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 cross 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.