blog/Some_thoughts_on_BitCoins.html

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   5   <title>Petter Reinholdtsen: Some thoughts on BitCoins</title>
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  11   <h1>
  12        <a href="http://people.skolelinux.org/pere/blog/">Petter Reinholdtsen</a>
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  19  <div class="entry">
  20   <div class="title">Some thoughts on BitCoins</div>
  21   <div class="date">2010-12-11 15:10</div>
  22   <div class="body">
  23 <p>As I continue to explore
  24 <a href="http://www.bitcoin.org/">BitCoin</a>, I've starting to wonder
  25 what properties the system have, and how it will be affected by laws
  26 and regulations here in Norway.  Here are some random notes.</p>
  27
  28 <p>One interesting thing to note is that since the transactions are
  29 verified using a peer to peer network, all details about a transaction
  30 is known to everyone.  This means that if a BitCoin address has been
  31 published like I did with mine in my initial post about BitCoin, it is
  32 possible for everyone to see how many BitCoins have been transfered to
  33 that address.  There is even a web service to look at the details for
  34 all transactions.  There I can see that my address
  35 <a href="http://blockexplorer.com/address/15oWEoG9dUPovwmUL9KWAnYRtNJEkP1u1b">15oWEoG9dUPovwmUL9KWAnYRtNJEkP1u1b</a>
  36 have received 16.06 Bitcoin, the
  37 <a href="http://blockexplorer.com/address/1LfdGnGuWkpSJgbQySxxCWhv8MHqvwst3">1LfdGnGuWkpSJgbQySxxCWhv8MHqvwst3</a>
  38 address of Simon Phipps have received 181.97 BitCoin and the address
  39 <a href="http://blockexplorer.com/address/1MCwBbhNGp5hRm5rC1Aims2YFRe2SXPYKt">1MCwBbhNGp5hRm5rC1Aims2YFRe2SXPYKt</A>
  40 of EFF have received 2447.38 BitCoins so far.  Thank you to each and
  41 every one of you that donated bitcoins to support my activity. The
  42 fact that anyone can see how much money was transfered to a given
  43 address make it more obvious why the BitCoin community recommend to
  44 generate and hand out a new address for each transaction.  I'm told
  45 there is no way to track which addresses belong to a given person or
  46 organisation without the person or organisation revealing it
  47 themselves, as Simon, EFF and I have done.</p>
  48
  49 <p>In Norway, and in most other countries, there are laws and
  50 regulations limiting how much money one can transfer across the border
  51 without declaring it.  There are money laundering, tax and accounting
  52 laws and regulations I would expect to apply to the use of BitCoin.
  53 If the Skolelinux foundation
  54 (<a href="http://linuxiskolen.no/slxdebianlabs/donations.html">SLX
  55 Debian Labs</a>) were to accept donations in BitCoin in addition to
  56 normal bank transfers like EFF is doing, how should this be accounted?
  57 Given that it is impossible to know if money can across the border or
  58 not, should everything or nothing be declared?  What exchange rate
  59 should be used when calculating taxes?  Would receivers have to pay
  60 income tax if the foundation were to pay Skolelinux contributors in
  61 BitCoin?  I have no idea, but it would be interesting to know.</p>
  62
  63 <p>For a currency to be useful and successful, it must be trusted and
  64 accepted by a lot of users.  It must be possible to get easy access to
  65 the currency (as a wage or using currency exchanges), and it must be
  66 easy to spend it.  At the moment BitCoin seem fairly easy to get
  67 access to, but there are very few places to spend it.  I am not really
  68 a regular user of any of the vendor types currently accepting BitCoin,
  69 so I wonder when my kind of shop would start accepting BitCoins.  I
  70 would like to buy electronics, travels and subway tickets, not herbs
  71 and books. :) The currency is young, and this will improve over time
  72 if it become popular, but I suspect regular banks will start to lobby
  73 to get BitCoin declared illegal if it become popular.  I'm sure they
  74 will claim it is helping fund terrorism and money laundering (which
  75 probably would be true, as is any currency in existence), but I
  76 believe the problems should be solved elsewhere and not by blaming
  77 currencies.</p>
  78
  79 <p>The process of creating new BitCoins is called mining, and it is
  80 CPU intensive process that depend on a bit of luck as well (as one is
  81 competing against all the other miners currently spending CPU cycles
  82 to see which one get the next lump of cash).  The "winner" get 50
  83 BitCoin when this happen.  Yesterday I came across the obvious way to
  84 join forces to increase ones changes of getting at least some coins,
  85 by coordinating the work on mining BitCoins across several machines
  86 and people, and sharing the result if one is lucky and get the 50
  87 BitCoins.  Check out
  88 <a href="http://www.bluishcoder.co.nz/bitcoin-pool/">BitCoin Pool</a>
  89 if this sounds interesting.  I have not had time to try to set up a
  90 machine to participate there yet, but have seen that running on ones
  91 own for a few days have not yield any BitCoins througth mining
  92 yet.</p>
  93
  94 <p>Update 2010-12-15: Found an <a
  95 href="http://inertia.posterous.com/reply-to-the-underground-economist-why-bitcoi">interesting
  96 criticism</a> of bitcoin.  Not quite sure how valid it is, but thought
  97 it was interesting to read.  The arguments presented seem to be
  98 equally valid for gold, which was used as a currency for many years.</p>
  99 </div>
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