...If somebody cleans out my bank account I have several very direct avenues of legal recourse....

Yes, well, maybe you might have - today, in any event - but this would seem to be inapplicable if you live in Cyprus/Europe.

The currency "backing" you perceive is just that - i.e., perceived. Modern money is generally created by things including credit creation, printing, and fiat, supported by fractional reserve banking (a virtual accounting myth) and enabled with stability of notional value through trust. Military or economic might do not of themselves "prove" or "command" money to have/retain value - as you seem to be suggesting - the USSR and China already tried that and failed (QED).
No, breach that trust and the whole thing collapses like a house of cards and the notional value evaporates.
So...guess what just happened in Cypress?

I am very interested in, but also ambivalent about Bitcoin and crypto-currency generally, but I do at least see that in Bitcoin the currency seems to be its own gold standard (as I wrote in a separate post), and trust seems to be made irrelevant and is substituted by the security and statistical authenticity inherent in the incorruptible cryptographic protocol. I would suggest the possibility that Bitcoin - or other crypto-currency - could be considered as a potential new "gold standard", against which all other currencies could be valued.
Nationa/International settlement and exchange could even take place through the medium of the crypto-currency, thereby reducing systemic risk. Forex trading could become obsolete.

I recommend maintaining a healthy skepticism toward any of the MSM (mainstream media) running TV docos or writing pro-Bitcoin or anti-Bitcoin pieces. They are arguably not doing this from the perspective of good journalism, since most of them don't seem to know the meaning of that term. So why would they be doing it? The answer is that, generally speaking, the MSM communicate only those religio-political marketing messages and propaganda that they are told to communicate (QED), and so the messages are dumbed down and NTR (No Thinking Required), aimed at the standard reading ability and/or mentality of a 13 or 14-year old.

The current artificial and deliberate cap of about 20 million BTC numbers (objects) that can be created in/by the Bitcoin protocol is very interesting in that it is a control - it safely controls the experiment and caps the bubble that we see inflating/deflating (it is currently re-inflating after having had one major deflation).
This control affects/limits the endogenous money supply (M3) in this enclosed system, but not necessarily the velocity of circulation of the money. The latter may be theoretically unlimited, but in practice could be under a constraint set via a function determining the necessary CPU cycle time forced to be consumed in operating the protocol.

I'm not too well up on the terminology here Iain - could you explain what you mean by "operating the protocol"? Do you mean 'creation of' - or simply trading bitcoin? I thought only creation was affected by CPU etc. but confused when you say this will affect the "velocity of circulation".

I am very interested in, but also ambivalent about Bitcoin and crypto-currency generally, but I do at least see that in Bitcoin the currency seems to be its own gold standard (as I wrote in a separate post), and trust seems to be made irrelevant and is substituted by the security and statistical authenticity inherent in the incorruptible cryptographic protocol. I would suggest the possibility that Bitcoin - or other crypto-currency - could be considered as a potential new "gold standard", against which all other currencies could be valued.
Nationa/International settlement and exchange could even take place through the medium of the crypto-currency, thereby reducing systemic risk. Forex trading could become obsolete.

I wonder what would/will happen if/when another similar currency is created ... (I suppose that would only happen if Bitcoin is a 'success' - in the medium term at least.)

^Thanks Iain
"the protocol apparently has to be involved to exchange Bitcoins" would explain it.

Re the circulation: unless it's value stabilises, this will be useless as a currency AFAICS. Even then it would have to stabilise at a very high value. At very high value, it could be divided in 'billionths' or 'trillionths'. The trickle down effect would take a long time to be felt by those without Bitcoin though....

Ska's link was interesting (http://www.naturalnews.com/039830_bitcoin_bubble_crash.html).
I quote -
• Bitcoin is a currency that's subject to human psychology
• As such, it is subject to the "greed" and "fear" herd mentalities of human investors

Sounds like something Jeeves would say to Wooster - "it's subject to human psychology"
I think in order for a money to be successful in terms of everyday use it has to somehow avoid those pitfalls.
I like the idea of a mutual credit system where one can create 'money' through work - rather than (mostly) needing the money to be available before work can be done - but it's not something I know much about. AFAIK it has only ever been implemented locally, on very small scales.

^Well the idea of a mutual credit system is to 'become a general medium of exchange'.

I'm not sure what exactly you mean when you say that beyond local, you're creating a 'private' currency - but I think you might be right
- I presume you mean with all the pitfalls of todays currencies.

Seems to be going back up now:

$184.5/BTC*

*Correct at time of writing

Another interesting posting on Bitcoin...

http://www.reddit.com/r/Bitcoin/comments/18f3pd/i_have_my_entire_retirement_and_savings_invested/

Glad to read that he did the smart thing to correct what could have been a really big foolish mistake and now whatever he makes from what he still has invested will be pure profit without risk.

But it could have easily become a situation where a fool and his money were soon parted, with him living on no more than $150.00/wk for a long time, if he defaulted on those credit cards and they obtained judgements against him, along with permission to garnish his wages till it was all paid off.

Was that... sarcasm?

Just for fun, I installed a bitcoin miner yesterday evening, and joined a mining pool.

If my maths is any good, it seemed like - at the current rate - it would take me around 400 days to mine one single BTC, even though I used a GPU miner (on my not-so-recent-but-still-relatively-beefy GTX460... but OK, AMD/ATI cards are better for mining). And do note the "at the current rate" - mining gets progressively harder as the minting-limit approaches.

Guess one has to gamble the bubble (or resort to botcoining :p) in order to cash out on the scheme - and neither is my cuppa tea.

As soon as I posted the above, the MTGOX website re-appeared.  Perfect timing really.

Lets see what happens from here.

<Update>

Trading is halted until 2013-04-12 02:00am UTC to allow the market to cooldown following the drop in price. Read more details on the support. Additionally trading fees will not be charged within 48 hours of trading resuming (until 2013-04-14 02:00am UTC).

</Update>


The latest press release from MTGOX currently says:

TOKYO - JAPAN - April 11, 2013  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 tripled 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! 
Regards
Mt.Gox Co. Ltd Team.

Hacker News has a post by Dan Kaminsky who casually attempted to do a hack on bitcoin - and (somewhat predictably) failed.

Not much depth in the article, but it does provide some insights into how bitcoin's protocol works - even if it does sound like the author is occasionally regurgitating info off some "talking points" PR sheet.

By all extant metrics in security system review, this system should have failed instantaneously, at every possible layer.

And, to be fair, it has failed at other layers – BitCoin thefts have occurred, in the meta-code that surrounds the core technology itself.

But the core technology actually works, and has continued to work, to a degree not everyone predicted. Time to enjoy being wrong.  What the heck is going on here?

First of all, yes.  Money changes things.

A lot of the slop that permeates most software is much less likely to be present when the developer is aware that, yes, a single misplaced character really could End The World.  The reality of most software development is that the consequences of failure are simply nonexistent.  Software tends not to kill people and so we accept incredibly fast innovation loops because the consequences are tolerable and the results are astonishing.

BitCoin was simply developed under a different reality.

The stakes weren’t obscured, and the problem wasn’t someone else’s.

They didn’t ignore the engineering reality, they absorbed it and innovated ridiculously.

Worth a read since it's that much more grist for the mill. And some of the information is quite interesting. Link here.

  I came across this today, it gets into how BTC are made, how they're traded, security, and the authors opinions on investing:

7 things you need to know about Bitcoin
Bitcoin is booming, but don't buy the hype before you read our guide.

http://www.pcworld.com/article/2033715/7-things-you-need-to-know-about-bitcoin.html

This is a significant announcement and key development for China as it continues its campaign to internationalize the yuan and chip away at the dollar’s role as the world’s reserve currency.

>

I think it's more a political statement than an economic groundswell at this point. But still not something to dismiss as pure politics either.

Ideally (for China ) this move will be coupled with a significant shift towards less manipulative monetary policies and exchange rate games on the part of China.

Because if China could just pull it's political head out of Mao's butt they would probably become unstoppable economically.

This rather looks like a first brick being removed from the wall.

Or at least an attempt to do so. The real trick will be to pull enough bricks out of the wall to make a new entry for yourself without having the whole building come crashing down on your head.

But China will first need to do a lot more to fix the problems caused by the need to secure highly placed political patronage in order to conduct any significant business. And also to check the blatant and pervasive corruption plaguing their emerging new economic elite before it will be able to push any harder than what it's intrinsic market potential as a customer base will allow.

Unfortunately, cases like the 'disappearance' of Chinese billionaire Liu Han, and the somewhat bizarre circumstances leading up to it, won't give the average western investor warm fuzzies about dealing with Chinese businesses or the Chinese government.

As a recent article about Lui Han in Bloomberg noted:

Liu’s rise to riches and sudden disappearance aren’t just the makings of a made-for-Hollywood potboiler. They’re a warning of the risks investors take when dealing with opaque private businesses in China, where fortunes depend on political ties and the favors of state entities, and even the wealthiest entrepreneurs can vanish if they lose the patronage of powerful government allies.

Certainly gonna be worth watching.

For these times, they are a-changin'... as the old Dylan tune goes.