With rising global adoption, many new kinds of applications are likely to be created to take advantage of the Bitcoin network, the design of which even specifies a built-in script for defining and executing new types of transactions involving any arbitrary number of parties.
In short, Bitcoin is a technology platform -- one that is benefiting from network effects.
It may fail as "money" (in a narrow sense) and still succeed as a global platform.
In fact, Bitcoin is already a success.
Please explain how a bitcoin blockchain record can testify in court that a copy of a document is authentic. Hint, you're infront of a jury, you have a blockchain hash, and opposing council has a notary public with 40 years of experience, both copies of the document differ, the original cannot be found.
Hers has an official looking seal, you have some random numbers.
Please explain how I can buy a pack of cigarettes at 11 pm in under 5 minutes with bitcoin.
In short most of your claims are highly exaggerated and don't work beyond the most trivial scenarios.
Here's an imaginary possibility. A hundred and fifty years from now, courtrooms come with computer systems built from scratch and operated by court clerks. Their sole purpose is verifying blockchain records. The jury knows to trust the machine. In fact, the jury instructions tell them to.
None of the jury members have ever seen official documents on physical paper. They only know about paper documents from watching historical fiction movies. In such movies, the possibility that the documents are forged is always a major plot factor.
Subsequent cases would be able to use the precedent, and win with less interesting experts.
If you think about it, this is a lot more convincing than getting a ribbon-covered document from a foreign jurisdiction that you may not be able to read, even if it authenticated by a series of trusted authorities (a chain of embassies in this case).
Now iam replying to this from a phone
Just saying technologies improve over time, bitcoin is a very interesting mix of technologies, probably the most exciting thing to come along since email, web, bittorent and social networks
In fact the whole value of the currency is based on the fact it takes work, and therefore time, to create.
Look, bitcoin is a platform and it is in it's infant stages. But, it has huge potential. Potential does not mean odds of success are 100%
Bitcoin-type technology has tons of potential, my friend.
The point of the person you're replying to is that, for 99.999999% of businesses, there is no benefit to using BTC. It doesn't offer the buyer any protection, it's extremely volatile, and it would require an overhaul of the entire economy's infrastructure to implement in any meaningful way.
Also, nice strawman with the laptop. Ever heard of smartphones?
BitCoins don't have any resistance to movement, or very little. Physical money does. This means the difference between BitCoins and physical money is perhaps comparable to the difference between massive particles like atoms and massless particles like photons, or to the difference between a classical conductor and a superconductor. Which is only to say that the same rules don't apply - new behaviors are observed.
We are in a new world and the study of economics is about to take a huge left-turn.
You can add direct-debit to bitcoint with a trusted third party. (And there might even be clever ways to do direct debit in bitcoin without that third party.)
CoinKite will be interesting to watch.
I really fail to see what problem that isn't already solved in this regard.
Actually, once you've been verified by an exchange (required prior to buying Bitcoins unless you do a private party sale), selling Bitcoins is easy; it's getting your USD wired/ACHed to your bank account that can be time-consuming. This is due to the legacy banking system, and not some problem inherent to Bitcoin.
EDIT: By the way, it's not "very difficult" to sell Bitcoins. If I want to sell a Bitcoin, I log onto my Bitstamp account, put in a limit order. When the sale is executed, I submit a short, pre-filled form for a wire transfer to my bank. I then wait a few days and the money is in my bank account, in USD. Not hard.
Part of the value of dollars as a medium of exchange is that the value does not fluctuate greatly from day to day or minute to minute. In the short term, you can rely on prices remaining fairly stable.
You make a good point, and my above explanation was a bit confused.
I think BTC faces both problems:
There's high volatility, driven by the current level of speculation and the fixed quantity of Bitcoins that exist on the market. This makes Bitcoin a fairly poor medium of exchange since it is unlikely to hold a stable value from one day to the next.
There's also (I suspect) poor liquidity, driven by the low number of people involved in the exchanges (compared to other assets and currencies). While it may be easy to exchange Bitcoin from a process standpoint, you may not be able to get a price sufficiently close to the last quoted price when you go to exchange for dollars. It may be more liquid than a house, but it is much less liquid than USD, EUR, GBP, etc.
Is my liquidity assumption mistaken?
Unless you're an investment banker, yes. There are multiple exchanges that handle daily volume in the 10's of millions USD, with order books deep enough that you could cash out millions of dollars worth of bitcoin without moving the price more than a few percent.
That's nothing compared to what Wall St or the city is used to, but it is plenty enough liquidity for all but the most well off individuals, and growing. When the Winklevoss twins get their bitcoin ETF to IPO, I expect these numbers to increase by orders of magnitude.
Also, none of that is counting the significant volume of transactions which occur non-public or off-exchange.
You're absolute (and obviously) correct about Bitcoin's volatility, but you're mistaken about its liquidity.
Bitcoin is quite liquid if you're in the U.S. and many other countries around the world. The only delay is the time required by the legacy banking system to wire or ACH funds in/out of your exchange account.
1) Bid Ask spreads vary by exchange and currency, but it seems that with the exception of BT China an MtGox, the bid ask spreads can be quite wide. Prices for BTC/USD also very a good bit by exchange, meaning the price a merchant sets might be influenced by which exchange they use.
2) The MtGox live chart seems to imply that an order of a few bitcoins (or a few thousand dollars) could have a profound impact on the actual price of BTC/USD. This does not seem particularly liquid to me, unless I misunderstand the chart.
US/EUR seems to commonly be around 100 billion or so a day.
The only reasons it is different with houses is because people are emotionally invested in them, not all houses are equivalent (and thus their value is unique per house), and liquidity is hence really low, and market prices adjust slowly.
Bitcoins are worth a thousand dollars because people who own them are not willing to part with them for less, and people who are buying them are willing to pay that much. This is economics 101. You can always cash out at the market price, unless liquidity is low; the only time that happens is in a teeny market or a crash.
It's only easy to buy a house for $100M if you have $100M you can spare for house-buying. And then you only get to choose from the rather limited range of $100M houses that are available for sale.
Similarly, you only get to sell a house for $100M if you have a house that nice to sell. And then you only get to sell to the rather limited range of people willing to buy a house for $100M.
But perhaps I've misunderstood. If you happen to have $100M burning a hole in your pocket, it's easy to buy a house that would normally cost $1M with it, because most people with $1M houses will happily sell them for $100M. But the parallel to that is that if you happen to have a house that would normally cost $100M, it's easy to sell it for $1M. Which it would be.
With the exception of Mt. Gox, this is simply not true. It's hard to both buy and sell Bitcoins if you've not been verified at an exchange, but once you do that (not very hard), it's equally easy to both buy and sell. The only delay is the time needed for the wire or ACH to arrive.
I get the feeling that many of you are talking confidently about something you have no experience with. Where are you getting the idea that it's hard to sell Bitcoins?
Bitcoins are a currency, there's no need to convert them. It's just happening now because some people want into this environment.
Have you tried paying your taxes in Bitcoin? The IRS (or regional equivalent) is not going to accept bitcoin any time soon and they will want you to pay taxes on, for example, profits. There is a need to convert, don't believe otherwise.
Companies regularly complains that this costs them 1% or so of revenue.
Saying you're not supposed to convert bitcoin is the statement of someone who thinks bitcoin is NOT an investment. So... not a goldbug.
1. People stop bothering to follow the law, and governments throw their hands in the air and do nothing about it.
2. Governments start accepting Bitcoin for tax purposes.
I am not confident that either of these will happen...
Yes, unless you want to, you know, buy something...
You need grocery stores, gas stations, clothing stores, and restaurants to start accepting it. Until then, it's really just a novelty for middle class college Libertarians.
Do you think that cryptocurrencies spring fully-formed from the forehead of Zeus?
That bar/grill is a novelty -- and it probably only accepted BTC in the first place because there was a BTC EVENT held at it.
There's even projects that accept donations in bitcoins, you'll see wallet addresses like this: 1JBEGFXW6ywMtZnCbjvKGJXDtdR6g6KmMi
Their utility isn't tied to the fact that you can turn them into more of your favorite currency later, that stupidity is what's driving the current bitcoin bubble. Wait till people realize what you can do with them.
Try buying an iPhone 3g right now on Craigslist. I bet it takes you all of two minutes.
Then try selling it. I bet it takes quite a bit more time.
Currently (and for the last years), the price of BTC has been rising implying that's actually easier to sell BTC than to buy? Moreover there are exchanges that are entirely symmetric (when opening accounts you do not need to qualify as a buyer or seller).
Asymmetry is a nice word but I don't see what's asymmetric here?
Also there is some basic lapse in logic here. Just because a WoW nerd can trace the currency on a technical level, does not mean it is "easy."
Why is this guy an expert? He was an equity analyst for a long-time, but obviously not good enough to get rich. And there are thousands of Wall St. analysts walking around in NYC. I wouldn't even trust their opinion on equities, much less something new. Never read opinion pieces written by journalists.
Even if you take the assumption that bitcoin will fail, the problems/issues the protocol or something similar solves are far too beneficial to ignore.
So basically if bitcoin fails, some other similar form of digital currency will rise up in its place. I feel as though its a 'cat is out of the bag' scenario.
* disconnected operation (solve the double spend problem in a disconnected setting) (this would really make something gold-equivalent)
* a provably correct, but cryptographically secure ledger (meaning real anonymity)
* proof of work based on a single crypto standard seems risky. Use 5 of them.
* provably no way to compromise the network even with overwhelming computational power
Combining 5 proof of work standards just gives you 1 new one. (There might be some robustness to be gained, though.)
I think that was the author's point.
For example, Paypal, Amazon or the IRS could announce tomorrow they will accept payment in Bitcoins but peg their BTC/USD exchange rate to one.
Speculation would all but stop and Bitcoins would become a transaction platform.
It's an open question whether such substitutes will trade on par with the real "in-blockchain" thing. Personally, I doubt it.
If enough goods and service providers followed suit, current speculators would have to take a hilarious loss to buy anything.
what are you, the owner of 100btc going to do:
a) buy $100usd worth of goods at ebay directly
b) cash out at a proper exchange for $100,000usd, then buy $100usb worth of goods on ebay and have $99,900usd left over? or cash out ONE btc for $1000usd, buy $100usd of goods and have $900 usd left over AND 99btc?
How do you expect any even remotely rational players do participate in this farce?
Given the fact that current BTC to USD exchange volume is fairly small, it wouldn't take that many large global goods and service providers pegging their BTC/USD exchange rate to cause the speculation market to collapse.
Those that recently bought their Bitcoins at $900 would sell below the current high price to realize their gain and avoid a potential loss, then those who bought at $800 would follow suit, and so on.
In very short order, Bitcoins could be trading in single digits.
you are proposing taking for example a $100usb product and selling it for 100btc... which at current market value is the equivalent of over pricing it to $100,000usd. Who would buy that when they could pay $100usd for it instead or convert 1btc and functionally pay 0.1btc for it instead of 100btc. What global goods providers would mark up their wares 1000x and who in their right mind would spend anything on that.
Sure, if BTC was worth > $1usd and you were selling them at 1:1 everyone would leap to do that because now they are GAINING by spending their BTC with you.
But your proposal means they loose 1000%. I don't understand what motivates this switch over.
What they ultimately want is to guarantee they're going to receive the equivalent of $X for every widget they sell, so they'll either have to declare that Y BTC = X USD regardless of market prices, or they'll have to accept whatever Y in BTC is equivalent to X USD on a given exchange on a given day -- which is essentially equivalent to doing business in USD directly, with BTC as just a weird payment mechanism.
Businesses are going to be hesitant to accept BTC for the same reason they don't tend to accept payment in kind -- you need dollars to pay taxes and wages.
Issuing more buy orders cannot cause a drop in price.
In your scenario, you propose that large businesses around the world issue a practically limitless number of buy orders on BTC, supposedly at a low-balled price, supposedly inducing people to fulfill those orders...
You can't affect the price of anything buy flooding the market with an enormous number of low-balling buy orders. You can create a floor, but that puts a lower bound on how far bitcoins can call - it doesn't induce the fall.
And you apparently forgot that the total number of bitcoins is severely limited (around 20 million).
Both cases lead to significant losses for whoever is trying to peg BTC to some arbitrary constant value.
What are you, Satoshi Nakamoto?
If enough goods and service providers pegged their BTC/USD exchange rate to one, the initial BTC speculators would take a bath.
But subsequent Bitcoin users would receive the benefit of Bitcoin transaction technology and the benefit of the US government's fiat currency for monetary policy.
Imagine if every goods and service provider pegged their unit product at $1,000,000USD. The VALUE of the US dollar would drop immensely. What force could actually make them do that though? Because no one's going to pay a million bucks for a big mac, unless they have 4 billion in the bank at least. Something that can't happen to bitcoin.
I do have a friend with 900btc though: I told him I was in the market for a dollar, and he just gave it to me, no questions asked. I wonder where he got it from?
In fact, I would argue that the script functionality is a huge flaw in bitcoin, probably the largest flaw. The existence of a scripting language within the transaction log makes it much more difficult to analyze whether I hold bitcoins or not -- my ability to spend bitcoins "held" in my address is contingent on my having additional information at the time that I post the transaction.
Having a generic proof-of-work-chain-based cumulative notary service might be valuable in and of itself. But bitcoin's value as "money" is independent of that functionality, and in the long run, the complexity of that scripting language and the difficulty of answering the question "have I been paid" will become problematic.
Fortunately software excels at automating tasks like this.
You already need software to scan the entire blockchain to determine address balances, is it really that hard for it to keep track of non-trivial unspent transactions separately?
Instead, you'll have a ton of publisher clearing house style "you just received a million bitcoins" notifications, once they enable more of the language in the client. It just seems confusing and unnecessary.
I'll just leave this here... http://www.befuddled.org/
There're ample historical counterexamples of currencies that are not tied to a government. Gold is the most obvious example; if currency was inextricably tied to governments, there would not have been a mad rush to colonize the New World (and extract its gold reserves). In prisons cigarettes frequently serve as currency, as a medium of exchange that is widely valued.
What really makes a currency is confidence. People have to believe that other people will continue to value the currency later. Government backing can provide one source of confidence. But so can strong crypto, and one could argue that these days people have more confidence in crypto than in governments.
What'll really kill Bitcoin is that this speculative wave has made the price incredibly volatile, so volatile that real merchants selling real goods have no idea what to price things at. So everyone holding Bitcoins purchases them for investment value, and then the price will crash when it stops going up. That destroys confidence in the currency, which destroys the currency.
I could easily see a successor currency based on the Bitcoin protocol emerging from the ashes, though. By then the speculators will have been burned so badly that they'll stay far away, so it'll quietly gain adoption in the background, and then eventually become the new currency of choice when inflation starts to make it's way through current fiat currencies.
Not quite. The confidence in "normal" fiat currency arises not so much from government backing, but from the fact that a well-managed national currency envelopes the GDP of a national economy. Government really needs fiscal discipline to not break the system (the consequences are well known); the trust part comes from the health of national economy and intersection of interests of all involved players.
Consider a major issuer like USA or Eurozone. The strength of their currencies stems from strength of the backing economies. In theory, the government could try fooling the system and run the printing press amok. In practice, such a government would be very short-lived, as it would piss off just about every person with money.
Save for outliers like Zimbabwe, there aren't really many cases of modern governments running themselves in the ground like that. Usually, runaway inflation is a consequence of a catastrophic event in the economy (bubbles, wars, loss of markets and other externalities).
Now, a super-fiat currency like Bitcoin is not backed by anything like that. It is a virtual construct with finite supply, and crypto is just a production vehicle here. It envelopes no economy, so the all trust here comes from compound interest of people who invest into it.
Then again, it’s entirely possible that we will be proven wrong.
Once for all practical purposes everyday life is handled in satoshis, how does an economy expand?
Basically, a full bitcoin economy is a bit like an economy on a gold standard. Not perfectly, since gold is still being mined, and the rate of mining depends on its price.
It makes rational sense for merchants to accept BitCoin and to keep some holdings in BitCoin because the price is increasing at such a rapid pace. Why wouldn't you want to sell something for x BTC today when that amount could be worth twice as much tomorrow? For the same reason it doesn't make a whole lot of sense to spend a BitCoin. Eventually the currency will level out when the incentive to spend equalizes with the incentive to receive. This might not happen for a while as long as speculation remains the predominant driving force.
It has loads of benefits over using the dollar, but a lot of those benefits are lost the second you're having it exchanged.
For instance, if I wanted to use bitcoin for contracting, my clients would have to convert their dollars into bitcoins, then I'd accept the bitcoins smoothly and easily, and then I'd have to exchange them (sell them) back for dollars to buy groceries and pay for the bus. Whereas right now, I get an Interac e-transfer and in less than 30 seconds I have money I can go to the store with, and it cost the sender only a dollar in fees. Sure, it's taxable, but the second I convert it from bit coins it's trackable anyway.
I definitely think this is a model we're going to see a lot more of in the future, but Bitcoin with it's thousand dollar and rising valuation and constant fluctuations is very difficult to get behind and actively use. And with the number of people, just of the people I know, who bought in hoping to cash out, there might be quite the tumble on the way. Who knows though, it will be interesting to watch, that's for sure.
Simple: as a merchant, I really like Bitcoin because it reduces fraud to absolutely zero for me (transactions are irreversible)!
By this logic you should put all your available cash into bitcoins right now. Are you? If not, why not?
So the question is will it crash to 0? Seeing the price soar to 1,000 means that people in the future might always be willing to purchase it at some price, hoping that it will return to that level.
Though, as it stands I don't think speculation gives it credibility. People who believe that are creating the positive reinforcement cycle so common in economic bubbles.
Another poster made me aware of this joke that I think summarizes Bitcoin pretty accurately. http://www.getamused.com/jokes/pennystock.html
Only in this case it's not a single buyer.
i.e. completely invalidating the comparison.
Found the link:
...governments were accepting gold for tax purposes, kings were filling their treasuries with gold, armies were sent to steal gold from other countries, etc. Gold was absolutely tied to government when it was used as currency, and I am using the past tense here because gold is not a currency outside of a few highly niche markets.
"What really makes a currency is confidence"
I think you are confusing confidence with demand. What makes currencies work is demand -- the fact that everyone in the market demands the currency. Typically this happens because of a government, or more precisely because of a government that enforces certain laws.
"so can strong crypto"
Oh yeah? Let's just assume that Bitcoin actually qualified as "strong crypto." I'll release my fork of Bitcoin that is identical in every way, but happens to have its own block chain that I started using this post. How successful do you think that will be as a currency? Why can't we all just create our own personal block chains (and thus all be rich)? There is more to the story than "strong crypto."
Not very convincing. If anything, the speculative phase matches the growth process bitcoin enthusiasts have predicted.
wut. you do know what middle-ages, gov't issued currency was made of, don't you? and who funded the new world expeditions? and for what reason? and you do know that even given the spanish crown's desire to repay their debtors, the bulk of that gold and silver windfall ended up going to china to fund their switch away from paper money by the Ming dynasty?
acting like gold != governments is... well, frankly, it's ignorant.
For example, physically shipping hundreds of kilograms of gold (or physical, folding USD) is a costly exercise fraught with security risks, and the risk profile varies depending on many factors, for instance the political situations in the sending and receiving countries.
Transferring large amounts of electronic USD across international borders via the traditional banking system is going to invoke all kinds of reporting requirements, and possibly higher transaction costs (though you can do large wire transfers for like $25 I think).
Transferring arbitrary amounts via bitcoin is easy, secure and the transaction itself is cost-effective (notwithstanding the current relative difficulty/expense of moving large amounts of fiat currency into and out of bitcoin in the first place, which problem I'd expect to ease as the btc economy matures).
Now let me ask you: do you really feel a global currency is worth less than $12 billion USD? The market cap for Facebook is $113 billion. Call me crazy, but I think there is more long term value in a digital currency with the properties of Bitcoin than a social network.
In order for bitcoin to be useful, it's going to have to grow. If it grows fast (network effects) then you'll get instability. I don't think there is a solution to this unique problem. The fiat solution of printing more money doesn't apply here. There has never been a sudden rush to USD like there is to bitcoins. If you can even call a few billion dollars a "rush". If bitcoin is to be used, then it's going to see $1000/coin and beyond.
i'm sorry, i try to be polite but.... jesus.
i am 1000% confident that this particular bitcoin implementation of global currency is worth less than $12 billion USD. you are treating this currency like we are dividing up slices of the world money supply. We are not. People are paying $1000 and basically receiving an IOU from no one, with the hope they will be able to sell to future speculators.
If Bitcoin succeeded as an actual currency, it would be trivial to implement new blockchains and many such systems would exist in parallel (Litecoin, Ripple?). But so far, Bitcoin has proven nothing regarding stability, it is just wowing naive investors by increasing in value rapidly.
The problem in your analogy is that Facebook never sold accounts for $1000 because people are not that stupid, except when they start seeing $$ signs flash in front of their eyes. And why does it need to keep increasing in value if its divisible to like 6 decimal places? It's perfectly usable as a currency now. This is the internet, who the fuck needs WHOLE NUMBERS.
Just....... jesus, man.
You display a nearly D-K effect when you act as if these are foregone conclusions with your "Just....... jesus, man." Especially after the catastrophe that was the last paragraph about price&divisibility. It's completely nonsense from an economic perspective. And there are clear benefits in using a highly divisible currency (and especially since it can be represented as a whole number... rather than a float. Ironic, whoops).
If we had a bunch of "units" of something we have 1 each and there are 10 total. We use them to buy melons and each 1 is roughly valued as 1 melon. Then people see the success our new system is having and want to use our units to buy melons as well. So, one of the 10 friends decides its a smart idea to sell his unit for 2 melons to someone who really wants to be a part of our cool club. The next day someone else sells their unit for 4 melons because even more people want in.
Is every unit now worth 4 melons now just because someone sold one for 4 melons to an outside trader? If I go to the store where I used to buy a melon for 1 unit and tell them now that I think I deserve 4 melons for a unit, what will they say?
Explain to me how you think storeowners should react or how Bitcoin is unlike this. Sincerely, I will listen as best I can.
Well, yes. That's why currencies increase in value, because they're in demand. That's why the value of the pound or dollar or whatever goes up and down.
> If I go to the store where I used to buy a melon for 1 unit and tell them now that I think I deserve 4 melons for a unit, what will they say?
Who knows? They might refuse to sell at that price. They might see that if they don't sell to you, you're likely to import melons more cheaply than you can buy them locally.
The storeowner should react by buying melons in bulk using his units and then selling them to you more cheaply than you can import them yourself. Bitcoin is not unlike this. It's the same. Things are worth what people are willing to pay for them.
But really even if they accept Bitcoin for 4 melons that doesn't mean they have embraced Bitcoin. It is just a credit to the power of Bitcoin's infrastructure that the trading network is there to accept the coins, no?
That's my biggest worry. Bitcoin culture seems to believe that at a certain point all individuals will give up resistance and embrace/adopt Bitcoin, whereas there are many many barriers standing before that and I believe it is only the trading network that is strong. However, I do not believe Bitcoin is a stock, so I'm not sure what it is.
What do you think, sir/madam phaemon?
Well, of course they don't. Things have just got worse for them. But that's exactly what happened to many local retailers when their customers realised they could get stuff cheaper by ordering over the Internet than they could buying locally. It's just how things go.
> However, I do not believe Bitcoin is a stock, so I'm not sure what it is.
It's an infrastructure. It happens to have a currency built in on top of it, but at heart it's an infrastructure. Its worth depends entirely on what people do with it, like the Internet itself.
So, it's a little meta to consider what a currency that's an infrastructure is worth in it's own terms, but no-one has to decide that....just let people pay what they want for their share.
I definitely understand the value as an infrastructure, but this is the web. Better solutions will emerge and could just co-opt the Bitcoin infrastructure. Like the way ISPs came in and bought access to the data lines of phone companies, same idea.
Uh, no he doesn't. He only takes Units. We're talking about your hypothetical melon salesman, remember?
> Better solutions will emerge and could just co-opt the Bitcoin infrastructure.
Probably. I would certainly hope so! That doesn't stop Bitcoin being valuable right now and new solutions being more valuable in the future. There's no reason not to have several competing digital currencies on the go.
All these threads are "Yay Bitcoin reached a new price plateau, proof that it's perfect!". So finally they pick an article that says it's a mess, but the thing is it's pretty much the dumbest article ever.
So then the Bitcoiners use it as a straw man, coming on saying "See this article's author is dumb he doesn't have our enlightened view of economics.... If you divide all the world's money by the number of Bitcoins I'm so rich!!!"
I'm sorry but even 3 years existence proves nothing, as there are many screwed up things in history with longer lifespans than that.
So yeah I'm frustrated as hell because this is pretty much the spam of the tech world now but it's front page news on HN every 20 minutes with some new story like "Researchers believe Bitcoin founder once visited zoo in Denmark". One could argue that it is a cargo cult, one could argue that it is a success, a failure. Many things could be argued.
The one thing that I think is for sure is that this whole phenomenon is tabloid-esque garbage that is mostly servicing greedy arrogant Bitcoin holders and their machine, since publicity seems to be one of the only true price correlates (nothin odd about that, huh?). I'm probly gonna get off this bent just because it's not worth the time but without the detractors Bitcoin is just like a digital Jonestown -
every post is met with more mindless optimism and every criticism with a response that is a complete non-sequitur followed by boo-hooing about hurt feelings and poor etiquette. I'm not on an online forum to get popular agreeing with everyone I'm here to test the waters and see what kind of knowledge is floating around.
Those I've had arguments with fail to articulate even simple points.
For example -- I agree that using a highly divisible currency is good. That was, in fact, my point. My issue is that a frequent explanation for the rapid price increase is "Well it's natural that the coins are going to gain a lot of value. Heck, maybe Bitcoin will surge in the real estate market and 1 coin will be worth a whole house!". With a highly divisible currency, why would the unit price have to increase to represent some arbitrary figure in the market (a house in this case). Because it seems logical to people? Because there are only a limited number of Bitcoins in circulation so of course there is scarcity and rather than using a different currency that can release more we simply have to bid the price up because "well, SN is god after all"?
If anything the fact that I want to argue should show that I do respect the potential of the community in that I actually want to take my time to interact with them. It shows that I give them the benefit of the doubt that even though I disagree I still think "well let's not write it off as a cult just yet". But when I get responses that are as cock-eyed and zombie-ish as the one above ("why analyze supply and demand curve when soon the entire planet will soon be bitcoin?!! i will own your country merely for investing now.") i will probably continue to lose my shit. So yes, I will need to stop looking.
This provides a much higher value floor, no ?
What if these protocols are not so easily displaced as you imagine?
When people compare to internet & DNS & things like that I get kinda pissed off. Those are standard protocol that we agree to because it helps ensure successful communication. Bitcoin is not anything like this stuff, it falls more into the category of "some code that runs on the internet".
Think of it more like a website (Facebook) instead of providing the false analogy that its like the internet itself. If Facebook were an open-source trading platform and it started looking askew, what do you think people would do? (hint: open-source)
Very much fits the analogy with Internet or the web.
ad hominem is bad enough dont bring in semantics please. in bitcoin there are 3 types of people -- hypemongerSpeculators, techDesigners, nonBelievers. The hypemongers call all the nonbelievers trolls, the trolls talk trash to the hypemongers for blindly defending a greedpile, and the techDesigners (who are supposedly the enlightened HN readers) generally don't care.
The only reason I even bring these arguments here is cuz all the HN headlines are hypemonger trash. I'm readying myself to accept this model of Bitcoin forums and move on, lol
$1000 per coin is speculation, but it's not particularly different from a startup people are buying into purely because of where it might be in five to ten years. The effect on Bitcoin is magnified somewhat because the maximum number of shares is capped.
Unless something radically better than Bitcoin comes along, I don't see it being replaced any time soon.
11,666,666 troy ounces
$15,108,332,470 at today's prices.
If you do count jewelry, increase those figured by approx. an order of magnitude.
You really need to see it as a powerful idea, not just a speculative asset
In practice, no one suddenly got richer because they'd gotten all this new gold, they just experienced massive inflation (and forgot to peg their tax rate to it, so their revenues collapsed but their expenditures did not and they went bankrupt).
Because it turns out you can't eat gold nor make weapons or ships with it.
Let me ask you if you can summarize the reasoning for why paying taxes in a currency helps a currency? It seems very obvious that the opposite is true -- if you don't have to pay taxes by working in an alternate currency, then you would obviously want to use that. Which is why tax law always requires arcane provisions to allow the taxation of barter and foreign currency transactions so that the loophole can be closed.
It seems that if the ability to pay taxes in a currency were sufficient to support a currency, then laws dictating how to handle non-local-currency transactions would be unnecessary.
It's not so much that "paying taxes in a currency helps a currency" - it's that forcing people to pay taxes in a particular currency or go to jail creates demand for that currency, which percolates through the economy (especially if they're concurrently giving it out when they're obliged to pay someone).
Consider what would happen if the US declared "you can pay your taxes in BTC, and only in BTC". There being ~21M bitcoins, and ~$2.5trillion of federal taxes, the price of BTC massively spikes. It's also suddenly much easier to pay people in BTC and not futz with an effective forex trade every paycheck (especially since that's what the government is paying all of its contractors and pensioners in).
This is true. But, I don't think it backs up your original point:
> the sine qua non of "money" is that you can pay taxes with it.
Reworded to non-latin, I believe this is saying that without taxes there can be no money. That just seems completely ludicrous. Sure, taxes increase demand for money, but that is a far stretch from saying money can't exist without taxes.
> Sure, taxes increase demand for money, but that is a far stretch from saying money can't exist without taxes
it really depends what you mean by "money". prior to government meddling in markets, most historical evidence points to economies relying on ad-hoc, non-denominated credit systems (aka, i can drink at the tavern all year because the barkeep knows i'll give him some of my grain come harvest time). these tabs were, notably, not denominated in an abstract currency. it wasn't "you've spent 16oz of gold at the bar this year", it was just "you've had a lot to drink, you better give me a good portion of your harvest".
you only really start seeing professional merchants and money-based trade after currency has been standardized by axial age governments for the purposes of funding their armies. to fund the armies, governments would mint money out of precious metal reserves, pay the army, and require the coins back from the population at large. all of a sudden, the whole population is now legally required to, in some manner, economically service the army (as they are the vehicle through which all coinage enters the market). the armies would then take over neighboring countries, enslave their population, and the slaves would mine more metal for coining. a nice little feedback loop.
anyway, sorry i got a bit off track there, but my real point was: currency was, by all historical evidence, definitely an invention of/majorly promoted by the state.
Unless you want to legally live and do business in a country, in which case you're going to have to pay the taxes that country levies in the legal tender currency.
The value of the US dollar, in essence, is the value of being able to live and do business in the US plus the avoided cost and risk of doing so illegally (which is generally quite high).
Provisions like those (together with legal tender laws) are necessary to prevent people from abandoning the "official" currency wholesale. Thus it seems that denominating taxes in a currency is a huge negative for a currency _in and of itself_.
Edit: after reading further, I think I see the disconnect. I was thinking purely in terms of income taxes and sales taxes/import duties. For taxes in absolute terms, like property taxes or luxury taxes, then the government demands a certain number of dollars, which does mean I need to get that money, even if in my day-to-day life I don't use it, which creates a demand for the finite resource of US dollars. Still, the federal government in the US, anyway, does not demand any taxes of this nature, so it doesn't seem to follow logically that the taxes relate to the value.
That's not true. Debt is perfectly possible with a fixed currency base, and mining or grabbing transaction fees is not a substitute for debt in any way. In fact, you can have a whole expansionary currency system on top of a fixed asset like BTC, in the same way that the USD was once convertible in and out of gold.
Bitcoin is fundamentally different because new currency is created through mining. Yes, you could create a secondary market on top of Bitcoin that handles loans, but not new Bitcoins, therefore it is debt- free currency. When Nixon decided to decouple the dollar from gold in the seventies, what he did was effectively to move from a debt-free currency to a debt based currency. The move had huge implications in shaping the world until today, because it meant that the US became free to print dollars endlessly. The external market for dollars was solid because of the world reserve status, enforced through the US military. In this way the US could print away AND keep internal inflation very low in relation to the amount of circulating currency.
Breaking this cycle, which is what feeds the US empire, is why I think Bitcoin will in the end provide a great service to mankind.
Money effectively is both commodity and an IOU. Attempts to force it into one category or another eventually leads to social breakdown.
The key question for our time is how to craft a stable monetary system that is decentralized. We don't know how to do this yet, and Bitcoin is not likely the answer BECAUSE it is finite (which would be catastrophic, as gold was). Crypto currencies can and should grow in experimentation but this one has a fundamental flaw.
actually, we can. it's called historical anthropology, and books upon books have been written on the topic. to summarize those books for you: the chartalists were basically right. standardized currency and thus stable markets took off once governments did what governments do: pass laws to standardize things. also, contrary to your assertion that the only "monetization" event was "how gold emerged as money", we've actually gone through a number of cycles back and forth between gold/precious metal-backed money and credit-backed money. metal-backed money tends to hold during periods of imperialism and warfare (where the expected lifetime of a given state is low due to risk of being conquered/defeated, and soldiers have high exposure to other markets), while credit-backed money tends to emerge during periods of stability and peace (where states are more stable and trust-worthy than the rate at which some given metal comes out of the ground).
Inflation is the expansion of money supply. Once bitcoin reaches full supply, by definition there can be no further inflation from bitcoin. There can be price fluctuations in the value of bitcoin, but not inflation. It's necessary to differentiate between prices going up / down, as opposed to inflation / deflation.
"In economics, inflation is a persistent increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy."
Inflation is always and everywhere a monetary phenomenon.
—Milton Friedman, 1963
So the GP was wrong when he said there can be no inflation by definition once all the bitcoins have been mined and the supply is fixed. Deflation (negative inflation) is pretty much guaranteed with a fixed money supply. There's more stuff to buy with the same amount of money, so things will cost less.
Consistent deflation will be very upsetting for the status quo. I'm not saying it's a good thing or a bad thing, but when the incentives shift towards keeping your money in a shoebox, and against using banks, taking or giving out loans, investing and spending, that's going to be a huge change.
What is correct view? I don't know, the only thing I remember about the monetary economics class I took, is that the professor and I didn't agree. About what I don't know. I do know that these are interesting times for him and colleagues. When/if Bitcoin stabilizes they can study the effect of monetary policy, the PPP, etc. I almost want to become one.
No, you're ignoring GDP growth. As the bitcoin economy grows (more goods and services available), the share of the pie 1 bitcoin represents correspondingly grows. This results in decreasing prices, i.e. price deflation.
Bitcoin could just have easily had a perpetually increasing monetary supply. This literally would have been a single line change to the bitcoin source code. Freicoin does something similar with it's demurrage and perpetual reward.
I have to be honest though, I'm not an expert on the subject. Also, everything about the critique presented doesn't have to be false for the successes that bitcoin has had to be real. I think that bitcoin really serves as a form of regulatory arbitrage... its real value, the value that people are placing on it, represent gains that can be made by avoiding fees and oversight. Its an alternate currency that couldn't exist without a state system.
As for the inflationary ideas...I find it really very similar to gold or maybe some other more rare natural resource... don't all of the ideas about hoarding and "de beers" (sic) style monopoly still apply? I'm genuinely asking not trying to be a prick...
>> "The developers of bitcoin are trying to show that money can be successfully privatized."
There is so much bias in this sentence that I don't even know where to start.
First of all, the developers of bitcoin are not necessary trying to show anything, are also not necessary the ones or the only ones. Bitcoin is an experiment, and they say that explicitly everywhere. Second, people encouraging the use of bitcoin are way bigger than what the author seems to imply, It's now an economy worth billions, remember?
>> "sophisticated algorithms guaranteeing the anonymity"
Again, bitcoin does not guarantee anonymity. They say that explicitly here https://en.bitcoin.it/wiki/Anonymity
>> "bitcoin is tiny; at the current exaggerated exchange rate, the total projected volume of “coins” is worth less than the gross domestic product of Mongolia"
_is_ tiny now doesn't give you a clue about it's future size.
"But the monetary philosophy behind this web-based phenomenon can be traced back to one of the oldest theories of money."
I honestly stopped reading to do my brain a favor.
Despite the link-bait title, he doesn't seem to want to make a definitive statement.
It wasn't a gold-currency world, it was a world of gold-backed US dollar. It makes a huge difference. While the advantages of being a reserve currency superceded the disadvantages of not having monetary control, Bretton-Woods stood. Once the tables turned, the US ended the gold backing.
Bretton Woods stood for close to 40yrs. The current system has about the same age and much as Bretton Woods is failing because the US abused its position as reserve currency to wage war financed by debt. History does repeat itself, in slightly different color tones...
The point is that it failed as a currency as soon as it lost the government's backing.
That doesn't mean the currency itself failed, just means it was abandoned by those seeking to implement monetary policy.
It would be like saying P2P networking failed because vendors prefer the iTunes model.
If you brought your gold to different people, they might all quote you different amounts, based on how easily the merchant or exchanger could convert the gold into their own currency.