blog/data/2010-12-11-bitcoin.txt

   1 Title: Some thoughts on BitCoins
   2 Tags: english, debian, bitcoin, personvern, sikkerhet
   3 Date: 2010-12-11 15:10
   4
   5 <p>As I continue to explore
   6 <a href="http://www.bitcoin.org/">BitCoin</a>, I've starting to wonder
   7 what properties the system have, and how it will be affected by laws
   8 and regulations here in Norway.  Here are some random notes.</p>
   9
  10 <p>One interesting thing to note is that since the transactions are
  11 verified using a peer to peer network, all details about a transaction
  12 is known to everyone.  This means that if a BitCoin address has been
  13 published like I did with mine in my initial post about BitCoin, it is
  14 possible for everyone to see how many BitCoins have been transfered to
  15 that address.  There is even a web service to look at the details for
  16 all transactions.  There I can see that my address
  17 <a href="http://blockexplorer.com/address/15oWEoG9dUPovwmUL9KWAnYRtNJEkP1u1b">15oWEoG9dUPovwmUL9KWAnYRtNJEkP1u1b</a>
  18 have received 16.06 Bitcoin, the
  19 <a href="http://blockexplorer.com/address/1LfdGnGuWkpSJgbQySxxCWhv8MHqvwst3">1LfdGnGuWkpSJgbQySxxCWhv8MHqvwst3</a>
  20 address of Simon Phipps have received 181.97 BitCoin and the address
  21 <a href="http://blockexplorer.com/address/1MCwBbhNGp5hRm5rC1Aims2YFRe2SXPYKt">1MCwBbhNGp5hRm5rC1Aims2YFRe2SXPYKt</A>
  22 of EFF have received 2447.38 BitCoins so far.  Thank you to each and
  23 every one of you that donated bitcoins to support my activity. The
  24 fact that anyone can see how much money was transfered to a given
  25 address make it more obvious why the BitCoin community recommend to
  26 generate and hand out a new address for each transaction.  I'm told
  27 there is no way to track which addresses belong to a given person or
  28 organisation without the person or organisation revealing it
  29 themselves, as Simon, EFF and I have done.</p>
  30
  31 <p>In Norway, and in most other countries, there are laws and
  32 regulations limiting how much money one can transfer across the border
  33 without declaring it.  There are money laundering, tax and accounting
  34 laws and regulations I would expect to apply to the use of BitCoin.
  35 If the Skolelinux foundation
  36 (<a href="http://linuxiskolen.no/slxdebianlabs/donations.html">SLX
  37 Debian Labs</a>) were to accept donations in BitCoin in addition to
  38 normal bank transfers like EFF is doing, how should this be accounted?
  39 Given that it is impossible to know if money can cross the border or
  40 not, should everything or nothing be declared?  What exchange rate
  41 should be used when calculating taxes?  Would receivers have to pay
  42 income tax if the foundation were to pay Skolelinux contributors in
  43 BitCoin?  I have no idea, but it would be interesting to know.</p>
  44
  45 <p>For a currency to be useful and successful, it must be trusted and
  46 accepted by a lot of users.  It must be possible to get easy access to
  47 the currency (as a wage or using currency exchanges), and it must be
  48 easy to spend it.  At the moment BitCoin seem fairly easy to get
  49 access to, but there are very few places to spend it.  I am not really
  50 a regular user of any of the vendor types currently accepting BitCoin,
  51 so I wonder when my kind of shop would start accepting BitCoins.  I
  52 would like to buy electronics, travels and subway tickets, not herbs
  53 and books. :) The currency is young, and this will improve over time
  54 if it become popular, but I suspect regular banks will start to lobby
  55 to get BitCoin declared illegal if it become popular.  I'm sure they
  56 will claim it is helping fund terrorism and money laundering (which
  57 probably would be true, as is any currency in existence), but I
  58 believe the problems should be solved elsewhere and not by blaming
  59 currencies.</p>
  60
  61 <p>The process of creating new BitCoins is called mining, and it is
  62 CPU intensive process that depend on a bit of luck as well (as one is
  63 competing against all the other miners currently spending CPU cycles
  64 to see which one get the next lump of cash).  The "winner" get 50
  65 BitCoin when this happen.  Yesterday I came across the obvious way to
  66 join forces to increase ones changes of getting at least some coins,
  67 by coordinating the work on mining BitCoins across several machines
  68 and people, and sharing the result if one is lucky and get the 50
  69 BitCoins.  Check out
  70 <a href="http://www.bluishcoder.co.nz/bitcoin-pool/">BitCoin Pool</a>
  71 if this sounds interesting.  I have not had time to try to set up a
  72 machine to participate there yet, but have seen that running on ones
  73 own for a few days have not yield any BitCoins througth mining
  74 yet.</p>
  75
  76 <p>Update 2010-12-15: Found an <a
  77 href="http://inertia.posterous.com/reply-to-the-underground-economist-why-bitcoi">interesting
  78 criticism</a> of bitcoin.  Not quite sure how valid it is, but thought
  79 it was interesting to read.  The arguments presented seem to be
  80 equally valid for gold, which was used as a currency for many years.</p>