First of all, I think bitcoins are basically a kind of stuff and not a kind of dollars. My brother commented that the market reminds him of the market for certain rare items in certain MMOs. And that’s basically what this is, to my thinking. Stuff that exists online in limited supply, that people want. A more environmentally friendly way of satisfying our consumer impulses than cars and houses. (But also more fungible and so forth, and I think possible to convert into a kind of dollars in the sense of something optimized for price stability.)
However, there is a hole in the model that this particular kind of stuff also depends on the standard set of sanctioned jack-booted thugs who protect it and promise to give it back and so forth. Bitcoins really only exist as information codes (private keys, placed in files known as wallets). You can arrange it so that the only thing that gives someone the ability to transmit your bitcoins is knowledge of a passphrase (or rather, which passphrase out of millions possible was the one you used). Or if you choose, you can move the only copy of the numbers needed to use your bitcoins to a piece of paper, USB drive, etc.
This also isn’t the same thing as logging into a website where you basically have to take their word for it that they are storing only a salted hash of your password, where they could potentially shut you down or transfer out your funds due to a power outage or government intervention, etc. Rather, it’s something where you yourself do the encryption all client-side and publish your transactions when you want to. The choice to republish and share that transaction to the network is made independently by a bunch of different nodes, who are programmed to block you if you try anything mathematically fishy. You only have to publish anything when you sign a transaction, which itself only happens when you need to prove that money someone else sent to your public address (which otherwise would be just a random number) does in fact belong to you, so you can pass it along to another public address.
First of all, I think bitcoins are basically a kind of stuff and not a kind of dollars. My brother commented that the market reminds him of the market for certain rare items in certain MMOs. And that’s basically what this is, to my thinking. Stuff that exists online in limited supply, that people want. A more environmentally friendly way of satisfying our consumer impulses than cars and houses. (But also more fungible and so forth, and I think possible to convert into a kind of dollars in the sense of something optimized for price stability.)
However, there is a hole in the model that this particular kind of stuff also depends on the standard set of sanctioned jack-booted thugs who protect it and promise to give it back and so forth. Bitcoins really only exist as information codes (private keys, placed in files known as wallets). You can arrange it so that the only thing that gives someone the ability to transmit your bitcoins is knowledge of a passphrase (or rather, which passphrase out of millions possible was the one you used). Or if you choose, you can move the only copy of the numbers needed to use your bitcoins to a piece of paper, USB drive, etc.
This also isn’t the same thing as logging into a website where you basically have to take their word for it that they are storing only a salted hash of your password, where they could potentially shut you down or transfer out your funds due to a power outage or government intervention, etc. Rather, it’s something where you yourself do the encryption all client-side and publish your transactions when you want to. The choice to republish and share that transaction to the network is made independently by a bunch of different nodes, who are programmed to block you if you try anything mathematically fishy. You only have to publish anything when you sign a transaction, which itself only happens when you need to prove that money someone else sent to your public address (which otherwise would be just a random number) does in fact belong to you, so you can pass it along to another public address.