As I continue to explore
BitCoin, I've starting to wonder
what properties the system have, and how it will be affected by laws
and regulations here in Norway. Here are some random notes.
One interesting thing to note is that since the transactions are
verified using a peer to peer network, all details about a transaction
is known to everyone. This means that if a BitCoin address has been
published like I did with mine in my initial post about BitCoin, it is
possible for everyone to see how many BitCoins have been transfered to
that address. There is even a web service to look at the details for
all transactions. There I can see that my address
15oWEoG9dUPovwmUL9KWAnYRtNJEkP1u1b
have received 16.06 Bitcoin, the
1LfdGnGuWkpSJgbQySxxCWhv8MHqvwst3
address of Simon Phipps have received 181.97 BitCoin and the address
1MCwBbhNGp5hRm5rC1Aims2YFRe2SXPYKt
of EFF have received 2447.38 BitCoins so far. Thank you to each and
every one of you that donated bitcoins to support my activity. The
fact that anyone can see how much money was transfered to a given
address make it more obvious why the BitCoin community recommend to
generate and hand out a new address for each transaction. I'm told
there is no way to track which addresses belong to a given person or
organisation without the person or organisation revealing it
themselves, as Simon, EFF and I have done.
In Norway, and in most other countries, there are laws and
regulations limiting how much money one can transfer across the border
without declaring it. There are money laundering, tax and accounting
laws and regulations I would expect to apply to the use of BitCoin.
If the Skolelinux foundation
(SLX
Debian Labs) were to accept donations in BitCoin in addition to
normal bank transfers like EFF is doing, how should this be accounted?
Given that it is impossible to know if money can across the border or
not, should everything or nothing be declared? What exchange rate
should be used when calculating taxes? Would receivers have to pay
income tax if the foundation were to pay Skolelinux contributors in
BitCoin? I have no idea, but it would be interesting to know.
For a currency to be useful and successful, it must be trusted and
accepted by a lot of users. It must be possible to get easy access to
the currency (as a wage or using currency exchanges), and it must be
easy to spend it. At the moment BitCoin seem fairly easy to get
access to, but there are very few places to spend it. I am not really
a regular user of any of the vendor types currently accepting BitCoin,
so I wonder when my kind of shop would start accepting BitCoins. I
would like to buy electronics, travels and subway tickets, not herbs
and books. :) The currency is young, and this will improve over time
if it become popular, but I suspect regular banks will start to lobby
to get BitCoin declared illegal if it become popular. I'm sure they
will claim it is helping fund terrorism and money laundering (which
probably would be true, as is any currency in existence), but I
believe the problems should be solved elsewhere and not by blaming
currencies.
The process of creating new BitCoins is called mining, and it is
CPU intensive process that depend on a bit of luck as well (as one is
competing against all the other miners currently spending CPU cycles
to see which one get the next lump of cash). The "winner" get 50
BitCoin when this happen. Yesterday I came across the obvious way to
join forces to increase ones changes of getting at least some coins,
by coordinating the work on mining BitCoins across several machines
and people, and sharing the result if one is lucky and get the 50
BitCoins. Check out
BitCoin Pool
if this sounds interesting. I have not had time to try to set up a
machine to participate there yet, but have seen that running on ones
own for a few days have not yield any BitCoins througth mining
yet.
Update 2010-12-15: Found an interesting
criticism of bitcoin. Not quite sure how valid it is, but thought
it was interesting to read. The arguments presented seem to be
equally valid for gold, which was used as a currency for many years.