(Replying to PARENT post)

A while ago I wrote that perhaps the greatest contribution the Bitcoin experiment will make to humankind is to teach you and me and our neighbors more about the realities of economics. And now I will add that the Bitcoin experiment will also contribute to greater understanding of attack surfaces and online crime. Many of the ideas about how to mine Bitcoins, store Bitcoins, and trade with Bitcoins as a medium of exchange illustrate both the strengths and weaknesses of any other medium of exchange in a world full of human beings. Seeing the discussion of Bitcoins here on Hacker News reminds me of early discussions in the 1990s of online payment systems such as PayPal, and the arguments beforehand that PayPal wouldn't have to invest a lot of time and effort (as it eventually did) building defenses against theft and fraud. If a weakness in a system is attached to a lot of money, the way to bet is to bet that someone will go looking for that weakness, even if you haven't thought of it.
👤tokenadult🕑13y🔼0🗨️0

(Replying to PARENT post)

I'd start from the other direction.

The newness of this stuff is overrated. The bitcoin phenomenon isn't ultimately different from phenomena described by Mackey: http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions...

As we know, each new version of speculative excess has the slogan "it's different this time". And each one is different, in some way. And you can extract various interesting particular lessons from all these newnesses - I'm sure after 2008, someone's written a deep, interesting article on the failure of the Gaussian copula‎ but really, you didn't need to understand the heat equation and Ito's Formula to know that synthetic bonds were a problem in 2006 (I'd recommend the enlightening discussions of Doug Noland of Prudent.com from that time).

But it is important to not allow ourselves to let the details of these situations distract us from the psychological dynamics which ultimately has carried all these phenomena. This psychological dynamic allows a slightly stretching of numerous points to add up to the concrete mistakes one point can point out later as "what went wrong". And these "what went wrong then" arguments are themselves dangerous since they general are coupled with "so this time, the different thing we are doing is..." and so forth.

Essentially, understanding magician's tricks are great. But never let yourself be fooled by the belief that you know all the tricks.

And I writing with the assumption that bitcoins aren't a "medium of exchange" in any meaningful way - for example, I could directly my car for something else valuablle far more easily than I could directly trade bitcoins and cars aren't a very meaningful medium of exchange today. This is the position that I believe most serious economists take, Nobel Prize winner Paul Krugman being on record here (not that I think this is really a left-right question).

👤joe_the_user🕑13y🔼0🗨️0

(Replying to PARENT post)

I find http://www.federalreserve.gov/releases/h41/current/h41.htm a useful way to understand the realities of US economy
👤known🕑13y🔼0🗨️0

(Replying to PARENT post)

I agree, but would expand it somewhat as it's not just Bitcoin but all of the 'virtual' videogame currencies as well (Eve and Second Life come to mind).

I wonder how many people learned a lesson from Ginko Financial collapsing [1] (a little hand wavy but around $750,000 USD pyramid scheme) and weren't conned in real life.

1 - http://www.wired.com/gaming/virtualworlds/news/2007/08/virtu...

👤michaelbuckbee🕑13y🔼0🗨️0