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I really don't get Bitcoin.

What is the point in a currency that ranges from $2 USD to $12 USD in a year ?




The value of the currency doesn't really matter to those of us who use it - It could be 1 bitcoin to 1 USD, or 1 bitcoin to 10 USD - as long as the downwards volatility is kept to a minimum.

What's problematic is when you buy something worth $50 USD with 5 Bitcoins, and the Bitcoin to USD drops before the seller can get their USD from MtGOX (or whoever their Currency Exchange house is).

The upwards volatility isn't a problem in that buyer/seller scenario. If I want to buy something worth $50 USD, and I go purchase 5 bitcoins for $50USD, and then, those bitcoins are worth $55USD by the time the purchase clears, then I only paid $50USD and the Vendor received $55 USD. Everyone comes out a winner.


Upwards volatility creates a similar problem on the other side of the transaction, though.

If BTC is rapidly rising against the dollar, then I'd rather spend dollars because I'll want to keep the BTC in my account in anticipation of further appreciation.

And, for that matter, the fact that the entire conversation is framed this way doesn't bode well for BTC as a currency. People who use a currency as a currency measure its rises and drops in value by comparing what you can buy with a given amount of the currency in the present versus what you could buy with the same amount of that currency in the past. When people measure something's value in terms of some other currency, as is the universal practice for BTC, that indicates they're thinking of it as a commodity for investment or speculation rather than a currency.


Currency stability is useful for trade and retail. When a macbook air costs $1000 things are simple - it cost the same amount a week ago, and it'll cost just as much next week. You can plan your purchases.

If all you know is a week from now it'll cost somewhere between 50 and 500 bitcoins, that's a lot harder to plan around.


Commission-free electronic transactions with anyone in the world?


That's rich, commissions are built into it so that if it's ever successful transaction fees will come in and grow over time.

http://en.wikipedia.org/wiki/Bitcoin

"The network never creates more than 50 BTC per block and this amount will decrease over time towards zero, such that no more than 21 million will ever exist.[15] As this payout decreases, the incentive for users to run block-generating nodes is intended to change to earning transaction fees."


The transaction fee stays the same, it's 0.0005 BTC.


I think the anonymity and decentralized design are more important than the small transaction fees. As a sibling comment points out, there are still fees for converting to and from national currencies, which are much less volatile.


So it is free to convert from USD to Bitcoin and vice versa ?

Because clearly I wouldn't want to hold anything in Bitcoin for a long period of time due to its instability.


There is a cost- liquidity and slippage are not accounted by most.


It's quite cheap depending on the service. I use bitfloor, which charges some very small commission ($0.01 on a $40 deposit)


So, there is a transaction fee...


Not for the transaction. The fee is for currency exchange. Should BitCoin be used for more than just purchasing products from Silk Road, it's conceivable that people might one day be prepared to use Bitcoins as a standalone currency.


Correct - in fact (unless you were a speculator) you wouldn't want to hold onto anything in bitcoin for more than the time required to clear a transaction.


Bitcoin seems to be more like payment method than currency.


But when judged as a payment method it has such poor usability that it seems pointless.


If you point out that it has poor usability for payment, well, it's actually a way to store your wealth. If you point out that the volatility makes it a bad idea there, well, it's actually a vehicle for speculation. Why would you speculate on randomly-generated numbers? Well, because it's so good for payment... or keeping your money away from the government... or... crap.


Bitcoin fills a niche that other payment methods can't. IMHO, that's the only value in it.

Bitcoin enthusiasts just have too high expectations for it.


The main point is that it is decentralized and (ostensibly, with enough care) anonymous. This makes it ideal for illegal transactions (drugs, gambling, weapons, contract killing, child pornography). These being incredibly inelastic goods, price fluctuations will do little to hamper continued growth of the Bitcoin.


I dont buy it just like Feds apparently dont buy it either (yet); otherwise they would be already shutting it down.

While bitcoins can be used for illegal transactions, it does not mean (and never will) that 99% of transactions will be illegal, just like Feds won't shut down knife factory because some knifes were used to kill. At the end, paying for something illegal is not illegal on its own; its the act or good you paying for illegal. So this or another way, in order to sentence someone, Feds will need more proof of a comited crime, than just blunt bitcoins transactions (how about crime itself).


Forging currency is illegal even though all of the components and component activities are legal. (Paper, ink, printing, lithography.) The Feds (or any government) can shut down anything they like given the right legislation. Anything that allows end runs around currency restrictions and taxes is fair game for governments, and passing laws against it (or simpy extending existing laws) wouldn't even be unconstitutional in the US.

Did you declare all your bitcoin transactions to the IRS? You may already be in trouble...


How could they shut it down? By making maths illegal? There'd be no point in a bill that outlawed bitcoin specifically, users would just move on to something equivalent.

That doesn't mean it isn't 99% illegal activity, just like e.g. Freenet.


They could easily kill bit-coin, and having made bit-coins worthless people would have far less interest using the next currency.


Like joering, you have failed to specify how the government will magically kill bitcoin.


Spend enough money on machines to have 51% of the processing power and subvert the integrity of the keychain, thereby making the entire system untrustworthy.

I cargo-culted that explanation, but it sounds good to me.


also, they can simply legislate to ban it, for whatever reason the want like someone mentioned before. Its up to you whether you want to break the law or not, but most people will not.


That is only a problem if you try and use the currency as a Store-of-value. Use it only as a Medium-of-Exchange and the fluctations don't really matter.

Money wasn't meant to be saved. Earn and pay your bills in the monetary plane. Save your surplus production in the physical plane.


The exchange doesn't have much of an effect when most goods are priced relative to the exchange rate (many sites even automate this). The only thing the currency price represents is the relative change in market size where these coins are used.


there is no "point", but this currency is very young in immature. If we had as many bitcoins as dimes on the market and 99,9% of businesses would accept them, then you wouldnt see such a fluctuations. To me looks like Bitcoin is a huge win! Imagine if people are willing to put their dollars in it, knowingly being aware this roller coaster can run from $2 to $12 and back to $2, then imagine its popularity when we have enough coins on market and enough businesses are accepting them.

Kudos to first adopters!


The people who view bitcoins as a currency don't like these huge fluctuation. Just like in a country-issued currency doing this, it causes problems doing trade.


It seems that people enjoy making a quick buck


Anonymity.


Bit coin isn't anonymous.


Maybe not now or yet but I believe that's one of the main goals of it, I think the mysterious creator of Bitcoin even alluded about that.


It was a design goal, it failed.




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