Month: July 2015
Creating a Bitcoin Economy
There are several ingredients needed to create a working economy in any currency. First, people must have the currency and second, there must be things to spend it on. This doesn’t happen overnight, but Bitcoin is well on it’s way to creating an economy, but there are several hurdles to this that must be overcome before that happens.
As I mentioned above, first, people must get the currency. That can either come through working for it, investing in it, or winning it in games. Naturally, if people work for it, that is the best option, but then there has to be something to spend it on, or it will just all be converted back to fiat. The game option can also work, and already there are gaming sites sticking their big toe into this market.
Next, there has to be something to spend it on, otherwise it just either sits around or is out exchanged to fiat.
I was an early adapter of e-gold, the online gold backed currency that thrived from the late ’90’s until the US government shut it down. E-gold, even at its height, was not a big as bitcoin is now, but it was around long enough to create a vibrant economy. I know because my business at the time revolved around the e-gold market, and I did very well with it. From that experience, beginning in 1997, I watched as a thriving economy developed around the currency. As you may well know, there is a world of difference between e-gold and bitcoin, but most of that will have to wait for another article.
One of the problems bitcoin has is that governments and banks hate bitcoin with a passion, because they are threatened by it. So they have pulled out all stops to try and destroy it. Yet, through all the trials and tribulations, bitcoin is still with us and it is growing by leaps and bounds.
One of the problems with bitcoin, and one of the things that kept me out of it for so long, is that it by itself has no intrinsic value. E-gold, on the other hand, had intrinsic value and therefore had a perceived value of being “as good as gold,” whereas bitcoin has no such value behind it. I believe this is one of the reasons for its market volatility, but I am sure that governments and banks also have a hand in this. Also, the failures of major exchangers hasn’t helped either, which is why it is a very bad idea to leave your bitcoins in the hands of an exchanger. As a matter of prudence, you should immediately withdraw all bitcoins to a wallet that is not affiliated with an exchanger, and you also should not store your coins in one of those web based wallets unless the company behind it is very solid. I myself use the Electrum wallet for various reasons. It’s too much to go into here, but your choice of wallet is very important.
Establishing the Bitcoin Economy
Just how, then, would one go from where we are today to establishing a real bitcoin economy?
As discussed above, people ideally should either earn bitcoin through their work, or, secondarily, get it for playing games or getting a return on an investment. That is the engine that really propels an economy forward.
In the days of e-gold, and later, Liberty Reserve, one of the main drivers was online games. Gambling games, high yield investment programs and other things made up about 70% of their transaction volume. Naturally, this meant that online scams and ponzi schemes were one of their main sources of transaction volume. And sometimes, that volume was red hot. Many exchangers did a brisk business because so many people wanted to get into the “latest investment program,” which most of the time was little more than a scam. I will have to say, though, that some of these old ponzi schemes were very well run and if you got in early enough you were able o do quite well, as many of these scams lasted for a year and sometimes two years. I haven’t seen anything that good in a long time.
In fact, a whole small industry developed covering the latest “investment program,” and they rated them. Some of these schemes did well, others did not. Today it seems that nobody knows how to operate a scam like this, so they just run with your $50.00 when they could have had thousands. I even heard of people mortgaging their houses to “invest” in some of these programs. It was just insane, but that is a function of human nature and it’s desire to get something for nothing. One operator had his scam going for I think about 4 years, but, in the end, they all ran with the money. I think the best one was both it’s own e-currency, called Osgold, and it’s evil twin, Osops. I got in early, so I made a good amount of money there, but at the end, there were thousands of dollars in my Osgold account I couldn’t get out, but by then it didn’t matter because I had already made many times what I initially invested.
But, that is NOT the way to build a “real” economy. I sincerely hope that bitcoin doesn’t turn into the den of thieves that used to inhabit these early e-currencies. No, what I am talking about is the creation of a real economy with legitimate activity, not one based on games and drugs. And that is the hard part.
The first component, then, is to give people a legitimate way to earn money. I have developed a website called Virtual Outsourcing. Right now I am using it primarily as a developer site, but I have hidden pages that can be made public that can turn it into an outsourcing site such as Freelancer and many others, but with the difference that there is actual human interaction so that employers needs can be matched with potential contractors. And payment is primarily through Bitcoin. If you have an interest in this, I need a joint venture partner, so email me or send me a PM.
Your Own Businesses
I have been an offshore service provider for many years, so I know how to best protect yourself and your business. Ideally, you, personally, should be located offshore, but you can start out on the cheap by incorporating your company, using nominees, and using offshore bank accounts or an offshore banking account to get you started.
Our popular Offshore Privacy Power Pack provides all of this. You get a private trust to own your shares, or a nominee service, you get an IBC or offshore LLC, an offshore banking account with optional debit card, and, of course offshore bitcoin webhosting. This is done through our sister company, Bitcoinhostme.com, and you can find a full description of the Power Pack here. With this and an anonymous vpn service, you will be all set up to work on your business wherever you are in the world. You can also use our Privacy Domain registration service, available through Bitcoinhostme.com.
This way, you and your business will be protected from the predations of which ever high tax country you live in. And, since you are not the “owner” of said business, you don’t have to pay the ridiculous worldwide income tax to Uncle Sam. If this is what you want to do, the optional nominee service should be used as you can use the nominee to open either an offshore bank account or the super private offshore banking account. You can find all of this and more at OffshorEarnings.
While the structure of Bitcoin negates most of the need for banks, there is still a need for some kind of financial institutions to make the system usable.
For example, if you aren’t satisfied with the level of privacy afforded by Bitcoin, you would turn to a depository entity to meet that need, and pay many of your bills that way instead of out in the open. You could also mopve funds between accounts in private. As far as the blockchin is concerned, the coins haven’t moved, but, in the background, they could have moved a dozen times or more.
I have a sample system already set up, based on a little known system called Loom. The system works very well, and the admin has no access to your funds or your passphrase. The drawback, of course, is that there is no password recovery possible. However, since the system is fully encrypted and is NOT database driven, even if some government agency did seize the server [unlikely because the server is in an undisclosed location offshore], all they would have is a piece of encrypted junk and even if they broke the encryption, unless the customer is real stupid, there is no personal identifying information.
You can see what I mean by going to our site at Offshore Cashier, which can also double as an exchanger to buy and sell bitcoin and other ecurrencies.
Let me interject here a very important point. At this stage of the game, it is INPERATIVE that both the admin of these businesses as well as the servers be offshore, so that they are all beyond any government’s reach, especially the US government and certain governments in the EU. If the political situation is not taken into consideration, and the businesses are foolishly located in either of these two jurisdictions, then eventualy the government will either enforce its policies on the businesses or shut them down. The attitude of the US government, especially, must be given serious consideration and for a group of businesses like I propose to survive, it simply MUST be located outside both of those places. Even China or Russia would be better, but not ideal. So, that leaves many offshore jurisdictions as the primary choices.
Secondly, the operator[s] of the companies need to be insulated from extradition requests should the US or any other government seek criminal prosecution for alleged crimes being committed. My own personal situation fits that bill, as I am in an offshore jurisdiction and immune to extradition due to my citizenship in said jurisdiction. However, I have taken the further precaution of locating the servers elsewhere and NOT DEALING WITH LOCALS, thus in no way can I have committed a local crime as this country only looks at crimes against it’s own citizens in such cases, and the businesses are located outside the country, thus this country has no jurisdiction over the business activities. This level of planning is absolutely imperative, as the US government has a long track record of making false charges and extraditing people based on those false charges. Then, the person is dragged through the sham “justice system” in the US and thrown in jail when they have done nothing at all. I, for one, have no desire to engage in such games.
Of course, you can hide behind Tor and an encrypted VPN service and use pgp for private communications, but that is your choice. Just make sure the vpn is NOT located in the US and does not keep server logs. After much searching I found one that fits that bill. You can check them out by clicking here, and I can tell you from my own experience that the service works very well, with servers all over the world.
Communications also need to be secured. My two favorites are Confidesk, with servers in Switzerland and Ireland, and Unseen, with servers in Iceland, possibly one of the most secure datahavens of all. If you want to contact me at that address, my email is firstname.lastname@example.org I will include my public key at the end of this article in case someone wants to contact me there. My address at Confidesk is email@example.com. In order to get their protection, though, you should open an account there and contact me internally. The same can be said for Unseen. It is always safest to pass email around through the same system. I would definitely avoid Hushmail, which is located in Canada and so can be forced to “tell all” at the government’s whim, and also safe-mail.net, which has servers in New York. These are both pathetic jokes as far as I am concerned, and you should look with suspicion on any US, Canadian, UK, or Australia based service because all of those countries are now run by Neo Nazi trash.
Unseen also supports p2p chat, voice, and video, and that might be a good platform we can use to have our meetings. Let me know if you are interested in chatting about this and we will work with the interested parties to see if we can agree to a time.