

Bitcoin implodes: 90% down from June Peak - wicknicks
http://arstechnica.com/tech-policy/news/2011/10/bitcoin-implodes-down-more-than-90-percent-from-june-peak.ars

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jonpaul
The biggest problem that I have with Bitcoin is that there's a bit of an
impedance of trading dollars for BTC and vice versa. When you could use
Dwolla, that helped, but now that Dwolla pulled out (at least that's my
understanding), it's even more difficult to get BTC.

What would be ideal, is to be able to use your credit card to buy BTC. But
that won't happen because credit cards need the ability to support charge
backs and that makes it difficult with BTC's anonymous nature.

Once this problem is solved, I think you'll find a lot more people becoming
involved with BTC again.

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NinetyNine
People on Silk Road offer automatic BTC transfers from various payment
companies.

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bdfh42
You can create a currency with the backing of something of value - even the
promissory notes of solid citizens - but you cant create a currency from
nothing - it has no value.

While not intending (I am sure) to be a pyramid scheme (artificial value from
short term demand) this is how it will/has inevitably turned out. The concepts
underpinning Bitcoin however have a future - as long as the mining is done
where wealth is accumulated and not on a GPU.

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TomOfTTB
Most of the world's currencies don't have backing these days. Even when they
do have some kind of commodity backing them the governments don't tell people
how much backing is there (The U.S. Government for example won't tell people
how much gold they have in reserve). Backing isn't relevant if you don't know
how much of it there is.

All a currency really needs to be valuable are two people who have faith in it
and who have resources they want to trade with each other.

Also for the record the only reason backing is important at all is because
backing means there's a finite amount of currency that can be created. Bitcoin
has, in theory, an equally valid limiting factor

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jerf
The real backing that a US dollar has is not its gold. It is the fact that the
US government has declared itself obligated to accept tax payments in terms of
US dollars, and it will not accept anything else. That's the dollar's base
case, and the reason why coming off the gold standard didn't bring the house
down is that was really _always_ the true value of a dollar. The gold was an
illusion, suitable for an era in which people couldn't think abstractly enough
to understand what the true backing was, but one that we can now be rid of.
The recursion of the value of government fiat money does indeed have a base
case.

This is why a government is so tied to its currency. In some sense it isn't a
true cause and effect relationship, both the stability of a government and the
stability of its currency is tied to the same third factor, its credibility.

"All a currency really needs to be valuable are two people who have faith in
it"

Which is an equivocation game, in that "have faith in it" must itself be
motivated by something at least locally rational or it won't work. I have
faith in the ability of a dollar to buy off the men-with-guns who will come
and take all my stuff and ruin my life if I don't pay my taxes.

All government fiat currencies are thus in fact backed by something real. I
don't entirely disagree with the BitCoin community that that is a more tenuous
backing than one might abstractly like, but I do not see anything in practice
that would be better; value stores are _intrinsically_ ephemeral and there is
nothing you can do about it.

The reason why BitCoin is crashing is that it was built on the false premise
that currencies have no backing, so we might as well create a cryptocurrency
with no backing. But that's false. BitCoin is actually _special_ in having no
backing of any kind, and that is why failure is and will continue to be
inevitable. The whole thing was built on a false foundation.

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icebraining
What about gold itself? Sure, it has some real world usages, like
semiconductors and such, but it's priced way above it, simply because people
have faith in it as a currency, nothing more.

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TomOfTTB
With all due respect I think you both misunderstand the principle of Gold as
currency (or bitcoin as currency for that matter).

Currency at its most basic level is a representation of the value generated by
the society it is used in. So the number of U.S. dollars represents the entire
value of what U.S. citizens produce at any given time.

What makes commodities valuable as currency is they are finite. There's only
so much Gold, Silver, and Bitcoins in the world. Since all these commodities
can be used as currencies (i.e. they can be converted to paper currency) they
represent value beyond just its practicality because it stays consistent as
the amount of each fiat currency available grows.

So Gold goes up in value because it isn't really going up in value. Everything
else is going down.

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jerf
"So the number of U.S. dollars represents the entire value of what U.S.
citizens produce at any given time."

That's not even close to correct under any theory of economics, I don't even
know where to start explaining that.

"What makes commodities valuable as currency is they are finite."

No, that just means they happen to exist in the real universe, in which
everything is finite, which is hardly a way of distinguishing between
"currency" and "not currency" (in information theory terms, that has no
information in it). What makes currencies valuable, and what makes things
valuable in general, is that people want them. People want the government not
to smash their doors down and haul them away and put them in jail, or freeze
their assets, etc. The rest of the value of a dollar recursively emanates out
from that. There's a value to having a dollar beyond just the goods and
services that can be obtained, it prevents Uncle Sam from destroying you.
There's no value to a BitCoin; the base case of BitCoin is "zero", unlike a
dollar or any other government fiat currency, unlike gold (which has
industrial and decorative uses which may not stay constant but won't drop to
zero for a long time), unlike anything else called a "currency". Currencies
_aren't_ arbitrary numbers.

(Not being jailed/fined/killed by something may seem like a bizarre base for a
currency if you think about it, and I wouldn't disagree. I do rather wish
people understood the gravity of treating "government" like a silver bullet
and just firing it every which way to solve every problem, especially when
turning everything into a criminal law offense. However genteel we've made it
over the centuries, it's still pointing guns at people, and I'd prefer to
reserve that for truly _important_ things.)

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grinnbearit
Having dollars does prevent Uncle Sam from destroying you and assuming no one
wants to be destroyed, everyone wants them. This makes the dollar a pretty
good medium of exchange (a short term store of value) but not very good as a
long term store of value.

Gold is still valuable as a medium of exchange largely due to historical
reasons but the problems of moving gold, storing gold and using gold for very
small transactions outweigh its benefits for anything other than a store of
value, gold is simply too crippled to be used as a currency.

Bitcoin aims to fill that gap by having similar properties to other successful
stores of value, (durability, reasonable finiteness) along with medium of
exchange properties like fungibility, but at the same time being digital and
thus adding properties like near instant transfers (on a global scale) and
near infinite divisibility.

Its not certain if Bitcoin will be successful, something better might turn up
to replace it, but IMO a purely digital currency definitely has a future.

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saturn7
In the UK Bitcoins are classified as a commodity.

It falls under the same rules as buy and selling gold which basically has no
formal regulation.

I heard somebody define "money" as the most liquid commodity.

The commodity that can be exchanged for goods and services the most easily and
efficiently is money.

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chrismealy
It's not money unless you can pay taxes with it.

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bdfh42
A good rule of thumb - but I would be happy to call it money if I can buy a
drink with it.

~~~
ordinary
"Money as in beer"?

