Bitcoins (2)

However, having said bad things about bitcoins, we must stop and consider:
http://delong.typepad.com/sdj/2013/04/bill-janeway-the-two-innovation-economies.html#more

The Two Innovation Economies by William Janeway:

For 250 years, technological innovation has driven economic development. But the economics of innovation are very different for those at the frontier versus those who are followers striving to catch up. At the frontier, the innovation economy begins with discovery and culminates in speculation… progress has been achieved through trial and error. The strategic technologies that have repeatedly transformed the market economy – from railroads to the Internet – required the construction of networks whose value in use could not be known when they were first deployed.

Consequently, innovation at the frontier depends on funding sources that are decoupled from concern for economic value… cannot be reduced to the optimal allocation of resources. The conventional production function of neoclassical economics offers a dangerously misleading lens through which to interpret the processes of frontier innovation.

Financial speculation has been, and remains, one required source of funding. Financial bubbles emerge wherever liquid asset markets exist. Indeed, the objects of such speculation astound the imagination: tulip bulbs, gold and silver mines, real estate, the debt of new nations, corporate securities. Occasionally, the object of speculation has been one of those fundamental technologies – canals, railroads, electrification, radio, automobiles, microelectronics, computing, the Internet – for which financial speculators have mobilized capital on a scale far beyond what “rational” investors would provide. From the wreckage that has inevitably followed, a succession of new economies has emerged. Complementing the role of speculation, activist states have played several roles… transcend[ing] narrow economic calculation: social development, national security, conquering disease….

Bubbles are part of nature.
When the bubbles burst, there may yet remain a valuable technology, sometimes not.

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Brother, Can Ya Spare A Bitcoin?

In Yahoo News:

Advocates describe Bitcoin as the foundation stone of a Utopian economy: no borders, no change fees, no closing hours, and no one to tell you what you can and can't do with your money. Just days ago the total value of bitcoins in circulation hit $2 billion, up from a tiny fraction of that just last year.

But late Wednesday, Bitcoin crashed, shedding more than 60 percent of its value in the space of a few hours before recouping some of its losses. Critics say the roller coaster currency movements are just another sign that Bitcoin is a bubble waiting to burst.

Jackdaws are also known for their lust for shiny objects, which they hoard hither and yon.

"Bubble" is just another name for "Madness" and "Folly".

The exchange the bitcoin is traded on is Mt. Gox, and it provides the following:

Hi everyone, just a quick update on the situation and what happened last night.
First of all we would like to reassure you but no we were not last night victim of a DDoS but instead victim of our own success!

Indeed the rather astonishing amount of new account opened in the last few days added to the existing one plus the number of trade made a huge impact on the overall system that started to lag. As expected in such situation people started to panic, started to sell Bitcoin in mass (Panic Sale) resulting in an increase of trade that ultimately froze the trade engine!

To give you an idea of how impressive things were here are some numbers that we would love to share with you guys:
- The number of trades executed triple in the last 24hrs.
- The number of new account opened went from 60k for March alone to 75k new account created for the first few days of April! We now have roughly 20,000 new accounts created each day.
Due to these facts we have been busy working on improving things since last week and our team has been working around the clock to improve Mt.Gox to catch up with the demand. We will continue to release several updates today and in the coming few days to improve our system overall performance.

Also please note that we may have to close the exchange for two hours in the next 12 to 24hrs to add several new servers to our system.
Thank you for your understanding and continuous support!

I can't wait to invest in something run by these fellows.
I especially am fond of statements issued by financial institutions which begin listing a number of points with an expression such as "First of all...", and then proceed to ignore all the following ordinal numbers.

New servers are the ticket !

Bitcoin avoids all the authorities who muck up the real world currencies.
It also allows every stock or currency scam in the world to be run.

Read Mt. Gox's Facebook page; it is rather pathetic:
https://www.facebook.com/MtGox/posts/453409538076792

The only person who would think such a thing a good idea is my mother's investment guy.

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