over time.

Pumpkin

The cap has already been talked about in the BC forums quite a bit. The currency has many decimal places and if Bitcoins become too valuable to trade cleanly, the decimal point is moved and a new name is chosen such as Bitcents.

The only drawback I can see to this incredible idea is that transactions can take an hour or more if you don't add a transaction fee.

Nexus Burbclave

The decimal point solution seems like an interesting potential fix, though I'm still a bit skeptical that it would completely solve all of the scarcity and valuation issues (hoarding, for instance).

Mind you, I'm just an armchair economist. It would be interesting to hear Professor Bloomfield's take on Bitcoin.

Arcadia Codesmith

In a world of transnational mass murderers, drug lords, human traffickers, pedophiles, IP thiefs, tax evaders, and other forms of predators and amoral opportunists, I'm not convinced that an anonymous, untracable means of exchange is something we ought to be promoting.

I value my pseudonymity, but I expect and wish my real self to be held accountable if my actions harm other people.

I'm afraid Bitcoin's potential to allow bad actors to escape accountability outweighs its utility.

A legitimate online currency should be fully compliant with the law in all jurisdictions in which it is traded, and easily trackable by law enforcement.

Maria Korolov

There is already a multi-grid, OpenSim currency -- the OMC currency from Virwox. It's currently accepted on 28 OpenSim grids:

https://www.virwox.com/omc-open-metaverse-currency.php

OpenSim grid operators looking to avoid the hassle of creating and managing their own in-grid currency also have the option of using PayPal or PayPal Micropayments.

A bitcoin module for OpenSim would expand payment options even further, and give folks more choices.

(Virwox currently allows people to exchange bitcoins for L$ and, indirectly, for US$ and OMC.)

From my business perspective, the one downside to bitcoins is the lack of auditability. Other electronic payment mechanisms have auditability built it, making it easier for businesses to use them.

Accepting bitcoin would be a lot like accepting cash -- businesses would have to create their own audit systems so that if the IRS comes calling, you've got all the records and oversight you need to survive an audit.

If bitcoin gets popular, there's also the chance that the IRS (and other taxation authorities) will start flagging those businesses for more frequent audits (just as they now flag cash-based businesses).

-- Maria

Hans Wurst

The only mission of the european central bank is price stability. neither inflation nor deflation are something you want to see. in limiting the supply of bitcoins, this currency is open for inflation or deflation, depending on the demand. There is space for plenty of virtual currencies, but that means tomorrow, somebody may offer a better implementation of the concept. People would start using that currency and the Bitcoin will loose all it´s value. The idea of a virtual p2p currency is sexy. I like it very much, but it somehow needs to incorporate price stability.

Ener Hax

my preference is PayPal - micro transactions for many things and if you set up a free PayPal business account, in can be in the name of your avatar and payments will be from that and not your real name

paying real-time and receiving your item instantly in-world has already been scripted for at least a year

Ananda

I have been trying to understand how a hard-coded, "randomized" distribution of the currency to early adopters could possibly result in a viable currency - a real currency needs to expand and tighten up in tandem with the growth of the economy it serves, to stay useful.

I have this feeling this will end up with someone negotiating with terrorists for gold deposits hidden in the Philippine jungles, or with the name Nakamoto being right up there with Ponzi in the annals of spectacular bubble-scams.

tubro

actually, Bitcoins are already being actively traded for Lindens here: https://www.virwox.com/

Cold Spitteler

Bitcoin as already very alive in the Second Life community, and it would be great to see it emerge as the default payment system in the open sim community. Currently there are Bitlex.org and Virwox.com to trade L$/BTC. My partners and myself have also opened http://mining4lindens.com for Second Life residents to make some L$ off Bitcoin mining without needing to get to entrenched in the details. We simply pay our miners L$ at current market rates for L$/BTC, and have paid out over L$500,000 to date.

Amin

I believe that bitcoin's mathematically determined supply gives it more reliability than national currencies.

The price stability of traditional currencies can only be bought through an expensive central banking system that continually taxes the economy to build up foreign exchange reserves that it can then use to push the value of its own currency up or down to keep the price fixed in terms of another foreign currency. Such a fixed exchange rate regime leads to an entire industry of speculation forming around the central banks, that buy/sell foreign currencies to it. It might be good for keeping the volatility of the currency low, but it's bad for the economy as a whole, and therefore bad for the value of the currency in the long run.

Khannea Suntzu

Arcadia Codesmith - if I use Bitcoin I do not empower criminals. These criminals use Bitcoin. Criminals also use roads. Criminals will do fine with or without Bitcoin. Bitcoin represents opportunities far beyond the detractions posed by crinminals. We should not abandon the opportunities og the high seas because there happen to be pirates there.

Ener Hax - Paypal in Europe requires linkage to a bank. I cannot be anonymous using Paypal, period. I can not own a paypal account without it being linked to a bank. Before long any unfounded paypal account in Europe will be deleted.

A while ago, In a time when my passport didn't read "khannea" yet (pretty soon it will be formal, YES my RL passport will read Khannea Suntzu", it's an artistic statement) I registered khannea.suntzu@gmail with paypal. At the time it didn't require identification, and I could freely take cash on my paypal and arbitrarily deposit on any Dutch bank account. Then paypal changed its rules and I got once chance to authenticate myself. I didn't and after some wrangling they banned the email address. So now I change my khannea.suntzu@ paypal to a new domain every month, because I can't have any guarantees paypal won't delete it.

Paypal has in essence fully become complicit to european banking oversight. This also means that anonymous avatar accounts using paypal are either extremely unreliable or simply not really anonymous.

The idea of BitCoin was described in detail in the book SnowCrash. It was also described that microtransaction systems triggered the USSR style collapse of nearly all state systems that depended on taxation systems. Read that book closely. It's quite prophetic.

In 2006 SL was briefly exploited by gambling organizations and associated groups from IRL to launder money. This did trigger US oversight over LL, and the US government could have in theory shut down SL at that point. The EU also did take notice and now LL cooperates proactively with regional tax authorities. In essence you can say LL is "law abiding". You may also say it is a 'state repression collaborator".

I don't know which terminology one I prefer.

I only know LL should do what keeps their garden virtual world safe. Its big and it is expanding steadily but it is still fragile. In a few years it won't be any more. In a few years SL will be a massively used medium of communication.

Once we are there LL can afford itself to dictate terms a bit more. And if it chooses to link BitCoin to its transaction regimen, it may have quite delicious implications.

Before long states will try and close down BitCoin. That much is certain. What is interesting is HOW states will try and in precisely what manner the failures to do so will shape the next decade.

I suppose it will be most interesting if states will try to use force.

Lap Liberty

I'm reading all about economy and the use of token cash. I had to stop and think about what this money is spent on or traded for. I came up with CONTENT. Having said that, I think that as long as LL is king of content, that the L$ will stay walled with the game until there is some sort of permission in place for the content made in SL to be exported to Open Sim.

But then, I don't work at Goldman Sachs.

SarahAndrea Royce

> But then, I don't work at Goldman Sachs.

Which is exactly why you made a good point. The analysts often don't take that point of view. So they said the danger for the Linden is inflation, when in fact it is deflation. Thats because the kind of "goods" you trade. They don't expire. So theres a point where the market is quite saturated, which already happend to Second Life - and probably will happen to any other succesfull grid or the hypergrid.

Amin

OpenSim and Bitcoin are made for each other.

Edmund Edgar

Transaction numbers have grown at least 10 times since September, 2011, so it's not plausible that there would have been no user growth since then. There's been loads.

The number on the wiki hasn't been updated simply because the method used there no longer works. Regular users no longer run a full node, because it involves downloading the entire transaction history, and in any case much lighter clients are now available.

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