
Bitcoin.org's Gavin Andresen on Open Source and Escrow - spenvo
http://www.bitcoinbulletin.com/2011/04/09/bowling-for-bitcoins-meet-the-trader-05/
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kristofferR
BitCoin is damn interesting, it has the potential to dramatically change the
world.

I hope it takes off. I think it will though, since the early adopters have a
vested interest in growing the currency (there never will be more than 21
million BTC in circulation, so acquiring 1000BTC now will never be less than
1/21000 of the currency no matter how popular it becomes).

New exciting things are happening daily on the BitCoin front:
<http://www.bitcoinnews.com/>

~~~
windsurfer
Where does BitCoin's value come from?

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Seth_Kriticos
Value source is pretty much the same as all other currencies too: people use
it to exchange goods.

It's actually a big game of trust, that you can use the bitcoin you get today
to buy something tomorrow.

As the number of people engaging in trading bitcoins, the market regulates
it's self by supply and demand basis ( here is a chart on the current exchange
values <http://bitcoincharts.com/markets/> ).

The difference to most other current FIAT currencies is, that there is a
maximum number of bitcoins that can be generated (20,999,999.9769 BTC), and it
gets harder with time (exponential computation time needed to get them). This
prevents runaway inflation.

To break it down to simple terms: it has value because people believe that it
has value and use it to exchange goods and convert it to other currencies.

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windsurfer
I still don't see why people would pay money for this virtual thing. It
doesn't have any real value yet, everything is promised to come. It looks like
some kind of scheme that promises future value in exchange for your cash
today. Isn't this called a Ponzi scheme?
<http://en.wikipedia.org/wiki/Ponzi_scheme>

If, on the other hand, governments backed this currency by guaranteeing some
kind of flat conversion rate, I would be all for this system. As it is, I'm
staying out.

~~~
kristofferR
BitCoin is not a money-making scheme, it's just an attempt at creating a new
digital international currency. It is not marketed as a scheme and it doesn't
promise any returns in the future.

However, the ironical thing about starting a new currency is that the value of
it is determined by the trust people have in it. Since Bitcoin is new and
unproven, the trust is quite low. Until it is trusted it won't have real
value, but a lot of people won't trust it until it has real value. It's a
chicken and egg problem.

By investing in Bitcoins you are investing in the belief that the currency
will gain in popularity. It actually is no different from investing in a
company at an early stage. By investing early before something is proven the
risks are higher - but so are the potential rewards.

The people who invested 50K in Facebook early are rich now. Those who invest
50K in Facebook today won't see anything close to the return the early
investors did, even with the same investment. A lot of people lost their
investment by investing in some other social network instead of Facebook. This
is just like any other high risk/high reward investment - you invest on your
belief that something will succeed.

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JoachimSchipper
I think we've had enough Bitcoin for a while.

~~~
tabsa
Yes, it's enough to talk about probably the biggest invention in financial
sector in last 20 years. Let's forget all about those calls for entrepreneurs
to focus on something more world changing than iphone widgets.

If Bitcoin isn't just a definition of a word "hack", and the most ingenious
hack i have ever seen in financial sector which is in serious need of
disruption.

Lets better read and talk about Steve Jobs'es new book and the how new ipad is
better than older and Ipad.

Why tumblr is the new wordpress...

~~~
kwis
> Yes, it's enough to talk about probably the biggest invention in financial
> sector in last 20 years.

Off the top of my head, I would state that the following are _unquestionably_
larger financial innovations in the past 20 years: SPDRs, HOLDRs, ETFs, ETNs,
dark pools, target-date funds, target risk funds, auction-rate securities,
online b2b markets, online b2c markets, online banking, automated market-
making, new insurance products, improvements in risk analysis (credit
scoring), removal of information asymmetries, just... so much innovation

The bitcoin market is less than a blip on the radar screen. It's so small that
if somebody were to sell 100,000BCN right now, they'd crash the price down to
pennies. And if somebody were to buy 100,000USD of BCN right now, the exchange
rate would skyrocket. It's a small, illiquid market of people who have, mostly
for political reasons, decided that they will convert electricity into a
private virtual currency.

I know that right now there are a lot of bitcoin miners, dreaming of how
wealthy they'll be once their deflationary-by-design virtual currency takes
over the world, but I can't envision any realistic scenario whereby that could
happen. Heck, the political risk alone makes it untenable as a serious store
of value as it would be trivial for a nation to outlaw it's use, thus
destroying the utility.

If you don't want to store your wealth in government-issued currency, that's
great. But I'd suggest converting wealth to productive assets (e.g. shares of
companies, loans to companies, land and other hard assets) rather than a
virtual currency that lacks both the inherent value of productive assets and
the transactional ease of government-issued currency.

~~~
spenvo
Excellent points. I'll confirm your assumption about BTC's volatility: a
single sell-off of ~10k last week took 25% of BTC's value with it. The limited
purchasing power of the BTC economy has hindered economic development, but
that is to be expected with any new currency.

However, Bitcoin as a medium of exchange is quite extraordinary and has
recently caught the attention of Anonymous because of its "untraceable" (term
used loosely) characteristics. There is the potential for Bitcoin to cater to
a community outside of sovereign banks. In other words, there are interesting
possibilities that exist beyond what goldbugs have in mind.

~~~
kwis
> but that is to be expected with any new currency.

I think the problem is somewhat unique to unbacked currencies. BTC has value
solely because some people agree that BTC has value. It can go to zero (and
stay there) for any reason.

The value has no minimum that can be defined by looking at the industrial
value of a commodity (as with commodity monies). Nor is there a minimum that
can be determined by comparing the money supply to the underlying productivity
of a nation whose residents are required, by law, to use the money (as with
fiat monies).

As an aside, if I wanted to setup competing currencies, I'd create a brokerage
that allows the cheap, easy, instant transfer of ownership of fractional
securities from one member to another. Then we'd have tens of thousands of
competing currencies, all of which are backed by a combination of assets and
productive capacity. Entrepreneurs could even setup companies designed solely
to work as currencies.

I know that wouldn't appeal to those who care primarily about traceability,
but frankly, I don't foresee any government allowing the widespread adoption
of any mechanism that allows for untraceable transfers of large sums of money.

