
Inside the Bitcoin economy - sethbannon
http://www.economist.com/blogs/freeexchange/2013/04/exchange-rates
======
tunesmith
This one is more interesting than the link posted earlier today. The comments
are interesting too.

So, what of the thought that the only value in bitcoin is its lack of serious
competitors? It seems that as soon as another decentralized currency comes
along that clearly improves on bitcoin in some way, you could see an ever
quickening flight away from bitcoin. There's nothing intrinsic about bitcoin
that keeps the value sticky. The value is the idea more than the
implementation. What if something like Freicoin or Litecoin or something
clearly better starts to get serious traction?

~~~
zby
I vote for PPCoin - the eco-friendly coin that promises to get rid with the
$4.5 million per month power consumption.

~~~
BrokenPipe
Could you explain why would I ever want to use a centralized currency like
that ? It can't be trusted.

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zby
It is not centralized - have a look at the whitepaper:
<http://www.ppcoin.org/static/ppcoin-paper.pdf>

~~~
BrokenPipe
It is, look at the implementation.

<https://bitcointalk.org/index.php?topic=101954.0>

~~~
zby
Interesting - I have to admit I did not get into these details before.

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pixelcort
One further clarification, you don't need to wait for 6 confirmations (~1hr)
if you don't want to.

A typical bitcoin client will receive the transaction within 5-60 seconds,
with 0 confirmations. Even 1 confirmation (~10min) is probably safe enough for
small or low-risk transactions.

If it's someone you trust not to double-spend, then you can get by with just
seeing the transaction on your end with 0 confirmations.

~~~
anologwintermut
Except you can't convert it into USD that quickly. If the price tanks well you
are waiting for Magic the Gathering exchange (yes, Mt.Gox, the main place
people do bitcoin conversion started out as a place to trade magic cards), you
get screwed. This wouldn't be a problem if there was large economy denominated
in bitcoin since they'd still have value there. But there isn't.

~~~
tlrobinson
In the meantime, you're free to use one of several merchant services (BitPay,
Coinbase, MtGox) that automatically convert BTC to USD immediately (and take
on the exchange risk, for a small percentage)

~~~
anologwintermut
That fixes an individual's volatility problem but it doesn't fix the problem:
there is some limit to how much volatility those places can absorb for some
small percentage.

~~~
tlrobinson
They said they were fine last week, and I'm not sure it gets much more
volatile than that:
[http://www.reddit.com/r/Bitcoin/comments/1ccbet/ama_request_...](http://www.reddit.com/r/Bitcoin/comments/1ccbet/ama_request_the_bitpay_team/c9f6dva)

~~~
anologwintermut
That say's the handled Mt. Gox going down, but not that they handled the
volatility . I'd imagine they took some large loss moving as the price fell.
Now thats the risk with that service and I'd imagine they have enough cash on
hand to cover it. But if it happens too many times, i'd imagine they are
screwed.

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tomelders
What troubles me personally is that all the talk around Bitcoin at the moment
is of Bitcoin as an investment opportunity. I'm personally more excited by
Bitcoins value as a currency. I think the most salient point in this article
is this

> Almost every good one can purchase with Bitcoins is actually priced in
> dollars and sold at a Bitcoin price reflecting the prevailing exchange rate.
> So there is almost no Bitcoin frame of reference independent of the Bitcoin-
> dollar exchange rate.

For me this is Bitcoins biggest weakness, the notion that it's true value can
only be unlocked when converted back into "real" currency. I'm not sure what
the solution is to this problem, or if there can ever be one. I am reminded
though of Brazil's unconventional solution to their hyper-inflation problems,
and it feels like there's a parallel in there somewhere...

[http://www.npr.org/blogs/money/2010/10/04/130329523/how-
fake...](http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-
saved-brazil)

