[LINK] Bitcoin .. zero merchant fees?

[Rick Welykochy]

stephen at melbpc.org.au wrote:

> Bitcoin Pursues the Mainstream
>
> By NICK WINGFIELD Published: October 30, 2013
> <http://www.nytimes.com/2013/10/31/technology/bitcoin-pursues-the-
> mainstream.html>

I got up to speed quite quickly after reading this multi-part
plain English article written by a bitcoin aficionado:

http://codinginmysleep.com/bitcoin-mining-in-plain-english/


> One potential obstacle to mainstream acceptance of bitcoin is the sometimes
> wild fluctuations in its value, which makes it alluring to currency
> speculators but could scare off ordinary consumers. One bitcoin was worth
> just over $200 Wednesday afternoon. Someone who bought a bitcoin in early
> April paid as much as $266 for it.

An early adopter purchased 25 bitcoins out of curiosity and forgot about them.
He recently discovered that his forgotten purchase is now worth $100,000's.


> Since bitcoin emerged in 2009, many of those who flocked to the currency
> celebrated it for being beyond the clutches of governments and other
> institutions. Until recently, the currency lubricated transactions on Silk
> Road, one of the Web’s biggest bazaars for drugs, forged documents and
> other contraband. The site was shut down in early October by federal
> authorities.

Yes yes yes. There are continual fingers pointed at the uses of
bitcoin for illicit transactions. I think they doth protest too
profoundly. Which currencies are being laundered worldwide by
the existing banks for terrorism, drug running and corrupt
financiers? It is disinegnuous to make much ado about a non-fiat
currency being used for illegal activities when fait currencies
are being used for the same purposes by a factor of oh, one trillion
to one in favour of fiat - a number I pulled out of my head, but
you get the idea.



> New bitcoin is created on computers connected through a peer-to-peer
> network. An algorithm controls the production of new bitcoin, which is
> meant to mitigate the risk of inflation.

This is where bitcoin gets interesting. You can mine bitcoin using your
own hardware and software by solving a cryptographically difficult
algorithm, i.e. calculate a nested hash of some long number. The level of
difficulty in completing the algorithm is self-adjusting across the bitcoin
network based on work already done and the number of bitcoin in circulation.

The author of the above article calculates an ROI on bitcoin mining
of upwards of 500% if you can be bothered buying suitable fast hardware
and running the mining algorithm for a long time. The current leader of
the pack in hardware (ASIC 50G-hash/sec) might set you back a few hundred
dollars. The electricity used by the ASIC is your highest expense.



> In March, the Financial Crimes Enforcement Network, part of the Treasury
> Department, issued guidelines telling businesses involved in the exchange
> of digital currencies that they needed to register as money services
> businesses and comply with a variety of rules to prevent money laundering.
> New York’s Department of Financial services began an inquiry in August to
> determine guidelines for digital currency businesses, issuing nearly two
> dozen subpoenas to start-ups, investors and others involved in the emerging
> field.

Unfortunately, the USA has not been very effective in preventing
existing forms of money laundering. viz "HSBC found guilty of money
laundering" on the web. The bank was fined $2BILLION, about one week's
profits and no-one went to jail.

Aside: if were found guilty in the USA of financial dealing withs rogue
states (Iran, N Korea, etc), as well as providing financial services
for terrorists and laundering Mexican drug cartel monies (all of which the
HSBC bank did do), do you think I would ever see the light of day again?
Given the provisions of the US PATRIOT Act, the answer is obvious.

The bottom line is the Fed in the USA will not tolerate a non-fiat
currency for long. It will likely be made illegal.


cheers
rick


-- 
------------------------------------
Rick Welykochy || Vitendo Consulting

All truth passes through three stages. First, it is ridiculed. Second,
it is violently opposed. Third, it is accepted as being self-evident.
      -- Arthur Schopenhauer