Bitcoin and positive vs. normative economics - <AUTHOR> http://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil/ <comment><USER3> I'm most bullish on bitcoin when I read articles such as this one, and most skeptical when I read the thoughts of the bitcoin believers. It's truly the most interesting technological development in years, if only because it reveals how little anyone really understands money or economics.

Here's another interesting (though imperfect) way of thinking about bitcoin: it's a decentralized corporation, where bitcoins are ownership shares and the business is money transfer, like a decentralized Western Union. And for further thought, could other types of businesses also be structured in this way?

<comment><USER4> It is amazing how one word "COIN" added to this word has shaped everyone's thinking. Would we treat it the same if the guys behind it named it "Bitcard" or "Bitpoint?"

That one word is what set apparently most people to speak of it, and treat it as money.

BC is nothing like Money. BC is a card trading game where the players make the cards, the difficulty to make cards increases , and the value of the cards is decided by the market. It's a fun geek game. Awesome.

BC is everything money as we know it today is not. Money followed value creation (something made, something done).

Bitcoin was created, valued at X, AND THEN looking for value to replace.

<comment><USER5> > It is amazing how one word "COIN" added to this word has shaped everyone's > thinking.

Yeah, Bit-distributed-public-ledger doesn't have the same ring, but I feel like there are a million problems that can be solved with this technology that are barely being explored.

Namecoin is one example, a distributed DNS system, but it feels like that's just scratching the surface of problems that require allocating sparse control over many decisionmakers.

<comment><USER6> Why is namecoin even useful?

<comment><USER7> Because you can circumvent the centralized authority of DNS registrars. Look at the Pirate Bay, who keeps having its domain names revoked by central authorities. Namecoin's ledger allows people to agree on who has what domain name without using a standard registrar

<comment><USER6> But why do you need to sell a name like akqbajauwbzjxu7163jebej? Can't people simply claim names the same way they claim bitcoin wallets?

<comment><USER8> The goal of Namecoin is to manage meaningful names.

I guess a service that provided free names like the one you made there might be an interesting addition.

<comment><USER6> In that case I don't get it... do I basically get a random name when I mine a namecoin? And then I try to buy names I actually want from someone who has the name I want? And if no one has the name yet then I have to wait until someone mines it?

<comment><USER8> I don't know the details, but you do still mine coins into a wallet and all that stuff, there are just special types of transactions where you post a bit of data to the blockchain and that data is the domain name you want registered.

</comment></comment></comment></comment></comment></comment></comment></comment></comment><comment><USER9> _> >BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions._

So basically it brings an ability to the middle-class that normally only the top 1% have. We know wealthy people use tax loopholes(and a few of them, laundering) and... why do the states need to monitor financial transactions? Don't tell me because terrorism. I'm sick of that being the reason for everything when we have this kind of nonsense[1] happening.

I translate this to: _" Bitcoin is designed to free non-rich people from the restrictions, fees & surveillance placed upon them by the wealthy elite"_

I don't know if crypo-currency will succeed long-term, but seeing how hardcore scared/doubtful some people are about it makes me think a nerve has been hit. I just hope that if btc fails, it fails naturally/organically/mathematically on its own... not because someone arbitrarily makes it illegal.

1\. [https://news.ycombinator.com/item?id=6954341](https://news.ycombinator.com/item?id=6954341)

<comment><USER10> "why do the states need to monitor financial transactions?"

I hate the "terrorism" BS as much as you, but money laundering and large-scale scamming ( [https://news.ycombinator.com/item?id=6972139](https://news.ycombinator.com/item?id=6972139) ) are actual threats.

<comment><USER11> > but money laundering and large-scale scamming are actual threats.

Yes, banks launder drug money for cartels. Without the state, who would slap their wrists?

<comment><USER10> I guess you're trying to be snarky or clever here, but I don't get your point. Maybe you can walk over to your local BofA branch, slap someone's wrist, and feel good about yourself?

<comment><USER12> HSBC knowingly laundered billions for violent drug cartels, and were fined a mere 5 weeks of revenue. None of the executives involved in this went to jail.

Meanwhile, people's lives are ruined for selling or even possessing small amounts of harmless drugs.

[http://www.bloomberg.com/news/2013-07-02/hsbc-judge- approves...](http://www.bloomberg.com/news/2013-07-02/hsbc-judge- approves-1-9b-drug-money-laundering-accord.html)

</comment></comment></comment></comment></comment><comment><USER13> Krugman is to Bitcoin as Ebert was to video games.

The central failure of Krugman's understanding of cryptocurrencies is in the value of mining. It's not simply throwing energy away into solving useless math problems; it's spending energy to create infrastructure. That infrastructure is the part that _does_ have intrinsic value, that _can_ be used for something else in the same way gold can be made into useful things. Look at Bitmessage or any of the other projects built on top of Bitcoin. These form the floor Krugman can't seem to find.

<comment><USER14> _It 's not simply throwing energy away into solving useless math problems; it's spending energy to create infrastructure._

I don't see how it is not the case that mining Bitcoins is throwing away energy.

If someone had made a crypto currency based on, say, protein folding [1], I could get behind that.

We could just create a crypto currency where we just hand out 100 units to every person. That certainly wouldn't require ASIC farms and such.

[1] Yes, I realize that the whole 'hard to do, easy to verify' bit is not completely obvious in the case of protein folding or SETI signals.

<comment><USER15> This has actually been done. You can now do protein folding and SETI (and a bunch of GMO research) while mining. Gridcoin is working with the full cooperation of the UC Berkeley BOINC project and is compatible with your choice of dozens of research projects: [http://gridcoin.us](http://gridcoin.us)

<comment><USER16> But not for ASICs mining bitcoin, unless they have a BOINC implementation that somehow uses sha256 as its core.

<comment><USER15> Correct.

</comment></comment></comment></comment></comment><comment><USER17> Ignore the flamebait headline. The distinction Krugman makes between positive and normative economics is a useful one.

On the positive side, I think Krugman and DeLong are overestimating the strength of the floor for the value of a dollar. Hyperinflation would make it impossible for the Federal Reserve to buy up enough dollars to stabilize the value of the currency. Sure, you can pay taxes with them, but the government collects taxes to buy things, and if people no longer have faith in the dollar, the government won't be able to buy things with those tax dollars. There's no floor on the value of Bitcoin, but there's no floor on the value of the dollar either.

On the normative side, I don't think one's position on the utility of central banking matters when it comes to Bitcoin. If blockchain currencies are the future, central banking is over, and our society will have to figure out how to make the economy work with endemic deflation. I think central banking is useful, but I don't see a future for it.

<comment><USER18> >Hyperinflation would make it impossible for the Federal Reserve to buy up enough dollars to stabilize the value of the currency

Even if this is true, where is the evidence that we're in imminent danger of hyperinflation? Despite mounting public debt, U.S. inflation has remained incredibly low since the start of the financial crisis four years ago, as has the interest rate that must be paid by the government to issue new debt.

From what I can tell, we have on the one side a dollar that has endured as a value store and medium of exchange for hundreds of years, and which has proven remarkably resilient (valuable) by any objective measure throughout the worst economic implosion since the Great Depression (which the dollar also survived). On the other hand we have Bitcoin which is intriguing in many ways but which has demonstrable volatility even just in the short span of its existence. And which, as a feature, is not backed (in the hard economic sense) by any nation or bank. I mean it's cool and all but I see where Krugman is coming from.

<comment><USER17> We weren't in imminent danger of hyperinflation. I think mass adoption of Bitcoin will _cause_ hyperinflation.

If every merchant you patronize today accepted Bitcoin, would you rather have Bitcoin in your bank account or dollars? I'd rather have Bitcoin. They're easier to transfer, they can't be counterfeited, and their supply can't be manipulated.

If every merchant accepts Bitcoin and every consumer agrees with my logic, hyperinflation of the dollar would occur. Coinbase and its 0% transaction fees will lead to rapid adoption of Bitcoin on the merchant side. I'm less confident about the consumer side, but I see that happening as well.

<comment><USER19> Inflation is a function of money supply and velocity.

If everyone adopted bitcoin, the velocity of the dollar would approach zero. Which means that inflation would go down, not up.

And yes, I would rather have my [savings] account in a hard, non-inflationary currency. On the other hand, I can only earn interest when someone is willing to take a loan in the currency and pay interest on it. And I am not about to take out a loan in a hard currency when perfectly good inflationary currencies are easily at hand. So, you're going to have a hard time finding a bank that pays interest on bitcoins. This is why "bad money drives out good", aka Gresham's law.

<comment><USER20> >I am not about to take out a loan in a hard currency when perfectly good inflationary currencies are easily at hand.

Sadly it is not so easy to make money this way, the forward exchange rates will cancel out any gain from the interest earned in the inflationary currency. Otherwise everyone would do this.

You can make money doing this but really you are just taking a bet on exchange rates, you can easily lose money as well if the fx goes the wrong way during your investment period.

There are very few risk free ways to make more money than investing in US Treasuries.

<comment><USER21> If you plan to spend your investment on rent, food, or fuel then Treasuries are a losing investment for sure. At best they reduce the amount of loss compared to holding cash.

<comment><USER22> 30-year government bonds grow faster than inflation, at least over here. (This is possible because economic growth is a thing)

</comment></comment></comment></comment></comment></comment></comment><comment><USER23> I was not disappointed to find this as the top comment (at the time I viewed the article):

 _1998 - Another "evil" prediction from Mr. Krugman:

\---

The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law"\--which states that the number of potential connections in a network is proportional to the square of the number of participants--becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.

\---

But hey, the future of the dollar might be the same as that of the fax machine ???_

<comment><USER24> Maybe as an economist, his predictions about economics will be more accurate than his predictions about technology?

<comment><USER25> The two cannot really be unentwined, especially not now.

</comment></comment></comment><comment><USER26> I'm a liberal, a Keynesian, but my interest in BitCoin is completely non- ideological. And I resent being painted with an ideological brush by Krugman because I can see the elegance in BitCoin, and I can see the possibility that one day, in spite of my ideological beliefs that unregulated markets are susceptible to bubbles and destructive volatility, BitCoin or something like it might still be able to function as a stable, useful world currency.

Ideology is never an accurate or complete description of the world. It is false awareness. What might be true under paradigm A might no longer be true under paradigm B, but at no point will an ideologue change his world-view to fit paradigm B. He will try to cram paradigm B into his ideology in order to preserve his ideology, rather than adjust his ideology to describe paradigm B.

For instance a fiat currency heavily regulated by state monetary policy might have been the best idea in the 20th century, during which for the most part there was no Internet. But in the 21st century, where the Internet enables markets that can function more efficiently, a virtual currency with a self- regulating monetary policy might be a better replacement. The jury is still out on that. BitCoin is an experiment, and that's the best thing about the Internet - it is a laboratory for experiments, where we can try new and different monetary policies really quickly, whereas in the wildly inefficient 20th century we were locked into one monetary policy at a time. We're just figuring out what works the best, but Krugman calling BitCoin "evil" suggests to me that he is afraid of what we might find out.

<comment><USER27> You seem pretty accustomed to economics. Can you explain how exactly or why would anyone buy any items (that's what currencies are for after all) using a deflationary currency?

Then again, it's not a design a flaw - as I once thought - it's a clear choice: Why would anyone would want to own a non-deflationary asset? :-)

So actually, in my view, BTC as a currency is already failed. No one will be eager to buy online (perform an actual exchange) when he can buy the same items using USD, because BTC will _possibly_ have a higher value tomorrow. While the USD almost certainly will not.

Best Regards,

ps. FIAT currency is regulated by the FED and you know who runs the FED. BTC market is run by those who have huge amounts of BTC and you don't have a clue about who they are. Not sure which one is more _secure_ for a society.

<comment><USER28> _Can you explain how exactly or why would anyone buy any items (that 's what currencies are for after all) using a deflationary currency?_

Why would anyone ever cash out of any position with a positive rate of return?

By this logic everyone should stop consuming and put all their money into SPY, or similar market tracking indices. Yet they don't.

<comment><USER29> Exactly. The traditional keynesian definition of rationality (wrt inflation/deflation) is so far removed from reality that it should be a joke by now. Nobody actually behaves the way their mental model says they should.

<comment><USER30> Except that's not what Keynseian's say, and people do behave the way Keynseian's say, deflation does curb spending and inflation does encourage it; Keynseian's don't claim people will stop spending, they claim they'll spend less.

<comment><USER29> None of them seemed to act like that was their view when we were looking at 0% inflation. The general attitude of mainstream Keynesians was that we were on the verge of an unstopable downward spiral if we didn't act in that very moment...which I remind you was driven by housing prices crashing back down after their biggest bubble ever. In reality, people don't sense inflation or deflation as it is reported by the CPI, PPI, or any other price index. They sense it locally on a product by product basis. And it is still entirely uncertain as to the relative attribution of reduced income vs deflation as a cause of reduced spending.

</comment></comment></comment></comment></comment></comment><comment><USER31> This title of this post does a disservice to its contents. "Bitcoin is evil' makes it sound like it's a propaganda piece. I went in expecting some of the usual poorly researched allegations that we've been seeing over the past few weeks. But surprisingly, the post does make a few good points.

> _Placing a ceiling on the value of bitcoins is computer technology and the > form of the hash function… until the limit of 21 million bitcoins is > reached. Placing a floor on the value of bitcoins is… what, exactly?_

However, the analysis fails again because he wants to decouple bitcoin's role as a store of value from it being a medium of exchange. To which I would like to ask: What's the point of a store of value if ultimately it cannot be exchanged for something else ?

That's like saying that the energy inside an atom's nucleus has no value. (prior to the discovery of controlled nuclear fission) Of course it had value but we couldn't use it without accessing it and tapping into it somehow.

Bitcoin's value is closely coupled with its utility as a medium of exchange, which is based solely off some pretty excellent technology and principles.

Now, don't get me wrong, I don't think its current value in terms of USD/Euros/etc. is necessarily linked well to it's current utility. However, there is value in being able to transfer something (a bitcoin or parts of it..) that no one else can transfer to someone across the world securely and almost instantly with little to no centralized control.

This ability is what places a floor on its value, whatever that hypothetical floor may be.

This is what excites the 'technical people' he mentions in his article. I don't expect non-technical people to 'get it' immediately, but people will get it, eventually. No one understood why email was important in the beginning either.

<comment><USER32> _What 's the point of a store of value if ultimately it cannot be exchanged for something else?_

One can also turn this point around: what requires the store of value to be the same thing as the medium of exchange? The store of value must be _convertible_ into the medium of exchange, but that doesn't mean they have to be the same thing. Yet Krugman blithely assumes that they must be: "To be successful, money must be both a medium of exchange and a reasonably stable store of value." He doesn't even consider the possibility of, for example, an economy based on Bitcoin as a medium of exchange and, say, gold as a store of value. For that matter, he doesn't even bother to mention that very few people actually use dollars as a store of value: people don't keep their retirement funds in cash under the mattress.

<comment><USER33> If Bitcoin _isn 't_ a relatively stable store of value then there is no sane reason to use it purely for exchange. If you're able to send dollars to Coinbase or MtGox and the end user is able to receive dollars from Coinbase or MtGox, chances are you can cut out the middleman and the liquidity risk by sending them direct, at similar or lower transaction costs. The equation looks a bit different if you're holding non-trivial Bitcoin balances, but you won't do that if it doesn't reliably store your value.

<comment><USER32> You're ignoring transactions where Bitcoin is exchanged for actual goods or services, or for non-monetary financial instruments like stocks. In such transactions Bitcoin doesn't have to be a store of value; it only has to be a medium of exchange. The same applies to traditional forms of money, which was my point.

It's true that there aren't many ways to exchange Bitcoin for actual goods or services or non-monetary financial instruments right now, but that's not due to any inherent inferiority of Bitcoin: it's due to the fact that governments and central banks have a huge incentive to either outlaw exchanges of Bitcoin for goods, services, or financial instruments like stocks, or at least impose artificial costs on such transactions that are high enough to discourage most people from making them. In other words, Bitcoin is not competing on a level playing field with other forms of money.

<comment><USER33> People won't accept Bitcoin for actual goods and services if they don't believe it will hold its value. Or more precisely, they will require you to pay x% _more_ in Bitcoin (at current exchange rates) where x is a premium to account for the expected loss in value over the period they expect to hold the Bitcoins, plus a margin for risk. If that premium happens to be higher than the cost of transacting in an alternative currency, Bitcoin is useless as a means of exchange.

Personally I'd see "governments have a huge incentive to outlaw it" as a pretty major inherent inferiority in something purporting to be currency too...

<comment><USER32> _People won 't accept Bitcoin for actual goods and services if they don't believe it will hold its value._

The same applies to any type of money. Google "hyperinflation".

Also, how much of an effect this is depends on how long people expect to hold money in between transactions; see below.

 _they will require you to pay x% more in Bitcoin (at current exchange rates) where x is a premium to account for the expected loss in value over the period they expect to hold the Bitcoins, plus a margin for risk._

People do the same thing with dollars and other currencies based on the rate of inflation they expect, i.e., the rate at which they expect dollars to lose their value.

Also note that qualifier: "over the period they expect to hold the Bitcoins". In other words, people need enough cash to cover current expenses for some period of time; but that amount can be pretty small compared to their total wealth, and it gets smaller as technology advances and economies evolve. People used to get paid quarterly, so they needed enough cash for a full quarter's expenses. Then the payment cycle became monthly, and now many people get paid biweekly or even weekly, so they need to hold less cash to cover expenses. (More precisely, they need to hold less as a fraction of their total wealth.)

 _I 'd see "governments have a huge incentive to outlaw it" as a pretty major inherent inferiority_

It's "inherent" only in the sense that we're not likely to get rid of governments any time soon. Is that a problem with Bitcoin, or a problem with governments?

</comment></comment></comment></comment></comment></comment><comment><USER34> I'm glad this article makes the distinction between positive and normative economics.

I have no problem with paying taxes and obeying almost all laws in a democratic country, and I am persuaded that inflation in sensible times and amounts is a good thing for the world. The paranoia and anti-society feelings that run so high in the bitcoin community actually put me off it. (Although I also dislike the fact that the Credit Card companies have the power to extract rent from nearly all transactions in the economy too - the fact that the price is the same regardless of whether the merchant is paying a fee or not means that cash transactions are subsidising credit cards).

But I don't think bitcoin has much chance of becoming a state currency, and I think it would go horribly if it did, so most of that anti-state rhetoric is irrelevant.

However, up until now, neither the government, nor the banks nor the credit card companies have provided me with an easy, cheap and safe way to make tiny transactions with my friends (and untrusted acquaintances) across the world.

Bitcoin is currently _useful_. I can take a picture of a QR code with my phone or fill in a simple form on a web page and safely transfer tiny sums of money with no or minimal fee reasonably quickly anywhere in the world. That is wonderful and creates a floor on the value of bitcoin, until better options are available.

Anyone who really doesn't want to see bitcoin succeeed (and that goes for Stross and Krugman) should make it a priority to work on making sure that dollars and pounds and euro balances are just as convenient, cheap and safe as bitcoin balances.

</comment><comment><USER35> 1) Bitcoin mining has a pretty horrible carbon footprint. ("but so does ..." doesn't eradicate this argument)

2) similar to the author's point that advocates can't tell the difference between "store" and "medium" of value, I can't tell you the number of arguments I've gotten in with people who equate a "store of value" to be the same thing as the "increase in value"

3) It's a 1% wet dream. Make money, potentially hidden income, avoid taxation? No money paid into the welfare state? WIN!

<comment><USER36> Actually, for your first point, you have to compare the carbon footprint of bitcoin to the carbon footprint of the alternative. What is the carbon footprint of all the different transaction processing systems run by Mastercard, Visa, Amex, etc? What about if you add in the cost of the massive mainframes that handle ACH transfers? The cost of printing millions of archaic paper checks?

I'm not saying bitcoin replaces all those things (it certainly doesn't), but it aims to.

<comment><USER37> The other systems aren't based around grinding CPUs at 100% power utilization for days/weeks/months doing worthless busy work. Unless your power comes from a zero-carbon-footprint renewable resource, it's pretty ugly.

<comment><USER38> The Bitcoin network doesn't require CEOs to burn jet fuel to visit their associates for catered meals; it doesn't require metal to be pressed into little discs, or trees to be pressed into little rectangles, and then distributed via combustion engine; it doesn't require receipts to be printed, duplicated, stored, and finally destroyed; it doesn't require millions of humans to commute to HVAC supported cubes to keep the system running.

<comment><USER37> So we're all back to hoarding money under our mattresses?

There will always be central banking infrastructure controlled by billionaires who are more socially important than you. We can't just "go decentralized." An average person is too busy to even remember their password to gmail is "password456" and not "password123."

</comment></comment></comment></comment></comment><comment><USER39> I love rule-based central banking. It injects predictability and stability into a monetary system and has had fantastic results in the developing world. Cryptocurrencies allow for rule-based monetary systems without the risk of a central bank failing to adhere to its rules prescription. A world of competing crypto currencies would be fascinating - various rule systems being adopted and phased out as (a) critical flaws are discovered, (b) more competitive rules are introduced, or (c) the global economy's needs and hence optimal rules system change.

The downside of discretionless rules-based central banking is it makes learning, and thus evolving, very expensive, requiring a rerooting of the currency and thus monetary system. This is why developed countries do better with discretionary central banks - their economies are too complicated for any known rules systems to work reliably and their central banks trusted enough not to be stupid.

I love the future Bitcoin portends - a world of competing and overlapping rules-based and discretionary monetary systems. I am fairly confident, however, that Bitcoin is not competitive for that world. Still, it's a great introduction and has its social value as a stepping stone.

<comment><USER40> I would argue that the rules of Bitcoin are not very useful for economic development.

Perhaps the most important lesson in the history of money is that the amount of money needs to flexibly adjust to economic circumstances.

The existing fiat system achieves this, because banks create and destroy money in a decentralized, market-controlled fashion by giving out loans and having them paid back. When a firm invests using bank loans, then the money supply and economic activity increase in lock-step. The result is an economy that was so stable in historical comparison that many economists declared the "macro problem" to be solved (the so-called "Great Moderation"; obviously, 2007 showed that they were hilariously wrong).

Metal standards do not achieve this, and they fail in two ways: The economy can grow faster than the supply of metal; that's the more usual failure mode. But the supply of metal can also grow faster than the economy, which is just as bad (i.e., Spain and the in-flux of metal from America).

Bitcoin can only fail in one of these modes, but since that's the more usual failure mode anyway, it's just as bad as a metal standard.

So that belongs to the normative discussion that Krugman talks about: An economy based on Bitcoin as money is going to suffer through the same problems (gratuitous recessions and mass unemployment) that economies based on metal standards used to suffer from [0]. We already know that, so let's just not go there.

[0] Similarly, economies based on the Euro suffer the same problem via the exact same mechanisms, as do economies where politicians implement unnecessary austerity.

</comment></comment><comment><USER27> Krugman is right, I agree with him 100% on this, but almost every time I tried to make any sensible argument about bitcoin with people actually holding bitcoin, I hit a wall.

Most people confuse currencies with assets, storage-medium with exchange, etc. While at the same they are just hoarding.

I think that BTC will stick around because it has some unique qualities that are _requested by the market_ such as partial anonymity, speed and size (a USB can contain whatever amount of USD).

But it has some serious flaws and as a currency is clearly failed. It is a libertarian's dream, but I don't think that the US or DE or RU government can't monitor whoever moves money in and out of the BTC blockchain.

<comment><USER41> I dealt with virtual game currency before I really started messing around with banks.

There was a ton of, "What do you mean I can't do this", and "What do you mean this takes longer than five seconds.. four DAYS?!", and "they're closed? So I can't? What? You're joking with me, right?"

I understand that dealing with money is incredibly hard due to regulation, but I would like something to use as a medium of exchange which doesn't leave me constantly infuriated.

<comment><USER42> Most of that probably has more to do with horribly bad legacy systems at the banks than it does with what currency is used. A little bit of competition will do well in showing what is possible, but shouldn't automatically replace the reigning currencies.

<comment><USER15> Definitively solving the problem of "closed on Sunday" would seem to constitute more than a little competition for legacy financial institutions.

</comment></comment></comment></comment><comment><USER43> It is deplorable that he used the word "evil" to describe Bitcoin. He fails to point out that Bitcoin is a system and of course it is possible for individuals to use this system to achieve some personal nefarious goals; but we have literally watched banks knowingly gamble huge sums of money in the centrally banked system and the whole system came crashing down. The decentralized nature of Bitcoin will not allow a few major players to crash the system, and then use the government to bail it out... and as a side note the government doesn't ever bail anyone out, it leverages its authority to force taxpayers (today and future generations) to bail out a system so that it can maintain the status quo.

<comment><USER44> > It is deplorable that he used the word "evil" to describe Bitcoin.

Krugman is clearly an intelligent man, but in his public writing he has a habit of declaring things he doesn't like as "evil."

Given we know he's not stupid, I assume it's to increase the attention he receives. Based on the re-shares from my left-of-center friends, it tends to work.

<comment><USER43> A few minutes after I posted that, I regretted that my comment focused on that. Krugman wrote another article implying that Bitcoins were "barbarous" and likened them to digging up mostly useless gold. I feel like he must think Bitcoin is serious because he is writing about it regularly- I wish I had focused more on his economic theory in my comment... maybe next time.

<comment><USER15> Like many technology and finance pundits, he seems to be currently in a love/hate relationship with Bitcoin.

See also Business Insider's recent turnaround and subsequent breathless tabloid-style coverage of cryptocurrency news.

</comment></comment></comment></comment><comment><USER45> There is perhaps no compliment greater than a criticism from the econostrologist in chief, Paul Krugman.

He is right about one thing tho. Bitcoin IS a bubble. But that is not a pejorative. Any good that becomes money will have a price that is far higher than is warranted by its use demand. It doesn't matter whether the floor price is 10% of the monetary premium, 1% or 0%. The monetary premium is based not on the good's use value, but its serviceability as money. I.e., is it fungible, divisible, transportable, verifiable etc. And along all these attributes bitcoin shines - even more than gold.

The best explanation of this so-called "bubble theory of money" is proffered by Moldbug. To wit:

[http://unqualified-reservations.blogspot.com/2011/04/on- mone...](http://unqualified-reservations.blogspot.com/2011/04/on-monetary- restandardization.html)

and

[http://unqualified- reservations.blogspot.com/2013/04/bitcoin...](http://unqualified- reservations.blogspot.com/2013/04/bitcoin-is-money-bitcoin-is-bubble.html)

</comment><comment><USER46> Three cheers to the mod who changed the title from "Bitcoin is Evil", even though that's what NYT wants to call it. The author spends most of the piece explicitly telling us that he will not be making a morality judgement about the currency.

One quote in the article caught my eye:

> _BitCoin looks like it was designed as a weapon intended to damage central > banking and money issuing banks, with a Libertarian political agenda in > mind—to damage states ability to collect tax and monitor their citizens > financial transactions._

Fun thought exercise: replace "BitCoin" with "cash." Businesses across the country choose to have a cash-only policy (or destroy receipts, avoid use of electronic records, and so on) to avoid paying taxes and having their transactions monitored. That's not to say this is wise or ethical behavior, but it certainly happens, even without cryptocurrency. So why do critics describe BTC as a libertarian threat and in-person cash transfers as normal?

<comment><USER47> I don't know enough about economics to know if it's possible to "de- politicize" it, separate a theorist from a particular type of government. But I perceive that Krugman, master of his intellectual domain, becomes deranged in the presence of the name "bitcoin" because technological innovations don't go in reverse, and disruptive ones change the facts on the ground. In those circumstances all government can do is either accept it or go full-on North Korea. In his world, the state must have at least the power, even if it must only judiciously decide when to apply it, to direct all human activity to maintain stability and order. If bitcoin really does threaten the power of the state to tax, the government's reaction is going to turn his utopian social contract "we're-all-in-it-together" paradise into a dystopian surveillance hell-state. and he, as the cheerleader of the State (if anyone remembers him) goes from being a good guy to a bad guy. I can understand how then that bitcoin presents a scary proposition.

I don't know how closely he's been paying attention to the rest of the news on how the government has been reacting to things on the Internet it can't control, like encrypted communications, but the government isn't taking the "acceptance" route, it's going the North Korea route. If he wrote a "PGP is evil" article about how it destroys the ability of the State to keep tabs on pedophiles and terrorists and tax cheaters, it would be derided here with a lot more force.

</comment></comment><comment><USER48> I've never agreed much with Krugman's theories, but at least he understands a thing or two about economy. However, what I've always found him to be _always_ clueless about is - technology. You have a better chance finding a more insightful tech article from a random tech blogger than from Krugman. He _always_ misses the point. Without exception. I don't know even why he keeps doing this to himself. He just ends up embarrassing himself.

How can Bitcoin, a technology, that has shown so much promise, in many other ways besides being "money" (which some still disagree it is), be "evil"?

Also, as someone else has mentioned, he says FIAT money is backed by men with fun, and Bitcoin by "nothing" (another point where he shows just how little he understands technology in general), yet Bitcoin is the "evil" one?

<comment><USER49> _However, what I 've always found him to be always clueless about is - technology. You have a better chance finding a more insightful tech article from a random tech blogger than from Krugman. He always misses the point. Without exception. I don't know even why he keeps doing this to himself. He just ends up embarrassing himself._

Yes, a textbook example of the Dunning-Krugman effect. He doesn't know what he doesn't know, and he's OK with that, because hey, Nobel Prize.

</comment></comment><comment><USER46> It's great that Krugman is trying to to make a purely positive analysis of the potential impacts of Bitcoin. He's entirely correct in saying Bitcoin has zero inherent value, as opposed to gold and USD. But that's missing the point.

Most of us don't think about owning gold in terms of how readily we can make pretty things out of it, or dollars in terms of how easily we can pay our taxes. We hold onto them because both have a reliable history of being easily traded for other goods and services. Ease of exchange trumps inherent value as soon as a currency's users regard it as stable, and Bitcoin hopes to be there in a few decades (presumably starting with the sort of people who follow interesting tech developments, rather than those who care about inherent value).

As a side note, the headline is ridiculous linkbait and someone really ought to change it. Krugman spends most of the article _explicitly stating_ that he doesn't want to muddy the discussion of how well BTC will actually work with normative/political arguments (i.e. the word "evil"). I can't help but feel like someone other than the author titled this article.

<comment><USER50> > He's entirely correct in saying Bitcoin has zero inherent value, as opposed > to gold and USD.

No, no, he is NOT correct on that. Bitcoin's inherent value is in the Bitcoin technology. Inherent value of USD is that government declared it has value (by fiat). You can actually create "pretty things" with bitcoin technology, the same way you can create pretty things with gold - those are just other things.

<comment><USER51> > Inherent value of USD is that government declared it has value (by fiat).

Wait, what? Definition of fiat currency is the one that has no intrinsic value.

USD's intrinsic value is the paper and the metal used to manufacture it.

<comment><USER50> Ok, but I think the point is clear. USD has value because U.S. government said so and people trust that government, and Bitcoin has value because some people trust the Bitcoin network as the "currency issuer".

If we imagine a scenario, where a majority of businesses will accept bitcoins, and people will be able to buy bitcoins and use either dollars or btc for payments, and both methods will be legal, we will see that dollar doesn't have any more "intrinsic value" (whatever that means) as bitcoin. It will be just two competing payment systems with different attributes.

<comment><USER51> Right, the trust in the future spending power makes a currency not only a medium of exchange, but a medium of store.

It seems that as far as alternative currencies are concerned, altcoins have a better chance of being spread. What's to prevent Amazon from coming up with AmazonCoin, pre-mining an entire AmazonCoin set for themselves, and then offer this altcoin with a liquidity guarantee on largest retail site. Nothing to prevent them from accepting BTC, but I think any US retailer would be prone to quickly trade in BTC for USD after the transaction is completed, as there's volatility risk, and payments to merchants and the tax man are due in USD anyways.

<comment><USER52> Amazon gift cards are already this.

</comment></comment></comment></comment></comment></comment><comment><USER53> This is an easy one to understand.

Krugman was a proponent of mass inflation, aka. helicopters of money, as a solution to the credit crisis. Bitcoin makes it basically impossible to manipulate the money supply the way the Fed has done to navigate the 2008 crisis.

Krugman sees Bitcoin as a threat to the central banks ability to stabilize the economy.

<comment><USER37> Also see: the euro crisis.

It isn't a "threat" so much as just foolish.

</comment></comment><comment><USER54> > Placing a ceiling on the value of bitcoins is computer technology and the > form of the hash function… until the limit of 21 million bitcoins is > reached. Placing a floor on the value of bitcoins is… what, exactly?

Doesn't he get that point wrong (like many others)? The mining rate, and eventually the limit of 21 million bitcons places a limit on the _supply_ of bitcoins, not on their value. If bitcoin is successful, it will only keep getting more and more valuable. Its hard to estimate how much, but the total market capitalization will probably that of a commodity like silver, or that of a nation state's currency.

Also, I think bitcoin is not really _supposed_ to be a store of value. Its main purpose is to pseudonymously buy and sell stuff (drugs, cough, cough). It's good enough if it can hold its value for a few hours - if someone builds a nice way to deposit dollars or euros, convert them, and immediately pay with the bitcoins, milliseconds would even suffice. In a market with such a high turnaround, of course, the value represented in bitcoin at a given time will be lower than for e.g. silver or gold, which are supposed to store value for a longer time (and also have applications as a material).

Finally, I don't think bitcoin can replace "real" money. It might have worked a few decades ago when there was a kind of self-carrying growing economy. The only way todays econonmy is still running is because of massive state intervention, which is impossible if bitcoin in the main currency. I mean, we gave up the Bretton Woods system and the gold dollar for a reason...

</comment><comment><USER55> One capability of bitcoin not often addressed is the ability for the majority of its users to change the rules.

If you can get the majority of users to agree to a change in the rules, then they will fork off the block chain in a direction that follows those new rules. Of course, you will have some percentage of users who like the old rules, and could theoretically continue on the old block chain.

One rule change, for example, is to have miners vote on the reward for new blocks found. Then, every so often take the medium or a random vote and award that amount for new blocks mined. This would allow miners to regulate the amount of new coin being mined, which could level off the exchange rates between bitcoin and the world currencies.

</comment><comment><USER6> I am an on again off again fan of Krugman in some respects. In this case he has managed to clarify the discussion, which is good!

The truth is that bitcoins derive most of their value from being a great medium of exchange and enabling things (smart contracts are ahead) that otherwise wouldn't be possible. Things like making no recourse payments online for the first time ever.

Bank of America did an analysis on the value of bitcoin and concluded that one of the components is the payment network. If PayPal's market cap is billions, why not bitcoin?

So I see this as giving a "floor" to the value of bitcoin via demand the same way as the US government's demand for dollars from its citizens (or the controversial petrodllar warfare theory and other shenanigans) boosts demand for the dollar. There is definitely a lot of demand boost in that.

And for now there is alsothe speculative bubbl. I don't know what the value of bitcoins should be, but it's certainly not zero - there will be demand for it by chinese millionaires trying to get their $ out of the country and bypass currency controls, and other things like that. And if the market cap is high enough, moving a few million dollars in bitcoins at a time won't move the market. Demand drives the price up.

<comment><USER52> If you couldn't turn Bitcoins into USD, would you accept them as payment for something?

That's your floor price. It's 0.

<comment><USER6> Yes, if I can trade them for something else I need. Cashing out is a hassle anyway.

It's true that dollars are more liquid. Does that mean you wouldn't accept a ton of free stuff if you couldny trade it for dollars but only other services?

<comment><USER52> Then why am I getting it for free?

That's the point - it's not free. You don't need a currency for "free". You need a currency for things which have value.

</comment></comment></comment></comment><comment><USER56> " I try to get them to explain to me why BitCoin is a reliable store of value"

I don't believe that BitCoin is a reliable store of value like the dollar is not a reliable store of value. I went to the US after a year to visit family(I live in Europe) and was surprised how much prices had gone up. Probably you don't see that when it is incremental, but you get to see after some time out.

The same happens with civil liberties. US was one of the countries with higher freedom in the world, but the tendency is so bad, compared to countries that were really bad in the past, but the tendency is so good.

Paper money, or digital money by the way is a medium of exchange. And there lies their utility as Mr Krugman knows..

I am biased about Mr Krugman, for me he is a puppet of central banks that create money and compete against bitcoin. He was awarded the Nobel Memorial price paid by a central bank and he owes his position from defending Wall Street against Main Street.

<comment><USER57> For the last 30 years inflation (drop in buying power/value of the US dollar) has been between 0.1 and 4.6%; before that, during a period of record inflation, its value fell bye an eye-popping 10-13% a year. By comparison with Bitcoin's volatility, that is an _astounding_ store of value.

<comment><USER58> I think you will see rather bigger falls than that with Bitcoin, once the early investors sell out.

</comment></comment></comment><comment><USER59> What's quite interesting in this piece from Krugman is that for the first time I hear hime doubt his previous outright negative stance. He slips in some "clues" how he is actually "not trying to be swayed one way or the other" when everything else I have read or heard from him regarding Bitcoin was entirely negative. Maybe he is just trying to keep the door open in case Bitcoin's success will prove him similarly wrong as his funny predictation in 98 where he mentioned that "the Internet is going to disappear in 2005".

Regarding the Charles Stross article, someone else had written a very good counter-piece just the other day:

[http://www.ofnumbers.com/2013/12/18/charles-stross-takes- on-...](http://www.ofnumbers.com/2013/12/18/charles-stross-takes-on-the- bitcoin-community/)

</comment><comment><USER60> It boggles my mind that Krugman continues to fail to see the point. I am not the only one who has noticed his blindness [4]. Or is he deliberately avoiding discussing certain aspects of Bitcoin (notably as a payment processing platform)?

 _" Underpinning the value of gold is that if all else fails you can use it to make pretty things."_

This is a very weak and in fact invalid argument. I can't believe Krugman is quoting this! "If all else fail" then gold would lose 90%+ of its value overnight. Look: roughly 45% of the world's gold production is used for financial speculation, 45% for jewelry, and 10% for industrial purposes [1]. In other words, 90% of gold buyers are buying mostly because they believe gold will preserve its value. And "if all else fail" (if speculators exit the gold market), prices will drop, and jewelry buyers will redirect their desire to other precious metals [2], leaving only industrial demand as buyers. Suddenly the world would be producing 10 times more gold than the demand, leaving the prices depressed.

And again, Krugman completely misses the point of Bitcoin having value not as a currency, but as a payment processing platform. Overstock CEO Byrne said it beautifully:

*"You're getting rid of the interchange fees. We're paying credit card companies around 2%. For a company whose margin is 1%, picking up 2% on that is quite attractive." [3]

[1] [http://www.gold.org/investment/statistics/demand_and_supply_...](http://www.gold.org/investment/statistics/demand_and_supply_statistics/)

[2] For the same reason people prefer expensive diamond over cheap cubic zirconia, even though both are practically indistinguishable to the naked eye. Yes they CZ is less hard, but most jewelry buyers don't care about hardness. They buy diamonds because they are expensive, that is all.

[3] [http://www.coindesk.com/overstock-unveils-more-details- bitco...](http://www.coindesk.com/overstock-unveils-more-details-bitcoin- adoption/)

[4] [http://www.washingtonpost.com/blogs/the- switch/wp/2013/12/23...](http://www.washingtonpost.com/blogs/the- switch/wp/2013/12/23/heres-what-paul-krugman-doesnt-get-about- bitcoin/?tid=pm_business_pop)

<comment><USER61> Your numbers are badly off. Jewelry is the use referred to when Krugman says "you can use it to make pretty things". (Gold in industrial use is generally invisible).

Gold isn't used in jewelry because it's expensive. It's used because it's pretty, it's soft and workable, and it doesn't tarnish. _And_ it's gentler to your skin; my sister's ears are too sensitive to wear cheap nickel earrings.

Now, I agree with you that the statement you quote from Krugman is invalid. But there's no reason to go around interpreting him as saying something wildly different than what he said. Gold bars are a store of value. Jewelry is not.

<comment><USER60> You misunderstand me. I know he is talking about jewelry. My point is that people _are_ buying gold jewelry mostly because it is expensive. Yes gold has certain properties, but there are other precious metals with similar properties (platinum, etc). So given the choice between similar metals with similar properties, people will tend to use the most expensive one for jewelry.

In other words, Krugman's argument is circular (gold has value because it has value).

<comment><USER62> It is most likely a combination of these factors, so that gives us something between 45-90%?

</comment></comment></comment></comment><comment><USER63> Who changed the title from the original's "Bitcoin is evil"? I thought Hacker News was opposed to editorial titles.

</comment><comment><USER64> Krugman is somewhat like Bishop Berkeley, no fool, arguing against infinitesimals before they acquired--in the 20th Century--a rigorous basis. The auditability of Bitcoins distinguishes them from the inaccessibility of the highly mathematized and virtually untraceable instruments of the financial crisis.

</comment><comment><USER65> Even if he's slightly off I still think Krugman is right in identifying Bitcoin's main weakness: it's the world's "hardest" currency ever - <USER2> "harder" than gold - and that will make it very volatile, which in turn will make it difficult to use as a store of value or (independent) medium of exchange.

What I mean by "hard" in this context is that its supply is constrained. If you look a fiat currency it can (and is) produced in whatever volume necessary by the central bank, in order to avoid a fall in prices. Gold has a similar (but distributed) mechanism: when the gold price goes up people mine more gold, increasing the money supply.

Note that that property of gold works even if it's the primary medium of exchange: if there is too much deflation then an ounce of gold will buy you more goods and services, making it more worthwhile to mine it - which in turn increases the money supply and acts as a counterforce to price deflation.

But this is obviously a flaw in the design of Bitcoin, not in crypto currencies generally. It should be possible to create one with potentially infinite supply, but where the cost of mining a coin remains relatively stable over time. Such a crypto currency would be usable as a store of value and as a (primary) medium of exchange.

I'd love to see that "infinite supply crypto coin", but unfortunately I'm much less optimistic that it would become as popular as Bitcoin. It wouldn't be usable as an investment/speculation vehicle, and that's probably the main use of Bitcoin right now.

</comment><comment><USER5> Krugman and Stross base their critique on Bitcoin's libertarian appeal, as if they took the promises of a few cypherpunks as reliable predictions.

Those in Krugman and Stross's "libertarianism is _evil_ " camp should take heart that some people out there think Bitcoin is a huge win for developing economies, and will cause only incremental disruption for places like the EU or US.

For the rich countries: Governments have many tools in their belt before they just lie down and accept, say, universal tax fraud, or the end of monetary policy. People interested in tax policy (sometimes very) slowly come up with good ideas to reduce fraud, like putting down the SSN of all claimed dependents (which made a lot of children disappear one year, but jumped revenues), or double reporting of W-2s. They likely wouldn't just roll over if we moved to BTC.

For the poor countries: A better medium of exchange, allowing cheaper remittances, easier cross border trade, or a _relatively_ more reliable store of value than local currency is an enormous win.

There are lots of options going forward. Bitcoin could be a passing fad. Bitcoin could liberate the economically oppressed while providing little more than a nice toy for those in wealthy countries. Bitcoin could destroy monetary policy and lead to barricades of wealth while destroying the capacity of governments to benefit their most vulnerable citizens.

But it's not safe to make moral approbations based on picking one of these uncertain results and assuming it is inevitable (especially, IMHO, by picking the most outlandish of the three).

</comment><comment><USER66> I had recently thought about this very topic, and having spent just a bit more time than Krugman on it, and knowing a bit more about bitcoin, I find it somewhat interesting that we arrived at drastically different opinions about the morality of it. I have a rather more positive (haha, pun intended) take on it given what has happened with the conventional monetary system, one that Krugman and any mainstream economist would probably agree with: the system is (largely) broken, and we must look for solutions. If Bitcoin is the technologist's experimental solution, it is worth embracing because it delivers on change. Krugman's solutions will focus more on government force as a constraining framework, instead of extensions of innovation---but I believe at the core of it all, the "libertarians" he decries are also the same people he would agree with on the utter folly of our current banking/finance dominated economy.

My expanded thoughts can be read here: [https://medium.com/technology-meets- policy/fd097809f88f](https://medium.com/technology-meets-policy/fd097809f88f)

</comment><comment><USER67> I've hit a paywall that can be disabled with real dollars. Oh the sense of irony.

<comment><USER68> Just google the title of the article: "bitcoin is evil" newyorktimes and the google search result link will take you to a readable version.

</comment></comment><comment><USER69> That's why I invest only in Dogecoin.

<comment><USER70> Same, the it's the only alternative that seems like it could potentially take off.

</comment></comment><comment><USER71> Krugman's rants can be safely ignored. He either genuinely thinks that the solution to problems created by printing and borrowing way too much money is.. printing and borrowing _shitloads more money_ , or he doesn't actually think that and is a government shill instead.

Either way, he's not to be trusted.

>> BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions

So? Damaging States' ability to _forcefully confiscate_ everyone's wealth is a distinctly good thing, here in the real world.

</comment><comment><USER72> US Government taxes certainly do support the US Dollar's value, but that support was more vital at the creation of the currency than it is today. Today's value is secured by the many merchants who trade in the dollar at fairly predictable prices.

Iran comes to mind as a merchant who could make a similar commitment to a cryptocurrency. What if you could suddenly buy oil at BTC X per barrel? This could establish enough of a link between BTC and a high-volume commodity that it could create some stable value, and might appeal ideologically to a class of economic actors that are already somewhat motivated to avoid trade in dollars and euros.

</comment><comment><USER73> _Placing a ceiling on the value of gold is mining technology, and the prospect that if its price gets out of whack for long on the upside a great deal more of it will be created. Placing a ceiling on the value of the dollar is the Federal Reserve's role as actual dollar source, and its commitment not to allow deflation to happen.

Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function… until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is… what, exactly?_

Where's the floor on the value of the dollar?

<comment><USER17> He claims that the ability to pay taxes in dollars and the Federal Reserve's willingness to buy up dollars to maintain their value places a floor on the value of the dollar. I disagree. In a crisis of confidence in the dollar, both factors would fail.

<comment><USER74> In a crisis significant and widespread enough to crash the dollar or any other government-backed currency you'd like to pick on, it seems likely that there would also be significant disruption to electrical and communication networks, which does not suggest BitCoin is a great thing to hold for that situation.

(a similar point is often raised against gold, in that a post-economic- apocalypse world would not immediately have the infrastructure to verify claims like "this is one ounce of pure gold", meaning gold's utility as a medium of exchange would not be as high as suspected by people who buy it to hedge against such apocalypses)

<comment><USER17> I'm not talking about a hypothetical doomsday scenario. Bitcoin _is_ the crisis.

The idea that holding Bitcoin is a better idea than holding dollars is spreading. The more it spreads, the higher the value of Bitcoin will be, and the lower the value of the dollar will be. Eventually, we will hit a tipping point. That's the crisis. That's the hyperinflation.

<comment><USER74> And aside from wishful thinking, what evidence do you have to back your hypothesis?

<comment><USER17> None, but it's important to remember that currency _is_ wishful thinking. The value of a non-commodity currency is what people believe it's worth. Trends in the public's beliefs about currency are incredibly significant.

</comment></comment></comment></comment></comment></comment><comment><USER75> every article from PK:

"you see this nobel prize? yeah bitch. I AM the muthafuckin' economy. Now worship this bitcoin opinion piece that highlights my lack of technological understanding. I am your God."

<comment><USER76> Every article, huh? Krugman has much insight to offer about the world of economics, although I know it's hip to rip on him nowadays. Oh well, stay ignorant.

</comment></comment><comment><USER77> As is often my habit, I skimmed the voluminous commentary here before reading TFA: I've got to stop doing that. I clicked through expecting a massive paper and got four original paragraphs, along with quotes of stuff we've already seen on HN.

I'll ignore the moralistic Stross material, both because that is wise and because Krugman takes pains to emphasize the positive nature of his argument. The tentpole of that is that there is no theoretical floor for the exchange value of BTC. This is roughly true, but I don't think it entails the disastrous consequences that excite so many BTC antagonists.

Even if it's difficult to imagine hyperinflation of USD (although I'm not quite so confident as Krugman in the Fed's dollar sink policy: if this is not a new policy why didn't it work in the 1970s; if it is new why shouldn't we expect it to change?) we've seen hyperinflation of many other currencies, a number of which were held by more investors than currently hold BTC. If such hyperinflation was disastrous, then it was mostly for those who held the affected currency, and mostly in proportion to their holdings. No tinpot dictator has decreed the use of BTC; if you think they're overvalued then just sell them.

Of course if there is eventually a giant terminal sell-off of BTC for reasons, investors might just choose some other set of cryptocoins, some of which might have an appropriately theoretical floor. Would Krugman care to opine on the positive fate of those theoretically worthier assets?

</comment><comment><USER78> >>BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions.

What does that sound like? Maybe an earlier top post on HN [http://blog.oleganza.com/post/71410377996/crypto-anarchy- doe...](http://blog.oleganza.com/post/71410377996/crypto-anarchy-does-not- require-anonymity)

</comment><comment><USER79> This seems to be mainly a reference to another article that has also been on HN.

By approximate scroll down length on mobile, the ratio of content that isnt a quote, to that which is, seems to be approximately 7:5 . (not taking into account the fact the quoted text takes less horizontal space, but I did overestimate the new text length in a few small ways as well, so I hope that this ratio is at least approximately accurate)

Essentially the article states a difference between "positive economics" (what is), and "nomfyvhbxgv economics" (what should be). The author claims that their political opponents tend to get the two confused (and that despite what people criticizing the article might think, that his political allies tend not to make the same mistake)

They then go on to say that the other article suggests that bitcoin was created as a weapon, connecting to the "what should be" part of economics, quote the other article, and repeat from the other article the part about a "gold fetish".

I personally believe that it didn't add a whole lot to what was already in the other article, though I admit I should probably reread the guidelines for comments and submissions. I intend to do that, and then possibly modify this post that I am now making.

</comment><comment><USER80> Ok. Krugman actually annoyed me enough with this one to respond. Here's an attempt to start a slightly more technically sophisticated dialogue with Krugman about Bitcoin. [http://da-data.blogspot.com/2013/12/to-krugman- finding-intri...](http://da-data.blogspot.com/2013/12/to-krugman-finding- intrinsic-value-of.html)

Now if I could find one of my economist colleagues to actually get him to read it... :-)

</comment><comment><USER81> >BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions.

And you are going to have to live with it, the same way the people who created Bitcoin will have to live with interventionist policies.

</comment><comment><USER82> I'm a founder of PikaPay, bringing Bitcoins to Twitter since 2011, so here's my take:

One of the most interesting social & tech experiments since the Internet itself. We are witnessing a revolution.

The number of nodes in the Bitcoin network makes it the most secure system of its kind. If it were used as currency, you could say technically that it was one of the most (if not the most) counterfeit-secure currencies in the world.

If it were used as a medium of exchange, due to network effects alone it would be extremely valuable.

I appreciate Krugman's raising the discourse even slightly above the level of "evil hackers." I don't think he realizes that the Bitcoin movement transcends politics and economics. With Bitcoin (as technology) you can actually even create a system that Krugman himself would like to use.

</comment><comment><USER83> " _(b) that the Federal Reserve is a potential dollar sink and has promised to buy them back and extinguish them if their real value starts to sink at (much) more than 2% /year (yes, I know)._"

I had not heard thing. Buy dollars back _with what_?

</comment><comment><USER84> Bitcoins can only be as evil as cars, guns, LEDs, pin-and-tumbler locks, trusted computers, square-rigged ships, Jacquard looms, and enriched uranium. The point is that _these are technologies, not people_.

<comment><USER85> There's an assumption here which may or may not be true: technologies are ethically neutral.

Some reasonable people disagree with this assumption.

<comment><USER84> But can technology be immoral? I'm a bit rusty on all that stuff but it sounds like we're talking about two (subtly) different questions. I would argue that technology can be _used_ for evil, but technology just sitting there by itself is no more evil than rocks or sand.

If you can prove that a certain technology _can not_ or _will not_ be used for good, then that raises different questions.

<comment><USER86> It's pretty clear that the hydrogen bomb is, in the sense you give, "immoral".

Sure, you can come up with complex, hypothetical scenarios where it has value, but fundamentally it has but one purpose, which is to murder millions of people.

In most moral systems, murder of one person is immoral, never mind millions.

<comment><USER87> Or maybe mutual assured destruction prevents the potential murder of millions giving an atomic bomb positive moral value

</comment></comment></comment></comment></comment><comment><USER88> I'm not sure Krugman's understanding of normal money is that great (or at least it is just developing): [http://www.debtdeflation.com/blogs/2013/12/17/oh-my-paul- kru...](http://www.debtdeflation.com/blogs/2013/12/17/oh-my-paul-krugman- edition/)

That said I also don't see that there is any reason that the value couldn't drop to zero or near zero. Maybe the next crypto currency could be called BitTulip.

</comment><comment><USER89> > [Placing a floor on the value of gold is that you can make pretty things of > it.] Placing a floor on the value of bitcoins is… what, exactly?

The fact that the blockchain serves as a tool for global distributed consensus. There's unlimited number of applications that can take advantage of that, irrespective of actual price of Bitcoin as a currency.

</comment><comment><USER90> Bitcoin is evil like book pressing machines are evil to hand written books economy (like few centuries ago)

</comment><comment><USER91> I think most commentators here missed the point of the article. Bitcoin is evil not because it fails at x, because the interest in it propagates bad (Krugman POV) economics. Krugman/Stross assume this type of economics is the 'Austrian school'/Goldbug economics.

<comment><USER92> Most likely Krugman didn't choose the title.

</comment></comment><comment><USER93> "Stross doesn't like that agenda, and neither do I"

Statists gonna hate bitcoin, no matter what.

<comment><USER86> I'm a statist, and I like Bitcoin.

In particular, I think a mixed economy half run by the state, half free markets works pretty well.

There is no contradiction between Bitcoin and the existence of a state. There are lots of ways of regulating and taxing. Sure, Bitcoin might change the details of them - that's just growing pains.

e.g. I would make it compulsory for any company granted limited liability to register the public keys of all Bitcoin wallets it has the private keys of with the tax office.

Or, if necessary later because that's too hard to track, tax either land or carbon emissions directly (rather than income or exchange of goods).

</comment></comment><comment><USER94> > Underpinning the value of gold is that if all else fails you can use it to > make pretty things.

But this 'floor' only accounts for, say, 3% of the price of gold. Whatever makes the remaining 97% a reliable store of value could also provide Bitcoin with 100% of its store of value.

A similar point comes from Tim Harford's fascinating description of the currency used on the Pacific island of Yap:

\</comment><comment></comment><comment></comment><comment></comment><comment>

Oddly enough, there is a near real-world equivalent to the Ningi, the triangular rubber coin larger than Mars dreamed up by the humorist Douglas Adams. It can be found on the island of Yap, in Micronesia in the West Pacific. Their coins, the rai, are stone wheels with a hole in the middle. Some are fairly portable a handspan or less across, and the weight of a couple of bags of sugar. But the most valued stones are far bigger - one British sailor wrote in the late nineteenth century of a stone wheel that was four and a half tons in weight and over nine feet in diameter. In other words, it was almost completely immovable.

Yap's stone money used to be a serious business. The stones were quarried and carved on the island of Palau, 250 miles away One Victorian naturalist witnessed four hundred men from Yap, a tenth of the adult male population, at work in the quarries of Palau. Getting the stones from Palau to Yap on a little bamboo boat was a difficult and sometimes lethal affair - some of them weighed as much as two cars. (And rai were especially valuable if someone had died on the expedition to fetch them.) The biggest stones might have been used for major transactions such as buying land or wives; more modestly sized stones - a couple of feet across - were exchangeable for a pig. Even then, it would have been a lot easier to move the pig than to move the stone.

All this meant that for purely practical reasons, the Yap islanders had to develop an important monetary innovation: they divorced ownership of the stone from physical control of the object. If you wanted to buy my pig, that transaction would be publicly witnessed: I'd give you the pig and in exchange, you'd transfer ownership of one of your stones - the one leaning against the tree, second on the left behind your hut. Now everybody would know that that particular stone was Tim's stone. You and I wouldn't have to go to the trouble of actually moving the thing. One day, a crew from the quarries were bringing a new large stone from Palau when they ran into a storm not far from the coast of Yap. The stone sank while the men swam to shore to tell the tale of their lucky escape and their loss. But of course, if the stone propped up outside your hut doesn't need to move around to change ownership, why should the stone at the bottom of the sea be any different? This giant stone on the seabed had an owner - the chief who had sponsored the expedition to get it. And now his ownership could be transferred to another rich islander, and then to another, just as with any other stone. It was perfectly good money, even though it was out of sight and out of reach.

\</comment><comment></comment><comment></comment><comment></comment><comment>

From "The Undercover Economist Strikes Back" by Tim Harford: [http://www.amazon.com/Undercover-Economist-Strikes-Back- Ruin...](http://www.amazon.com/Undercover-Economist-Strikes-Back- Ruin%C2%97/dp/1594631409)

<comment><USER95> 3% of the price of gold? Where did you get that figure from?

<comment><USER94> I made it up - in this case it doesn't matter whether the correct figure is 3% or 0.3% or 30%.

</comment></comment></comment><comment><USER96> Sometimes I wonder if Bitcoin really is a weapon made by a nation state. Like Stuxnet. Or alternatively could a nation like North Korea co-opt it in an attempt to dislodge the dollar?

</comment><comment><USER97> Can't understand how it going to work. In my opinion the banks will kill the Bitcoin before it will really start working, I don't see how they are going to let it succeed.

</comment><comment><USER98> Does anyone else think that Paul Krugman looks a lot like Chris Parnell? Couldn't stop thinking about it when watching Chris as Dr Spaceman on 30Rock.

</comment><comment><USER99> > Underpinning the value of gold is that if all else fails you can use it to > make pretty things.

Is this really why gold has value? Are you kidding me?

</comment><comment><USER100> The title is pretty sensationalist. He doesn't really come close to arguing that it's evil in the piece.

<comment><USER101> Obviously. Krugman wields his power at NYT to troll market anarchists / public choice theorists and not much else.

<comment><USER100> I used to think he was so cool.

</comment></comment></comment><comment><USER102> Why does he write it as BitCoin? I'm sure he is aware that it is normally written as Bitcoin.

</comment><comment><USER26> Oh boy - this should get a positive reaction!

</comment><comment><USER103> The title is just link bait. Very annoying.

</comment><comment><USER104> If Krugman is short bitcoin, I'm long.

</comment><comment><USER105> Finally Krugman talks about it...

</comment><comment><USER106> The new title is much better.

</comment><comment><USER107> I have a really hard time taking a column called "The Conscience of a Liberal" seriously, even more so when he claims: "Stross doesn't like that agenda, and neither do I; but I am trying not to let that tilt my positive analysis of BitCoin one way or the other." in a piece titled "Bitcoin is Evil".

<comment><USER74> How about taking seriously someone who is, you know, well-known (to the point of receiving a Nobel Prize for his work) for being good at this economics stuff? If a Nobel-winning physicist was writing about physics, you wouldn't dismiss it because the physicist's politics don't agree with yours. Ditto Nobel-winning chemist writing about chemistry, etc.; why should economics be different?

Also, his point about BitCoin enthusiasts being unable to distinguish between what makes a good currency and what pushes their ideological buttons may apply to you.

<comment><USER108> >> If a Nobel-winning physicist was writing about physics, you wouldn't dismiss it because the physicist's politics don't agree with yours.

First of all, Physics and Economics are two different things.

Physics tends to be about facts, Economics is more about opinions, views and theories. It's not because we're not Nobel Prize winners that we shouldn't disagree with the author, and I'm sure there are many well-known economists out there who won't agree with him.

>> Also, his point about BitCoin enthusiasts being unable to distinguish between what makes a good currency and what pushes their ideological buttons may apply to you.

Bitcoin enthusiasts are not the only users of Bitcoin. I use Bitcoin and it's for no ideological reason. It's helping me better than any other payment system right now and that's all I care about.

<comment><USER109> Economics is about models that are verified by past events, and further tested through their ability to predict future outcomes. This is the opposite of pure opinion. The fact that many pundits ignore this doesn't make it go away

<comment><USER101> This is not, strictly speaking, totally accurate. Praxeology doesn't necessarily agree with this viewpoint.

<comment><USER109> That's why you shouldn't follow Austrian economics.

Edit: also, Austrian economics is like pseudoscience, it isn't representative of real economics

<comment><USER101> Some would say that the Keynesian model is psuedoscience for having untestable priors. I don't have a dog in the fight but neither do I think your screed against Austrian economics is an airtight argument.

<comment><USER109> Which model fits reality better? I think the answer is clear given the evidence.

Edit: what are the priors you are speaking of.

</comment></comment></comment></comment></comment></comment></comment></comment><comment><USER110> TL;DR - _but when I try to get them to explain to me why BitCoin is a reliable store of value, they always seem to come back with explanations about how it's a terrific medium of exchange._ (or what a clever crypto technology it is based upon).</comment>


The Fight for Root - A look into OS X System Integrity Protection - <AUTHOR> https://medium.com/@FredericJacobs/the-fight-for-root-13934b12e831

<comment><USER2> as an intermediate beginner, a question that immediately came to my mind is: what are such measures good for if an accepted, but let's say "owned", developer gets access granted on such restricted APIs?</comment>


IOHIDeous OS X Local Kernel Vulnerability - <AUTHOR> https://siguza.github.io/IOHIDeous/ <comment><USER2> Oh my I feel so sorry for apple security engineer's right now. I'm curious the motivations to release such a serious, and complex, 0day on new years eve!? Makes me wonder who brushed this guy the wrong way, or if he just wants to watch the world burn.

That said, seriously impressive work and I give him props.

<comment><USER3> > I'm curious the motivations to release such a serious, and complex, 0day on > new years eve!?

CVE 2018-0001, it's all about namespaces.

<comment><USER4> Bonus points if they issue it as CVE-2018-65536 (pen-test the world, so to speak)

EDIT: "No one would ever store the CVE incrementing fragment as a 16-bit unsigned int!"

<comment><USER5> Or in the pattern CVE-dddd-dddd ...

For additional fun, find a buffer overrun based on the CVE ID.

</comment></comment></comment></comment><comment><USER6> There are two pieces here that I find really impressive:

First, the skills and persistence to get all these moving parts going. This must have been weeks of tiring work and exploration.

Second, the fact that the author wrote an incredibly detailed posting with a lot of detail and background information.

Wonderful work.

</comment><comment><USER7> To all the kernel programmers out there, can we get a HN-level ELI5 for this?

It looks like a total system compromise is possible. Under what conditions? Any ways to ensure we don't get pwned?

<comment><USER8> Needs to be running on the host already (nothing remote), achieves full system compromise by itself, but logs you out in the process. Can wait for logout though and is fast enough to run on shutdown/reboot until 10.13.1. On 10.13.2 it takes a fair bit longer (maybe half a minute) after logging out, so if your OS logs you out unexpectedly... maybe pull the plug? And maybe don't download & run untrusted software until the bug is patched (or, you know, ever)? Also, any decent antivirus shouldn't take long to add this to their malware definitions.

Not sure if this is HN-level, but... I hope it's understandable.

<comment><USER9> > Also, any decent antivirus shouldn't take long to add this to their malware > definitions.

Have Mac users finally started running antivirus?

<comment><USER10> Apple actually creates some signatures in house with "XProtect", but I'm not sure they do the same for raw privesc exploits. I'm also not sure how thorough they are with their signature creation...

</comment></comment></comment></comment><comment><USER11> I'm actually not too surprised. I briefly delved into Mac kernel programming in the early days of Hackintoshing (in an attempt to write some missing device drivers), and the amount of complexity there seemed excessive --- to someone who had done previous kernel work in Windows and Linux. The overall impression I had was "far too many moving pieces". And as everyone should know, complexity hides bugs.

</comment><comment><USER12> Amazing writeup.

</comment><comment><USER13> The article is really eye opening for non-os guy. Love mac and worry. But sometimes you do appreciate in a sense Darth xxxxx.

</comment><comment><USER14> Responsible disclosure would have been to email@example.com. Do apple have a bug-bounty program?

<comment><AUTHOR> "Responsible Disclosure" is an Orwellian term concocted by vendors to control the actions of independent vulnerability researchers who work without real compensation, using information freely available to consumers, in competition with malicious attackers.

The term you're looking for is "Coordinated Disclosure". Yes, Coordinated Disclosure would involve sending the bug to Apple and waiting for them to publish it.

If you'd like to complain that this disclosure is irresponsible, fine. But try not to do it using the vendor's marketing term, because it's not up to them to decide what is and isn't "responsible". Other reasonable people --- myself included --- will probably disagree with you, and say that getting information out to people as comprehensively as possible is usually the most responsible thing you can do with a security bug.

<comment><USER15> I don't like the term you made up. But fine, I think this is "Irresponsible Disclosure." Is that better? Did anything change?

Vendors and non-vendors alike are all responsible for good security, and that includes working together to make this happen. If you are working against vendors because of some preconceived notion that they are "evil," that's not a good thing.

If it turns out that the author did submit to the vendor and worked together to minimize damage then I'll retract my statement. Until then I think it's irresponsible, not just "uncoordinated".

<comment><USER16> The problem is that allowing the vendor to define what is responsible, which seems these days to be expanding into giving them unlimited time to fix it, is to allow them to take unlimited time to fix it.

Cooperation or even coordination takes willingness from both parties. Let's look at the actual page apple has on reporting security issues [0]

"When we receive your email, we send an automatic email as acknowledgment. If you do not get this email, please check the email address and send again. We will respond with additional emails if we need further information to investigate a security issue."

Something seems a bit off here. I would have expected a human to get back within a few working days for a serious security problem. That might be in the auto response email, but I wouldn't be surprised if it wasn't.

"For the protection of our customers, Apple generally does not disclose, discuss, or confirm security issues until a full investigation is complete and any necessary patches or releases are available."

Does this extend to the security researcher that reports the vulnerability? If so, that's probably why there was no coordination.

[0] [https://support.apple.com/en-us/HT201220](https://support.apple.com/en- us/HT201220)

Edit: removed spelling mistake mistake.

<comment><USER17> As a Mac user, I feel it's irresponsible. I don't want zero days published before Apple has a chance to fix.

I also think that the vendor has a responsibility to fix the exploit quickly, and if not the researcher should publish and shame the vendor.

<comment> Digital-Citizen Is 3 years considered quickly enough? How about 3 years for a remotely- exploitable problem? According to The) Telegraph, "Apple was informed about the relevant flaw in iTunes in 2008, according to Brian Krebs, a security writer, but did not patch the software until earlier this month [Nov 2011], a delay of more than three years.".

It seems to me that nobody but Apple has a responsibility to its users. The public at large certainly doesn't owe Apple (or any other software proprietor) specific performance regardless of whether they report what they've found publicly or when.

Apple is also not being nice to its users by denying them software freedom: most of MacOS is proprietary and the aforementioned bug concerned iTunes, a proprietary media player. So no matter how technically savvy and willing the user is, they're not allowed to diagnose and fix the problem, prepare a fixed copy of the changed files, and help their community by sharing copies of the improved code.

"Responsible disclosure" is indeed propaganda that benefits the proprietor in a clumsy attempt to divert blame for a product people paid for with their software freedom as well as their money.</comment></comment></comment></comment></comment></comment>


Ask HN: What do startups use for customer support? - <AUTHOR>

Just curious what small startups (3-5 employees) use for customer support/bug tracking/CRM? <comment><USER2> I use Olark...but I like to think it's more of a sales tool. Then again, some of you will argue that support can be used as a sales process; I don't care how big/small of a company you run, customer service is probably the single most important factor (from a consumers standpoint) next to the product.

I've tried Zendesk and while they're great in parts like ticketing and assigning tasks to individual support members, I think they fail at recognizing at the bases of customer support. THERE IS NOTHING MORE THAT I HATE when I have to register twice. I already have an account at xyz.com, why do I have to create one to fill out a support request? It's very confusing, especially when they tune the design to be pretty similar.

LiveChat rocks, the guys at Olark are doing it really well..snapengage is pretty badass for that automatic messaging(sending a msg like: Hey, hwo are you liking the site? <\-- typo put on purpose) can really start engagements as I don't really want to send the same message every time a new visitor comes to my site.

Btw, I'm building a support system which is targeted at sites which have customers, which is really meant to cut down support(VisaulWebsiteOptimizer is expecting to cut theirs down by more than 50%), and provide a natural interface(both for your startup and customers) which basically creates a powerful help page(and no, unlike zendesk, you dont have to rehire your designer to spend a week triming it to fit your company's brand). In case you're interested send me an email at email@example.com and I'll make sure to include you in the private beta.

</comment><comment><USER3> We are currently building support software because we thought that the options did not fit our needs. We'd love to get some more beta testers. <http://suplify.me>

</comment><comment><USER4> <http://www.olark.com/>

</comment><comment><USER5> I've used <http://www.zendesk.com> before. Using <http://tenderapp.com> now and liking it.

</comment><comment><USER6> We built <http://tenderapp.com> to handle customer support on Lighthouse. Tender quickly became a product of it's own.

</comment><comment><USER7> <http://snapengage.com> (real time)

</comment><comment><USER8> <http://www.assistly.com/>

</comment><comment><USER9> <http://www.parature.com></comment>


Ask HN: Are there people who just experiment with tech and make a living? - <AUTHOR> Independently, without having to worry about commercialisation like entrepreneurs do? Like modern Leonardo DaVincis?<p>If so, how do they get paid? Writing books or something? <comment><USER2> For me this question looks like "is there a good paid job to play with the newest toys in the market"?

The closest thing I know are some evangelizers in big companies who build proofs of concepts with megacorp tech + state of the art solutions in order to display some features or products in action and how does it integrate. A similar role are the proofs of concept made by engineers/prototypers who work for an offering manager.

In a similar fashion Software Architects, or other tech decision makers, _might_ have the chance to experiment with technology for about one week every 2 years just to proof that certain technology fits the bill for their project, but usually they also additional worries, so usually all their experiments and choices are highly conservative and tend to be old proven technology which they want to double check with their existing stack.

</comment><comment><USER3> Researchers ? Tech journalists ?</comment>


How to loose $5k in no time? - <AUTHOR> http://www.kreci.net/website-flipping/how-to-loose-5k-in-no-time/

<comment><AUTHOR> Just my little suggestion to easily loose $5k or even more if you want... =)</comment>