Assets are really weird. To make money you have to go to work. To save lots of money ($886k) you have to really push hard: Have a high-end job (at Google or a Big.Co.), have a university degree (better with a phD) and spend 20 years or more of your life to make that amount.
But somehow this guy made the same amount without putting really any effort or taking any risks. It's like inheritance when you are suddenly rich and collected all these years efforts.
What I'm trying to convey is that living without any assets is pretty darn hard in today life. As many (the majority) of people are inheriting wealth from their grand-parents and countries, they find life much easier.
I guess this also made life more expensive. Since they have the assets, this group can raise the prices (virtually) infinitely. They can exchange assets between each other, but people who are new to the game will be screwed.
I think the same thing is happening to Bitcoins. It's becoming too expensive that we'll see the 0.01% and the remaining of the 100%. It'll be probably as worse or much worse than real life.
> without putting really any effort or taking any risks
He sunk $27 into an investment that (from his knowledge at the time) had a high chance of ending up completely worthless, and a low chance of exploding in value (if bitcoin took off).
That isn't "without taking any risk". On the contrary, it was a very high-risk investment. In this case, it paid off. (It was a low value investment, but that doesn't change the relative risk: making lots of (un- or anti-correlated) low-value, high-risk investments, instead of one big one, is a way to reduce your total risk).
The guy is living in a Norwegian country. So $27 is probably the price of a meal in an expensive restaurant. I'm assuming he didn't make any investment but was rather curious how this thing work and wanted to hold some of this digital currency.
If he was making an investment, he'd have probably followed and tracked it. That was not the case. He just found out about it.
Otherwise, my comment wasn't about that particular detail.
> So $27 is probably the price of a meal in an expensive restaurant.
That wouldn't qualify as an expensive restaurant in any Western country, let alone Norway (one of the most expensive countries in the world). $27 in Norway would get you about three Big Macs. A nice restaurant would be well north of $100 ($250+ if we agree on what nice is).
>> To make lots of money ($886k) you have to really push hard: Have a high-end job (at Google or a Big.Co.), have a university degree (better with a phD) and spend 20 years or more of your life to make that amount.
To be fair, you'd make this much in ~6 years as an engineer at Google. The problem with accumulation is that most people also will spend nearly as much over that time period and not have $800k in the bank.
This article really just tells the story that when there is a fixed supply of something, and demand increases, price increases of that thing. In some cases people have that thing stored in their attic and forget about it, in which case they get a pleasant surprise that they now can trade it for a greater value than they first purchased it for (assuming there is liquidity in the market).
Granted - the speed of the price increase of Bitcoin is very impressive - other examples from history:
- Man buys $27 of Gold Coins, finds they're now worth $886K
- Man buys $27 of Tulips, finds they're now worth $886K
- Man buys $27 of Railroad shares, finds they're now worth
- Man buys $27 of (insert .com boom company) Shares, finds they're now worth $886K
- Man buy $27 of Beanie Babies, finds they're now worth $886K
Yup. But the reason this is such a big problem for Bitcoin is that Bitcoin has greater aspirations than just being the next tulip or Beanie Baby. It wants to be a real currency.
And as long as its price is fluctuating like this, you've got to be kind of crazy to be using it as anything but a novel currency.
Buyers have every reason to be hesitant to buy things using Bitcoins because of the possibility that the pizza's worth of BTC they could spend today might be worth enough to buy a house in another couple years. If you had a lottery ticket that you had good reason to believe might be a winner, would you trade it for a pizza? I sure wouldn't.
On the other side of things, sellers have rational reasons to not accept BTC out of fear that the company's bank account might rapidly diminish in value.
The (non-speculative) Bitcoin community is this fascinating caricature of currency situation in old Soviet bloc countries. Practically speaking, dollars are more valuable because of their greater stability. But people go on using the other currency anyway because of politics.
I think what you're suggesting is there are more people speculating on bitcoin's value than the value of some of these other examples - that is probably accurate, as in many ways the barriers to entry to start speculating on the value of bitcoin are low.
Article claims it was "the first real-world bitcoin transaction". Without those first few transactions from enthusiasts, bitcoin may well not have taking off. And those 10,000 wouldn't have been Laszlo's only bitcoins. So from that POV, maybe it was a pretty wise investment :)
> Bitcoins are reaching lottery-level payoffs. In 5 years, will be see a lot more of these stories?
I suspect not. Whatever the long term shape of the price curve is, I think that in the moderate term its probably something like a logistic curve, and this year saw most of the steep portion of the logistic curve and is already bending into the high-end slow-growth portion of the curve.
In 5 years it'll become world currency and in 10 years all other currencies will hyperinflate relative to it and will be abandoned. Gold will go down too as more people will learn that Bitcoin is more flexible way of "storing wealth".
Send me a message on email@example.com (twitter: @oleganza) in 5 years and ask for 1 BTC if Bitcoin is not yet recognized as international financial instrument. I will gladly give it to you if BTC price is below $10000 or it's still not possible to pay in Bitcoin in any major city for about anything.
Money can only be used to exchange stuff when it has value. And it has value only when people are willing to hold it. If no one wants to invest in money long-term, then it has no value and thus cannot be used in "exchange".
After all, money does not "move", it is always stored in someone's pockets and switches owners instantly. It's just everyone has different time preferences and stores different amounts of cash for different amount of time.
Sure, hypothetically, but there is a lot that can go wrong.
Scalability is an issue. In the future we will probably have to rely on thin clients making bitcoin less attractive.
Governments won't peacefully accept bitcoin. Why would we let people make under the table payments, enabling tax evasion and laundering? They've ignored it so far but as it becomes more popular we could see action taken against it. You may object that bitcoin is decentralized and on the internet and therefore invincible. But if exchanges were shut down that would be devastating.
1. Scalability is a solvable technical problem. Also, there are many ways to implement fast micro payments outside the blockchain and make all IOUs resolvable within a day thus preventing all sorts of fraud (e.g. fractional reserve banking).
2. Governments will die off without ability to have "budget deficits" via money printing. No one would vote for politicians because they wouldn't be able to build stuff "for free" by borrowing money from your unborn children.
3. Owners of Bitcoin have all incentives to adjust the protocol to fix all bugs and implement all useful features to not lose their wealth. Not a problem for Bitcoin and not a problem for anyone else either. Even if Bitcoin is replaced by Bitcoin2, it won't change things for the fate of the governments.
There are 2 paths a populist government can follow, left and right. Both governments persecute outsiders to the benefit of insiders. Both realise that taxation isn't a viable strategy.
In the leftist case, the outsiders are the rich and the insiders are "99%", they use deficit spending to remain in power. In the rightist case, the outsiders are wealthy foreigners and the insiders are their own citizens, they use expansion and conquest to remain in power.
Fiat currency enables leftist policies, hard money encourages rightist.
The bigger story about SR is that Bitcoin price did not collapse 10x after the shutdown. Which shows that Bitcoin is used as gold, speculative store of wealth. And so it reasserts itself as a viable wealth transport.
I have a lot of BTC lying around somewhere from way, WAY back when BTC was in its infancy. It kills me everyday not knowing how to get it back. I've been through a few computers so far and most of my data is gone.