Category Archives: Complementary Currencies

Bit O’Money: Who’s Behind the Bitcoin Bubble? | The New York Observer

It was a tweet from a stranger that crystallized the concept of Bitcoin for Bruce Wagner. “I can explain the benefit of Bitcoin in four words,” one of Mr. Wagner’s 12,000-some Twitter followers wrote. “Briefcases full of cash.”At the time, briefcases full of pennies seemed more apt—one unit of the new virtual currency was then worth $0.06. Then, in one day, the price of a Bitcoin jumped to $0.22. Mr. Wagner, a former I.T. specialist who now produces and stars in his own web TV shows, became obsessed with the things. He sat at his computer, too excited to eat, reading the myriad white papers, trade blogs, technical analyses and forum discussions about Bitcoin. For five days, he hardly slept. He just kept thinking, This is amazing. This is going to change everything.The last time he’d been this excited was when Windows came out. He got his hands on some Bitcoins and sold when the price doubled. It kept climbing. He invested more.Bitcoin is Internet gold, a digital currency developed by a community of programmers in 2009 that represents the first plausible manifestation of an unregulated global “cryptocurrency” first imagined by anarchist computer hackers in the late 90’s. Bitcoins are snippets of code that use encryption to prevent counterfeiting and double-spending. Complex algorithms control the money supply, in theory replacing the need for banks or a central regulator. Right now Bitcoins can be generated—or “mined”—by running a program on a powerful computer. This task requires exponentially more time and processing power as the number of Bitcoins grows, and the absolute number of Bitcoins is capped at 21 million, mimicking the scarcity of gold. There are now 6,539,450 in circulation; $2 million worth were traded on the main Bitcoin exchange Mt. Gox on Friday.

via Bit O’Money: Who’s Behind the Bitcoin Bubble? | The New York Observer.

Advertisements

Can You Be Prosecuted for Using Gold or Silver? – Liberty Dollar by Bill Rounds

The Liberty Dollar case has had a huge impact on the world of gold and silver trading, investing, ownership and use. I covered a lot of ground in Part I and Part II, but there is another important aspect of that case that leaves the legal landscape partly shrouded in ominous and threatening clouds. What is the risk of criminal prosecution or criminal conviction to those who make or use gold and silver rounds of “original design”?

Is There A Risk Of Prosecution For Trading With Gold And Silver

To answer that, we have to fully understand the actual law that was broken. We also need to consider the existing law that was not at issue in the Liberty Dollar case, the threats of prosecutors and the effect of potential constitutional challenges to those laws if a prosecution were undertaken.

Mr. von NotHaus Violated Fraud Based Statutes

The Liberty Dollar Trial was about fraud, not a private currency system as prosecutor Anne Tomkins falsely implied. The jury was asked to decide if the elements of fraud and conspiracy to commit fraud were met, nothing else. No other legal basis for the prosecution was ever presented to the jury and implying that there was another legal basis is mis-stating the facts of the case.

Critical Facts of The Case

Liberty Dollar made, sold, and used rounds that had many similarities to official US government coinage. The rounds were minted with a face value but the FRN value of the silver in the coins was less than this face value. Liberty Dollar encouraged exchanging Liberty Dollars with people who were unaware that the underlying FRN value of the silver was less than the denomination minted on its face. Liberty Dollar profited from this difference in value.

via Can You Be Prosecuted for Using Gold�or�Silver? – Liberty�Dollar by Bill Rounds.

Seth Lipsky: When Private Money Becomes a Felony Offense – WSJ.com

The next chapter in the struggle over sound money may be the case of a newly minted felon named Bernard von NotHaus. Mr. von NotHaus was convicted this month of counterfeiting money by issuing silver coins called Liberty Dollars. His company’s website says it’s been taken down by court order, and absent a successful appeal he could spend years in jail.

Mr. von NotHaus was convicted under a section of the United States Code that makes it a crime to manufacture or pass “any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design.” The law was enacted during the Civil War, soon after the Union began issuing the paper scrip known as greenbacks.

It is too soon to say what Mr. von NotHaus’s grounds of appeal will be, but it is not too soon to say that his case will be one to watch at a time when so many believe our economic troubles are tied to the fact that the dollar has become a fiat currency, and when leaders world-wide are calling for a new reserve currency.

So alarming has been the collapse of the dollar that the legislatures in as many as a dozen American states are considering using their authority—under Article 1, Section 10 of the Constitution—to make legal tender out of gold and silver coins. Lest the ghost of Friedrich Hayek or any other advocate of privately issued money get any bright ideas, however, the von NotHaus verdict will stand as a warning.

The warning is contained in paragraph 33 of the indictment handed up against Mr. von NotHaus in a courtroom at Statesville, N.C. It said:

“Article 1, Section 8, Clause 5 of the United States Constitution delegates to Congress the power to coin money and to regulate the value thereof. This power was delegated to Congress in order to establish a uniform standard of value. Along with the power to coin money, Congress has the concurrent power to restrain the circulation of money not issued under its own authority, in order to protect and preserve the constitutional currency for the benefit of the nation. Thus, it is a violation of law for private coin systems to compete with the official coinage of the United States.”

via Seth Lipsky: When Private Money Becomes a Felony Offense – WSJ.com.

Pay With Facebook? No Thanks. | Fast Company

Lisa Rutherford points out in this excellent column at VentureBeat, any de facto online currency worth its bytes will have to be valid across several verticals. As Rutherford says, other online currencies have existed before–social network Hi5 has coins, Microsoft has Points, and Second Life has its own virtual bank. But never before has any one scrip shown the potential to reach so many users, with the potential to buy so much stuff.

I’m not an expert on numismatics, so there are probably more ramifications to this scenario than I’m acknowledging. But with Facebook Credits having different exchange rates all over the world, users will be able to hedge currencies, gain currency advantages, and buy and sell according to the currency markets. I’m not saying this is a bad thing; should Facebook Credits gain real gravity and the marketplace expand to real goods and services, there will be money to be made. But by making itself a marketplace and an issuer of scrip, Facebook may have invited a more complex economy than it ever intended.

Add to that issues of security, and the whole concept becomes troubling. Facebook has had problems with its application approval process as recently as two weeks ago, and can’t seem to kick its recent rout of phishing attacks, either. If you look at a company like PayPal, with its legions of account officers, its Fort Knox-level online security, and its IRS-like tenacity, you start to get an idea of the seriousness of the Web payments business. PayPal manages over 70 million active accounts, and safeguards the financial information for another 100+ million inactive ones. With 200 million users of its own, Facebook is going to need an internal PayPal of its own, and that’s a hard department to conjure from scratch–even for Silicon Valley’s golden boy.

via Pay With Facebook? No Thanks. | Fast Company.

via Pay With Facebook? No Thanks. | Fast Company.

Local Exchange Trading Systems

Local Exchange Trading Systems (LETS) also known as LETSystems are local, non-profit exchange networks in which goods and services can be traded without the need for printed currency. In some places, e.g. Toronto, the scheme has been called the Local Employment and Trading System. Michael Linton originated the term “Local Exchange Trading System” in 1983 and, for a time ran the Comox Valley LETSystems in Courtenay, British Columbia. The system he designed was intended as an adjunct to the national currency, rather than a replacement for it, although there are examples of individuals who have managed to replace their use of national currency through inventive usage of LETS. LETS networks use interest-free local credit so direct swaps do not need to be made. For instance, a member may earn credit by doing childcare for one person and spend it later on carpentry with another person in the same network. In LETS, unlike other local currencies, no scrip is issued, but rather transactions are recorded in a central location open to all members. As credit is issued by the network members, for the benefit of the members themselves, LETS are considered mutual credit systems.

via national-currency.

via national-currency.