Bitcoin Forum

This article is one of the best & most intelligent articles I've read about why Bitcoin WON'T become the next currency:
https://medium.com/money-banking/2b5ef79482cb

That guy GETS Bitcoin, and he truly understands that it is NOT a currency. It is a commodity/investment.

It all comes down to the volatility and wild swings of Bitcoin pricing. Any item whose prices swing so wildly up & down can't be depended on for daily, routine transactions. Items that swing wildly up & down are considered speculative commodities (like gold), or a speculative investment (like the stock market).

Nobody wants to spend $5 on a loaf of bread today, only to realize that they could have gotten that same loaf of bread for 5 cents yesterday, or that they'll have to spend $500 tomorrow for that same loaf of bread. That just isn't how currency works.

Currency is STABLE. A loaf of bread is $5 today and it will be $5 tomorrow and it was $5 yesterday. If inflation happens, then MAYBE IN A YEAR'S TIME, that loaf of bread will cost me $5.05 in today's money. And MAYBE IN 2 YEAR'S TIME, that loaf of bread will cost me $5.10 in today's money. it's slow, predictable, stable, and dependable... because it's a real currency.

For Bitcoin to be actually be taken seriously as a real currency -- and not a commodity worth hoarding -- the price would have to become completely stable. And there's no indication that the price will ever stabilize. Ever.

Nobody is buying Bitcoins to spend them... people are buying Bitcoins to hoard them as speculative investments, just like gold or stocks. And that's why Bitcoin will not become anything rivaling currency.

Now, as long as everybody realizes that Bitcoin is nothing more than the equivalent of investing in gold, or playing the stock market, or playing at a casino craps table... then i think we're thinking about Bitcoin in the right way. We're all just playing the roulette table in one big casino. Nothing more, nothing less. Not that there's anything wrong with that... it's just important to know exactly what Bitcoin is.

Bitcoin is just like gold, but it's not nearly as precious because, come on, let's face it, we're basically buying & selling pac-man pellets here (as one other article perfectly nailed it).

Thoughts?

You are welcome to your opinion.  It doesn't make you right, but you are welcome to share it with anyone who will listen.

It's swinging now because it is still in price discovery mode. Whether it is going to be $1 or $1,000,000 one day it's going to reach equilibrium and that's when the things will get interesting....

Yes, equilibrium. That's EXACTLY what Bitcoin needs to be accepted as a currency. But when will that happen? For all we know, that might not happen until 2140, when the last bitcoin is mined. I would love to see Bitcoin become a currency, but it needs to hit that equilibrium point. How can we make it get to a point of equilibrium sooner rather than later?

Without even going into detail critiquing this..... is it really wise to judge a currency that could last hundreds or thousands of years on a small window of time where it is still being 'born' basically?

+1 If you look at the statistics you will see that the amount of BTC traded today on exchanges is measured in 10's of thousands. If you look at the economic transaction side of BTC you see it is measured in millions of BTC. The currency side is alive and thriving.

http://bitcoincharts.com/bitcoin/

Oh like how this has ended in tears?!?

https://lh3.ggpht.com/_otfwl2zc6Qc/S9sez35UorI/AAAAAAAANWg/duUnwNSGRiI/s1600/apple.jpg

All things have volatility.  The exchange rate between EUR and USD for example is continually changing however the changes (most days are relatively small).  Want to know why?  The Forex market is $4T per day, or >$1.3 quadrillion US dollars annually.  Think about that a second $1,300 trillion (although I just like saying quadrillion) dollars a year in pure speculation (and hedging, arbitrage, etc but no actual commerce).  The entire global GDP is roughly $70T annually.   

Bitcoin trade volume on a good day might be $10 to $20M USD.  EUR:USD exchange rate can vary by as much as 2% on a high volatility day and BTC:USD exchange rate can vary by 40%.  Why?  Simple the  EUR:USD trade has maybe 60,000,000x as much volume.  Will BTC:USD ever be traded in trillions of USD per day?  Who knows but as volume ramps up (we are not talking 20% higher volume but 20,000% higher volume) volatility will come down.  The markets will get deeper and more steep.

The idea that people don't accept rapidly falling prices is a falsehood.  Take HDTV for example.  Everyone knew when they were released there would be better ones for half the cost in a year.  Hell most early adopters would tell you that AS THEY WERE BUYING ONE.  As the performance improved and prices fell at each price point people bought knowing the track record that lower prices would be available in 3 months, 6 months, 12 months, etc.  At the point where the utility of a TV today outweighed the potential savings tomorrow they bought. 

Utter nonsense. Statements like this lack insight into human nature. People are buying bitcoins in order to spend them when they see fit. We all know Bitcoin is going to rise in overall price over the course of time. Someone might cash some out for a car if their coins become worth enough. Or a house. Or start a business. Delaying momentary gratification for future gain is called "saving". It gets called "hoarding" by the uninformed.

The quoted statement also misses a lot of context. Many of us have spent a bunch of bitcoins in the past year or two and did our  parts in getting this show on the road. Only speaking for myself, I'm saving my coins because it's my money and I'll do whatever I want with it. Saving is the wise thing to do right now.

Mostly all we can do is wait while the free market works it out.

Services such as BitPay help quite a bit though.

They allow merchants to use bitcoin as a payment network rather than a currency.  This minimizes the risk for both the Consumer and the Merchant as each only holds the bitcoin long enough to perform the transaction.  Meanwhile the exchanges back and forth to enable the transaction add liquidity to the market.  The visibility of merchants advertising that they "accept bitcoin" adds to it's perceived validity and create a situation where a merchant can opt to keep some of the receipts in bitcoin to pay their vendors.

103,539 BTC traded on Gox today. (Speculation and currency exchange)

Bitcoins sent last 24h: 1,551,145.95 (Currency exchange)

And you still say BTC is not a living breathing transactional currency?

There is no such thing as perfect equilibrium in anything, ever.  The amount of USD inflation varies from month to month and year to year. This is for a single synthetic financial construct totally under the control of a single central bank.  Even they can't prevent volatility in the rate at which the USD devalues.

There is no magic point where Bitcoin (or anything) will suddenly be at equilibrium and have 0% volatility however volatility is declining and it will continue to decline as the markets get deeper, faster, and more efficient.  Volatility a decade from now will be significantly lower.   Price apreciation isn't the same thing as volatility.  Bitcoin is also expanding rapidly, number of users, number of merchants, amount of coverage and that is reflected in the price.  That too will eventually slow, as a case in point look at the growth of number of internet users.  As Bitcoin becomes more and more widespread the number of potential new users will shrink and the upper rise in exchange rates will slow.

As someone above said reporting that Bitcoin wont make it less than 5 years after its creation is probably mature.  You seem to have made up your mind so

1) Sell all your BTC except those you are comfortable seeing go to $0.00
2) Transfer it to a paper wallet.
3) Check back in after 20 to 30 years.

Agreed with BitcoinTate

As for you Bitcoin Girl, meh, your points seem to come from the perspective of someone who doesn't yet understand the value of bitcoin, because you likely haven't used it to solve a problem in the real world; whether it be sending money internationally with little fees, contributing to an organization like wiki-leaks, or purchasing something. There's more than enough of a potential market in the few examples we've listed above to justify a substantially larger $/btc price than we see today.

If you'd like, we can trade my pac man pellets for your bitcoins, if you have any.

Also, in case you care, you come across as a FUD agent, or a troll, neither of which is appreciated here.  If you'd like to be better received you should more carefully package your messages.

yeah, i think the key thing to keep in mind here is that bitcoin is still in it's infancy.

according to Max Keiser, when bitcoin his $2700 it will be on par with the market capitalization of silver.  to this day, silver is still considered a volatile investment.  however, that doesn't make it unwise to invest in silver.  he further suggests that silver is a good hedge against bitcoin, and that bitcoin investors should peel off 10% and put it into silver.

Yeah, I'd agree.

Most of your posts seem to be trying hard to explain to all of us that use bitcoin how it can't be possible to use it, and how something that has existed for over four years isn't likely to exist very long.  You might as well be running into a movie theater in the first 10 minutes of a movie and yelling to all the patrons about how it is impossible to make projected pictures move while offering a bunch of explanations about your technical reasons for believing so.

that's completely unfair Eye, she (or he) does not come across like that at all.  s/he brought up a valid point to consider and mull over.  a lot of people have already done that here in the past, but that's not a reason to berate her thinking.  we all just want more information, and i suggest we continue to help one another out positively.

I will consider dropping 10% of my BTC into silver when it hits $2700. But there is no way in hell I will dump any BTC into silver before then. Both silver and gold prices are being suppressed by central banks selling off gold and silver derivatives to keep precious metals from undermining the USD and euro which would indicate the true pace of inflation.

Sorry for coming across as a troll... I think it was my pac-man line that probably did that. I really appreciate the great responses so far... this gives me a lot of great food for thought. I especially liked the AAPL stock chart!  :)

As far as FUD goes, yes, I personally have FUD about the future of Bitcoin, but this isn't coming from a place of wanting to see it fail... I want to see it succeed, and I'm extremely nervous about it. I think that as I start to purchase actual things with the (very minuscule number of) Bitcoins that I own, that I may become more enlightened to BTC as a currency.

Thanks so much, buddhacoiner!! :)

Sorry, I might have been too opinionated in my original posting. It's just something that I am concerned about and I wanted to discuss with the forum... sorry if it came across the wrong way. I was mostly trying to sum up that other guy's article and further exemplify it with my own personal concerns.

In any case, I appreciate the excellent discussion about this topic... EXCELLENT thoughts & opinions & points of view!! :)

How much is a ticket for a Justin Bieber concert in 2035 worth valued in gold?

If the ECB announced that they were to introduce a currency to substitute the current Euro with a release plan like Bitcoin starting with a value of 0.01 cents, in a few hours, price would have soared into the thousands of Euros.

Bitcoins rise in price is due to it's release method, i.e. it's difficulty self adjusting properties.

Real money are a commodity too. Liquidity for a business is just another worth for it. It takes money to make money, a commodity you need to stock to be able to do business.

Wild price swings, sure but real currencies would swing as much too if it wasn't for international agreements. Small currencies outside the "monetary world club" are thrown around as much as Bitcoin.

What is hampering Bitcoin as a vehicle for payment ATM is it's crazy price rise. No one is going to buy anything with an asset that appreciate as fast as Bitcoin. That's why you see these 20% - 50% discounts in web shops accepting Bitcoins.

But take it easy it will slow down that's a fact of supply and demand. Will it lead to a crash? Maybe, but not for sure, we might end in an situation where most of Bitcoins in existence are held by too few with to much invested to dump them without making them worthless. In such a scenario prices will be pretty stable like any other currency in the club! Those arguing that it can't happen to Bitcoin should remember how Gold and diamonds always have been attempted to be controlled by the ones that hold the most of it.

So the greatest threats are competition or regulation by governments.

Yes, plenty are spending them... Everywhere you look, market data shows that Bitcoin spending has increased significantly in the recent past:

BitPay alone recorded a merchant transaction volume increasing by 7.6x between February ($687k) and March ($5.2M): http://www.marketwatch.com/story/bitpay-eclipses-silk-road-i... (sure $3M or it was Avalon, but that is still a nice increase from $687k to $2M)

The estimated volume of USD transactions is increasing: http://blockchain.info/charts/estimated-transaction-volume-usd

Silk Road going over 2 years from zero to $2 million/month of Bitcoin revenues: http://arstechnica.com/tech-policy/2012/08/study-estimates-2-million-a-month-in-bitcoin-drug-sales/

Bitcoin casinos reporting lots of profits: http://arstechnica.com/business/2013/01/bitcoin-based-casino-rakes-in-over-500000-profit-in-six-months/

Etc.

are you really a girl? i think you would be the second one we've seen around here ... no wait maybe the third ... or are your just trolling to get a rise?

Volatility maybe an issue now, but it is improving (note you need to consider daily swings not weekly or monthly for what people are using bitcoin for is relative). Also you are discounting the other desirable monetary properties, privacy, censorship resistant that outweigh the volatility for the target market to bootstrap it to those sunlit stable greener uplands of monetary nirvana.

The increase in value is EXACTLY why I do not ever buy a computer knowing I could buy a faster computer at a lower price a month down the road.


I am still kicking myself for paying $3,000 for a 66MHz computer back in 1995.

If only I had kept that investment I would have a much faster machine today.

Everyone else believes the same thing since nobody ever buys computers.

 
Let me stop you right there.  Around these forums, you can hardly swing a cat without someone arguing their own personal definitions.  It doesn't help that money is a strange and complicated subject, where no definitions seem to actually fit reality.

Currency is "that which circulates".  A commodity is a fungible thing.  An investment is something that you have a rational basis for thinking that will increase in value or provide a productive return.

Bitcoin is all of those things.  The only way to claim that bitcoin is NOT a currency is to get into a quibble about fractions.  I have a jar of pennies.  They don't circulate.  I haven't seen figures, but I wouldn't be surprised to learn that most pennies are similarly in jars instead of pockets.  Is a penny not currency because not enough of them move?

The truth is that there are no fixed values.  There is no frame of reference.  The world is a sea of floating relative values.  This includes all forms of money.  The dollar is stable because the dollar market is friggin huge.  The bitcoin market is volatile because it is small.  Volatility isn't a weakness of bitcoin, it is the natural consequence of smallness.

Why would you ask that, and why should it matter?  Are you twelve?

Silly question.

Why does it need to be "stable" beyond a reasonable degree? Like we can determine it's not going to likely crash below a certain point beyond a certain market cap. Sure it can, but the dollar could crash too. Right now there is a lot of uncertainty because it just launched. Also not enough people are using it for us to know what it's worth yet, but we will know in a few years and then these sorts of discussions make more sense.

I would be more concerned if the Bitcoin was stable right now.

Think how word of mouth works. I tell 5 people about Bitcoin, they then tell 5 people each, and then each of them tell 5 people etc... This leads to wild growth with the occasional dump and mini-panic until the majority of people have heard about Bitcoin and have made up their mind about it. Then, we have stability, and then we have a strong currency.

This applies for business adoption too, which adds to the short-term volatility.

Mind you there are a million other factors involved, but from a helicopter's perspective, I'd say the price is moving how it should.

Silly question deserved a silly question ... hint: i'm not 12.

Edit: and you are all being trolled for your testosterone, lol.

Didn't read the article but I agree that as of right now BTC doesn't have much value as a currency and is instead a commodity to invest in.

Something that changes so quickly and so drastically isn't a good thing to use a currency.

In the future if bitcoin becomes more stable then it could be a great currency.  So far though in the past 3+ years that hasn't really been the case.

I mean think about the guy who bought a pizza a couple years back and it now would've been worth 1million dollars...... that's not how a day to day currency should work. You want/need currency to be stable. You need to know that those btc's you spent for a pizza a couple years ago would still buy you the same pizza today in order for it to be a realistic currency.

I agree in some general (very general) respects with the OP, but some of the generalizations are outright absurd.  

I agree in general that BTC has a lot of the attributes of a commodity, but it SPENDS like currency.  I disagree that it is like gold, because one generally can't convert gold instantly into fiat.  It has a lot more in common with gold-backed currency, but lacks some of the attributes traditionally associated with currency.  People do tend to hoard it, just like they did old-fashioned gold-backed currency, but they also spend it, just like they also spent old-fashioned gold-backed currency.

I find the constant messianic bullshit about BTC imminently replacing fiat currency annoying.  But I also find the dismissive bullshit that BTC is basically play money even more annoying.  Obviously BTC has value.  I can and have been selling off some of mine as the price continues shooting up.  Why?  I need money and am broke, but have BTC that is suddenly worth a fuckton more than it was when I got it.

I also don't buy BTC to hoard.  I win them gambling, mostly poker but also via a few other opportunities that present themselves, which I obviously won't discuss.  Added fun comes from the fact that not only do I win BTC, but the BTC I already have appreciates in value while I have it.  It's like gambling on two things at once.  Gambler crack!  "Yo Dawg, I heard you like gambling, so I put a gamble in your gamble, so you can gamble while you gamble."  It's nice to make money on a monthly basis even when you lose.

Also, to be a little more serious, most of the gambling-related businesses out there routinely cash out BTC to fiat to cover their cost of operation, putting it back into circulation.  Since their income is almost entirely BTC, and they need to keep their business operating, including by doing things like getting DDoS mitigation and other net services, that money is always going to be flowing.

Finally, the idea that currency has to be at equilibrium to be currency is nonsense.  Ask the Germans in WW II who had to roll up a grocery cart full of Reichsmarks to buy a loaf of bread how stable their currency was.  BTC is volatile, and definitely more volatile than "solid" currencies like the U.S. Dollar, but much less volatile than some of the worst currencies in the world that are subject to hyperinflation.  In those countries, BTC may be a real alternative to their so-called "real" currency.

So I don't believe BTC is going to become an index currency like the dollar, but it will provide a lot of competitive pressure to force governments to behave themselves, because if they rob their citizens too much and render their own currencies increasingly worthless, people will have incentives to switch to BTC.  

I don't buy the messianic bullshit that BTC, or crypto in general, is going to "overthrow" governments.  However, what it does do, and what is almost more subversive, is that it makes badly behaving governments IRRELEVANT.  You don't overthrow the government, you just treat its ill-informed activities as damage, and bypass them.

Nope.jpg
BTC will stabilze at market penetration, its most powerful feature is the people buying in and hoarding to profit, becuase ot make more people buy in.

You could run the economy on just a few coins if you wanted, it is divisible 10^8 decimal palces, plus however may zeros out front

People must understand that their is a fundamental difference between using something as a currency (which is a unit-of-account and in which prices are defined) and using something as a mere PAYMENT VEHICLE.  Nothing and I mean nothing any ware on earth is being sold FOR BTC right now, their are merchants that take BTC AS A PAYMENT VEHICLE FOR A PRICE SET IN NATIONAL FIAT CURRENCY, that is all.

A merchant can not allow the price they charge for goods to violently shift up (which would drive away customers) or down (which would eliminate their profit margin), thus a merchant sets prices in the most stable thing they can find.  That's why we see people using cigarettes as money in a hyper-inflationary environment, but you can get the same thing if money is so deflationary that it becomes useless as a unit-of-account.  People say "oh that will cost ya 3 packs of cigarettes worth of money, lets see a pack of cigarettes is 15 cents today (was 20 yesterday) so that will be 45 cents, thank you come-again".  The only difference is that in a deflationary environment the merchant would immediately run out and buy cigarettes with any money they get before it loses value, in a deflationary environment the merchant instead hoards the money and converts them to cigarettes when he needs to make a wholesale purchases.  That is basically the BTC economy today.

Gold was money for millenia and could certainly become money again.. well, if there wasn't a better alternative right here. ;-)


Concerning price fluctuations, it's only so wild because the demand fluctuations for bitcoin are wild, because new people "enter and leave" daily. The day that the number of people entering and leaving Bitcoin-world is small compared to number of people already in, you'll have the price stability you want.

Hoarding is self defeating and will lower the price.   If everyone hoarded there would be no market.  Hoarding will start a price decline meaning people will start trading again because it becomes expensive to hold.   Market forces.

Even in Roman days, when coins were minted in gold, silver, copper, etc. and even bronze, the value of the coins generally exceeded the value of the precious metals.  People didn't melt down the coins and just sell bullion, because the coins, themselves, were worth more than their value as precious metals.

There was an element of fiat even then.  Part of the value of the coins, rather like the U.S. dollar, was that someone would come and whip your ass if you didn't accept it.  The ability to unleash violence is largely why fiat money has any value.

You really have to be careful about using absolutes in conversations.  It is rare that the resulting statement is accurate.  This would be one of those inaccurate statements.

Gold isn't exactly a stable day to day price against USD either. Go on goldprice.org and click on '30 days'.
When all the bitcoins have been mined, and buying/selling bitcoins is 100% decentralized so one exchange doesn't rule the market value BTC will be pretty stable

Really?  I have to wait 136 years before I can expect BTC to stabilize?  I was really hoping it would happen in my lifetime.

In an inflative fiat currency world, people need a currency that can hold value

The Internet is a Bubble!!:
http://www.pewinternet.org/Trend-Data-(Adults)/~/media/Infographics/Trend%20Data/Early%202013/Internet%20adoption%20over%20time%2012.12.jpg

Web Browsers are a Bubble!:
http://media.netmagazine.futurecdn.net/files/imagecache/featured_main/articles/features/2011/10/platforms.jpg

lol! +1

 ;D  And not just vanilla pellets. The shiny ones, that make you eat the ghosts. 

I  think he does get it. Very much. I can't really see how Allinvain's theft was from his own wallet, but there's a lot of valid arguments in that article accounting for why there is a need for something like bitcoin, and explaining why bitcoin is not the solution yet.

It is indeed a protocol...  :-[

It's a platform, open, and built for very good purpose (hey, a tiny bit of news coverage and everybody wants in!) but it is at the moment nothing more than a nice big plate, waiting for the steak we have to put on there. It may feel like we can claim victory and fight against anyone talking bad but it's just not finished yet: The deflationary nature of bitcoin makes it always lean towards the commodity side. If I'll wait for tomorrow, I'll be able to buy more! And while i'm at it, transaction times are horrible. Quite not the advertised 'instant'. And I can continue for hours... But in the end I certainly hope bitcoin or some offspring will succeed in becoming a payment method alongside and accepted by the conventional ones we know today.


Now I have to go out for a walk.. that guy almost convinced me that governments printing money is ok. ???

Perhaps not 'instant', but I've never seen it take more than a few seconds for any of my transactions to relay throughout the network.  You've got to be pretty impatient to think that 2 to 3 seconds is "horrible".  Are other electronic payments that much faster?

The need for a stable distributed currency is very real, and bitcoin does not currently meet that need. However, it will provide us with a platform to build "child currencies" which are stable. Think about how HTTP is built on top of TCP/IP. In the same way, we will build new, stable currencies on top of bitcoin. They will be pegged to dollars, gold, oil, and anything else your heart desires.

I wrote a paper about this future, and if you come to the bitcoin conference in San Jose in May, you can hear me talk about it and ask questions at the "Bitcoin in the Future" panel.

The take-away is that buying bitcoins now is the best way to bet that these "child currencies" will be successful. They depend on bitcoin, and if they are successful, bitcoin values will go up.

2 to 3 seconds is not horrible. The time it takes for a transaction to travel the network is not an issue for me. What is is that it takes 6 'confirmations' to make sure the transaction is irreversible, so every seller wants to wait for the 6 confs to get the coins in his wallet. Freaky sellers might wait just 1 but that's still 10 minutes. I will not wait 10 minutes at the grocery store. Imagine the lines accumulating. Then there's the guys like satoshidice. If all the inputs are 6+ confirmations they validate the incoming coins immediately. It's a nice workaround but there's a limited supply of "6+input coins" in my wallet so if you spend too much you still have to wait.

i read the first couple paragraphs and just facepalmed that the article missed so many examples that disprove the article


here is a link to an image that gives away an example. i wont use the image tag as i dont want to give it away before you read what i had to say above first.

example (http://www.insidefacebook.com/wp-content/uploads/2009/11/chart2-500x424.png)

next is talking about why the article continues to assume btcoin is doomed to fail


the same can be said about gold and silver. but guess what guys. while gold bars are for investors, gold nuggets, gold dust ingots and coins can be used as "currency".

hang on.. how about BITCOINS for investments. and satoshi's for currency.. problem solved.

that being said, bitcoin legally would never 100% replace FIAT, but keep in mind, there are 7 billion people in the world. it doesnt need EVERYONE holding bitcoin. infact it only takes TODAY 12 million people (amount of bitcoins in circulation today) to want to invest just one months salary of £$€1000 into bitcoin. to make bitcoin instantly worth £$€1000 each

that is just 0.17% of the population putting only EVER one months salary into bitcoin.

so how do you like them apples.

food for thought

And that is not a bubble!  ;)

exactly my point.. he thinks anything growing at more then a 45% must be a bubble... hense me facepalming, just reading that article

Me thinks the smilie and the bold were a dead giveaway...

Other forms of electronic payment (credit card, debit card, paypal, etc.) Take much longer to make sure the transaction is irreversible.  I've read in some places that credit card transactions can be reversible for 6 months!

For some reason merchants are willing to accept the risk of credit card transactions being reversed, but not the risk of bitcoin transactions being reversed.  I suspect that with more experience and better understanding this bias will fade.  Furthermore, I expect that within the next few years we'll begin to see trusted/insured/regulated third party corporations that will handle "fast" transactions.  Users will keep some bitcoins on deposit with the third party, and merchants will trust that any transactions from the third party won't be reversed "without cause".  This will allow the third party to provide consumer protections against merchant fraud.

it aint much of a stretch of the imagination for places like starbucks to get a MTGOX account right now, not in a few years. but now. and just request MTGOX codes for payment for coffee..

instant confirmation. and out the door while the coffee is still piping hot with a layer of throff on the top

If and when it becomes more widespread I'm sure it will fade.
But there's a bit of a paradox in there. One of Bitcoin's selling points is the fact that nobody can interfere with the system of transactions. And not reverse them. And the acceptance of being paranoid about that. So something in the protocol still has to evolve a bit to adopt this mindset completely.

we have not discovered the fair value of bitcoin yet. Once we do the wild price fluctuations will settle down.

the protocol doesnt need to change. bitcoin can still be irreversable. but exchanges can adopt policies that if a merchant is scammed then the merchants access to fiat is frozen. and their identity (due to high volume trades) is passed onto the authorities.

much like paypal cant stop a delivery of goods mid flow. of demand the merchant sends the goods that are promised. but they certainly can use merchants /customers identity and access to the service to cause enough headache to sort out a few genuine issues.

Escrow (if that is what you mean) is a very good workaround to this problem. But it's a workaround. It's fixing your sewer with ducttape. Why? Cause bitcoin should be (at least that is my opinion) an open protocol, changable, able to 'grow organically' (read the article). So with the ducttape in place we should be working out how to use real cement and pipes to make that horrible smell go away.

 

Bitcoin's irreversibility allows it to act as a currency.

If I hand you a $10 bill, and you walk away, it is impossible for me to "reverse" this transaction.
If I send you a bitcoin, it is impossible for me to reverse this transaction.

It is only through third party services that currency transactions become reversible.

This is true of Dollars, Euros, and Bitcoins.

There is no need for the U.S. Dollar to "evolve" for a third party to provide consumer protections.
There is no need for the Bitcoin protocol to "evolve" for a third party to provide consumer protections.

This I don't get. How about double-spending, 51% attack etc.?

I agree. Thieves will exist forever. But I like to protect myself against them



US Dollar bills may not have evolved that much, but the paper money in my country(euro) has evolved very much. Silver holograms, cotton paper, UV markings, etc. You name it we got it...  ;D

And which of those evolutions are the ones that made it possible for a third party (Visa, PayPal, MasterCard, etc.) to provide consumer protections?

I wasn't saying that currencies shouldn't evolve, only that evolution of the currency isn't necessary for a third party to provide consumer protections.

Please read my posts. Escrow is ducttape.

banks third party services, paypal are the digital protection.

paper notes EG bank notes are irreversible without a fight and maybe a bit of blood, or a slap across the face with a wet fish if refusal to repay occurs. or if your night a fighter. then a small claims court case.

so here is the solution..

escrow for digital protection. (a comparitive to banks, visa, mastercard and the dreaded paypal)

and bitbills, cascasius coins for irreversible instant transactions..

now that is one possible future path bitcoins can take.

Yes, bitcoin acts like a payment network until the first confirmation.  Then it begins to act more like a currency.  After a few confirmations it is much more like a currency than a payment network.

If you are comparing bitcoin to physical currencies, and complaining that exchanging bitcoin is horribly slow as compared to the physical exchange of currencies such as dollars or euros, then I'd agree.  With those physical currencies, the money is in my possession the instant that I am touching it and you let go.  On the other hand bitcoin offers significant improvements over physical currencies as well.  Especially in its ability to be exchanged electronically, and its fixed inflation schedule.

If you are comparing bitcoin to payment networks such as Visa or MasterCard, and complaining that bitcoin doesn't provide the same consumer protections, then I'd agree.  With those other electronic payment networks, the consumer can dispute charges and get their money back when they encounter merchant fraud.  On the other hand bitcoin offers significant improvements over other payment networks as well.  Especially in its ability to provide merchant protections against reversibility within minutes, and its reduced fees.

Bitcoin is a very interesting blend of electronic payment network and currency.  You can think of transactions with a few confirmations in the blockchain as the "currency" aspect, and the connection of peers and miners relaying and confirming transactions as the "payment network" aspect of bitcoin.

It is unlikely that any of the "core" aspects will ever change:

• Inflation schedule
• Average 10 minutes per block (confirmation)
• Risk of reversibility prior to confirmation
• 51% attack vulnerability

There is not reason that third party solutions can't be created to alter the user experience and shield them from those aspects that they don't like.

In an ideal world, maybe that's true.  In the real world, we have some counterexamples:

http://upload.wikimedia.org/wikipedia/commons/thumb/3/3e/Zimbabwe_$100_trillion_2009_Obverse.jpg/250px-Zimbabwe_$100_trillion_2009_Obverse.jpg

http://upload.wikimedia.org/wikipedia/commons/thumb/9/93/50_millionen_mark_1_september_1923.jpg/320px-50_millionen_mark_1_september_1923.jpg

Perhaps the problem is not that Bitcoin is rising in value, but that the dollar and other government-controlled currencies are falling in value.  A loaf of bread might've been somewhere around $2 for the past few years, but consider this: back in the '60s, you could've gotten a gallon of gasoline for maybe 15¢ or so.  The price at the pump today is closer to $3.50-$4.00...but the value of the silver in two pre-1965 dimes would buy about as much gasoline today as it did 50 years ago.

And to take it a step further.. those evolutions should make it less possible (impossible is impossible..  ::) ) for third party to provide such. We are bitcoin!

*YAWN*

all been discussed.

 ;D Hey mate, can I change this for some small bills? Going to the pub and I don't want to show off...

ill change it for you

here you go heres £35, should be enough for a few pints down the pub
http://dl.dropbox.com/s/hqbo0hwrw63de7m/25million.jpg

When the noobs discover the alt-coins the capital will flow from BTC till LTC, NMC and maybe some other coin? in that scenario the competition between the coins make their price relative USD more stable. But we might be several years from that scenario where price is stable in crypto currencies against fiat.

+1

Thx!  8)

What a scam.

I just took it down to the pub, and the barkeep tells me that there is no value on that currency.

He says he'll happily accept bitcoin, but that that image you provided doesn't have any.

lol well its only a template https://bitcointalk.org/index.php?topic=92969.0 (https://bitcointalk.org/index.php?topic=92969.0)
the true notes have tamper proof holographic stickers hiding the private key.

which is me just hinting that non escrow non digital non bank backed/insured bitcoins can be done

Not only that, during this phase of exponential adoption the "fair value" will also change rapidly.  Capitalization was low and now it's being driven higher quickly, volatility is the nature of the beast and necessary right now.  As rate of adoption levels off near certain saturation levels, the money coming into the system to market capitalization ratio will shrink and I think at that point so will volatility.

To be a good currency Bitcoin will need as much adoption as possible.  Adoption will necessitate periods of volatility.  Saying Bitcoin sucks as a currency because it is becoming a better currency seems a bit short sighted to me.

Then again I don't know what the hell I'm talking about so maybe I'm wrong and this guy does GET Bitcoin.  Interesting thread, I'll keep reading.

bitcoinGirl325

Like my wife, she was complaining that I was loosing time on this, 3.5 years ago.. now she's saying she regrets not buying some BTC a year ago.. She also admit that my "project" to sell the house and start a major mining operation 2 years ago was not as crazy as she tought... We did'nt do it because she own half of the house and did'nt want to sign the papers..   next year, I predict I'll ear her complaining she should have bought some BTC at 200..   

I'm realistic, in 20 years she will still be against my "Crazy Projects" ;)

IMHO life's too short to hang out with people like that.

[edit]
Redundant question removed,  I really should read a whole thread before replying :)

the funny part of bitcoin is (i think) that the "equilibrium" where price keep stable for months actually gives value to bitcoin. Because then as it has been said it is used as a currency.
So ... it's hard for me to think that bitocin will actually keep stable. But then... post like that appear showing that is has less value.

Maybe a steady rise balancing between hoarding and economy growth is the future...

Agree.


Why is there so much resistance to change? It's a protocol, not a bible..
It's quite clear that no currency or payment system will ever be completely satisfactory, but why not put some effort in making it evolve to the wishes of its users. As long as no-one has 51% or more voting power for change ;D

The article stated bitcoin is not the final solution (final whatever  ;) ), it's a primer.

Here's where Satoshi's real brilliance was: in order to create a currency that people use to exchange for goods and services, it is first necessary to get that currency into as many people's hands as possible.  So, you could just distribute them randomly, or allot x amount per person.  But then who would value them?  

The American psyche is such that we love to see people "make it".  We love to see assets gain in value and people getting rich.  I'm not as into getting rich as some of my countrymen (although financial independence is highly appealing), but I think this is an undeniable observation about most typical Americans.  Well, in Bitcoin we have a highly-deflationary (eventually) currency that has a limited number.  And it's rapidly gaining in value and making a lot of people rich.  So what do most Americans want to do?  They want to get some!  And then what happens?  Well, then they are Bitcoin holders, and if they want to buy something, they have the Bitcoins needed to do so.  Yes, at the moment Bitcoin is rapidly gaining in value so fast that most (but not all!) people don't want to spend them.  But once we reach some magical number, maybe somewhere between $1000 and $10,000, this will plateau out and more people will begin to spend their Bitcoins.  And at that point, we will have bootstrapped a working currency.  Brilliant.


By the way, I'm speaking of Americans to exclude any other nationality.  One of the most appealing things to me about Bitcoin is it's place as a global currency.  I look forward to the day when people from all continents use Bitcoins in their daily transactions.  I suspect it's not too far away.

Great read, really enjoyed it. Some very good points and arguements to make.

It is due to the design of bitcoin.  You can't make changes to the "core" aspects without nearly 100% consensus of all users.  The design prevents it.

Anything less than 100% consensus results in a forked blockchain with a "new" currency that is not bitcoin, but that some people might call bitcoin.

Put 30 people in a room and try to get them all to agree 100% on some simple change in their life, and you'll get an idea of how difficult a consensus is in a large group of people.  Now imagine thousands, or hundreds of thousands of people all over the world from various cultures and political situations all coming to a consensus on changes something as important to them as their money.

i think you have this backwards. If even 1 person refuses to accept the change than he is the only person in the world using bitcoin. Everyone else in the world has just switched to a new cryptocurrency that they are calling bitcoin that is technically not bitcoin.

i suppose i could let the fork slide and call the new adapted currency bitcoin so long as literally 100% of people accept the change, but no less than 100%.

That's right. Makes me think bitcoin could be more like a framework than an actual implementation. But I have to be carefull.. That takes the value out of a coin.. 8)

I can see price discovery, that is how the 'outside economy' values the 'bitcoin economy'. I can even get it that a bitcoin has a 'price' from that point of view. But price discovery shouldn't happen inside an economy. If 1 portion of Haagen Dasz strawberry cheesecake costs 0.25 BTC it costs 0.25BTC regardless of the 'exchange rate'. The price will change in time, off course but it is not determined by the exchange rate.(if the ice cream is produced completely within the economy...) The exchange rate is determined by the price of 1 portion Haagen Dasz. I don't see that happening with bitcoin today.

in regards to the picture you posted. you cant even begin to compare a company growing over 6, 7, 8 years span to bitcoin growing over a couple of weeks. facebook users grew heavily over almost a decade because people like the service. Bitcoin grew heavily over a few weeks because of speculation and people trying to get rich quick.

its fine if you don't think bitcoin is in a bubble. that's your opionon.  but anyone who trys to deny that bitcoin is showing all the signs of a massive bubble are just being biased and refuse to accept reality.  the fact of the matter is bitcoin has all the signs of being a bubble. 

i love bitcoin and support it 100%. but to deny reality of the current situation is silly. maybe btc isn't ina  bubble, maybe it's really worth this much. but it certianly has every single indicator that you need to declare a bubble.

Because Bitcoin exists as independent nodes.  You can't force everyone to stop the old version.  The old version will always exist.  So in any controversial change the most likely scenario is an incompatible fork with some users/miners/merchants supporting one version and some supporting the other.

Of course both will call their version "Bitcoin" and that is just going to lead to chaos. 

There is no technical reason why tomorrow some % (no it doesn't need to be 51% it could be 1% or 99%) of miners don't change the rules so the block reward goes back to 50 BTC and says there forever.  It could be done.  It would be an almost trivial change from a technical standpoint.  However some majority of current users would refuse that change and keep running "original Bitcoin". 

For good or worse the core components of Bitcoin will probably never be changed.  The only changes which will occur are ones which are absolutely mandatory.  An example would be ECDSA is partially compromised so developers create a new address type using a more secure form of cryptography.  At some block after most nodes are aware of this change (and thus don't fork) transactions transfering funds from the old address to the new ones could be created.

Anything that doesn't need to change likely will never change.

I understand the reasoning behind fixating the rules.
But for some other (future) bitcoin offspring one can keep in mind that force usually accomplishes less than freedom in the long run.

Force?  Freedom?

You are looking at the product of real freedom.  No one can force you to change your node's rules against your will.  That is freedom, but it goes both ways.  You likewise can't force anyone else to change their rules, and neither can anyone else.

Virtually everyone involved in bitcoin actually likes the current rules.  If we didn't, we wouldn't be here.  We don't believe that different rules will be any better, and no one can force us to follow rules that we don't like.  A couple billion dollars isn't a big deal in the grand scheme of things, but it is still a couple billion more than the closest competing ruleset, and the spread is increasing by leaps and bounds daily.

Sorry to make you mad. I don't want to force my rules to anyone. I'm talking about letting rules find their way like the bitcoin price currently does. If 'we' didn't like it we wouldn't be here. But does it taste good or does it only smell good?

It will slow down, eventually, it won't lead to a crash, because by then so much business and assets will be in bitcoin and all the merits and bonuses will still be there and it will be in all there best interests to continue using bitcoin.

It will continue to climb, people will eventually buy some, it will climb more, etc, etc.

It is .. *drum roll* Inevitable!

There's a problem with OP's perspective: it is based on the idea that there is scarcity in the bitcoin supply.  In reality, there is no practical scarcity - I daresay for everyone on this board, their money supply will run out before they make it through the sale depth on Mt.Gox.

So with supply out of the equation, the remaining factor is how much money a bitcoin purchaser wants to spend.  They can choose to spend some USD on bitcoin, and some USD on Alpaca socks.  They may also choose to spend somewhat more USD on bitcoin, and some bitcoin on Alpaca socks.  At the end of the day, they have the same number of bitcoins.

Choosing to hold onto bitcoins due to expected price rise is fine, but it DOES NOT eliminate the possibility of boosting your supply of BTC a bit more than you had planned, then spending them on something.

There is no net difference whether you buy that blow with cash or BTC - your net investment in BTC is unaffected. 

The OP (and several recent articles) put forth the idea that deflation-prompted hoarding eliminates spending for something that can be freely exchanged in either direction at current prices.  This is a logical fallacy at best, and a red herring to boot.

I can't find an idea of scarcity in the opening topic  ???
Besides that, isn't there a difference between scarcity in the bitcoin supply and the sale depth on gox? Oil seems to be getting scarcer but I bet noone on this board can make it trough the petrol depth of the local gas station

I agree that the basic problem with currencies has always been price instability, in particularly governments' harmful management of currencies (a). That is the reason many people are attracted to bitcoin as an alternative to fiat currencies, and was undoubtedly one of the reasons why Satoshi created bitcoin (b). The ideal currency, on the other hand, wouldn't be a factor in people's economic decisions: they would be indifferent as to whether they held it or spent it (contrast that with bitcoin in April, 2013). It could then just be used for what money is for: transferring value over time and between people.

A formula can create price stability. Here's an example of how it could work. Like anything else, the price of a currency is set by supply and demand, so you'd have to adjust the supply of the currency to change with demand. You could use transaction volume (c) as a proxy for demand (or is it actual demand?). It's easy enough to increase the money supply: perhaps you could adjust block rewards. To reduce the money supply perhaps you could institute demurrage (holding) fees (Freicoin has implemented these) and destroy the coins collected through those fees.

How to implement this idea is the question. I doubt you could get a consensus among bitcoin miners to adopt this, but bitcoin has a big first-mover advantage.  

(a) Generally, this has been their desire to inflate currencies to pay their bills. In the most extreme cases currencies have been inflated out of existence, e.g. in Germany (the Weimar Republic) and Zimbabwe, and almost out of existence in Argentina. The asset bubble of the 2000s in the United States, which later crashed, is also an example (though housing policy contributed to that as well). There have historically been problems with deflation too, most notably the Great Depression.
(b) Satoshi encoded (http://bitcoins.tumblr.com/post/39509685666/the-times-03-jan-2009-chancellor-on-brink-of-second) "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks" into the genesis block.
(c) A measure of recent transaction volume:

https://i.imgur.com/9Gvuehq.png

By getting it up to a million or few million per coin sooner rather than later.

That was an easy one. :)

-MarkM-

I posted a USD transaction volume graph there. I believe this  (http://blockchain.info/charts/estimated-transaction-volume?timespan=1year&showDataPoints=false&daysAverageString=7&show_header=true&scale=0&address=)(BTC) is the correct one.

What ever fork SilkRoads and Mt.Gox recognize as 'legit' and which is able to use their services will BE 'BitCoin'.   Miners will really have no say about it regardless of how much hash-power is on each side of the fork, the side that is orphaned from the SR-Gox service infrastructure will collapse so rapidly in value that miners will be driven out of business and forced to comply with the decisions of their new financial overlords.

JB:  The ideal currency, on the other hand, wouldn't be a factor in people's economic decisions: they would be indifferent as to whether they held it or spent it.

Thank you for giving Freicoin a mention.  This is a principle we at FRC embrace, but most people do not realize that money has a value called 'liquidity-premium', which is the value money gives due to the 'wild-card' effect of being able to convert it into ANYTHING at any time.  This premium is the source of interest and thus to equalize money with a generalized basket of goods money needs to lose ~5% of its purchasing power per year.  We implemented demurrage for this purpose alone, not a means of adjusting total money supply because these demurrage fees are immediately and perpetually re-injected into the supply to keep it constant.

While demurrage is a technically feasible and very fair way to lower money supply, the difficulty will always be in determining what the money supply SHOULD be and how rapidly it should get their.  I have little faith in transaction volume as a meaningful indicator of anything in BTC because it is so easily spoofed with circular transactions.  We discussed this heavily at FRC and ultimately rejected all existing internally generated measurements of BTC-like chains as inadequate, meaningless or highly manipulable.

The only remotely promising idea was to create a kind of internal bond market in which special transaction allow two people to take bets on expected inflation/deflation.  These bets then get averaged to yield an expected rate and then then money supply is adjusted until the prediction curve bends back to zero.  This proved beyond our skill to implement as it would be exceedingly complex.

There's nothing inherent to any asset, including the USD or BTC, that makes it magically prone to price swings. That's retarded and you should feel bad for thinking this. This is just the early stages of a growth industry, where correct prices are very very difficult to discover. Merchants can simply self-stabilize by pegging to USD or something similar, and they do.

Sorry, I spend them...

The flaw of bubbling anything is inherent in us humans, if you want a babysitting currency you can go pick one of the dozens. Obviously the economy is going to attract a lot of "businessmen" at the current stage and could potentially harm people, bitcoin demagogues will probably try to portray Satoshi as a villain as a result. It is essentially very similar to 3d gun printing (http://www.youtube.com/watch?v=b8qtJuOFbs4)