Bitcoin Forum

I think one of the reasons the Bitcoin value is dropping is that there are more and more bitcoins everyday, yet the amount of people interested in Bitcoins is not growing fast enough. Therefore there is already enough bitcoins for the people involved, so the newly generated coins have to be pushed for "normal money" (of course not everyone is selling their generated BTC, but I would imagine a lot of new miners do) at a lower price. This is probably caused by promoting mining instead of promoting bitcoins as the actual currency.

Would you not agree?

The reason they're falling is simple. The broader economy is slipping back into deflation. This makes inflation hedges like Bitcoin less attractive.

Bitcoin always tops with the stock market, or at least it has so far, and acts much like a penny stock. The last peak in BTC occurred prior to the flash crash, and so it's absolutely no surprise to see it falling right now as stocks fall and t-bonds rise.

I'm planing to buy a lot of BTC eventually but I've been waiting for the next major deflationary phase to run its course first.

Naturally, this is all my personal option/conjecture.

Its from an increase in supply of bitcoins with a paralell decrease in demand  :P

But seriously its a lack of goods or services.

My business operation is posed for increased demand for bitcoin services as soon as I figure out how to streamline the process of making money.

I should have done this a long time ago:

http://bitcointalk.org/index.php?topic=4667.0 (http://bitcointalk.org/index.php?topic=4667.0)

I have been a bitcoin enthusiast, but I feel I need to play devil's advocate to balance some complacency and blind optimism I've expressed before.

I don't think bitcoin can succeed without significant improvement on user friendliness, per criteria proposed in this book:

http://www.amazon.com/Change-Function-Technologies-Others-Crash/dp/B000NA6U2O

For some, the current UI seems to be simple enough, but if you are serious about using it, you'll have to deal with the wallet file, a task I found to be nuisance even for computer geeks.

As a method of online/electronic payment, I always compare bitcoin's with Paypal, and as far as I can see, the pain of using Paypal does not exceed the pain of switching to bitcoin.

* Many online merchants accepts Paypal, very few accept bitcoin
* Being a non-reversible payment is a two-way street, it's an advantage for some but disadvantage for others.
* To recharge/withdraw money, linking paypal to a bank account is actually easier than jumping hoops with MtGox, Liberty Reserver and other equally hard-to-use intermediaries. (Coinpal/Coincard did a great job in this regard).
* To send/receive money from friends, without a mobile client, bitcoin is no easier than Paypal at current form.

The biggest advantage of bitcoin is its underlying de-centralized monetary concept, but without a real episode of hyper inflation, most ordinary people do not care this difference. 

In short, I really hope bitcoin will not become another great but failed academic experiment.

Couldn't agree with you more, getting funds in and out of the bitcoin economy is a pretty daunting task and I think this really holds it back from taking off.

I absolutely agree with the OP and also with bitcool. It’s a bit of a hen-egg-problem though, because if you market Bitcoin to a broader audience at this stage, they could be scared off as it’s not easy to handle and there are few shops accepting it. On the other hand, features/applications needed to reach this audience don’t have enough demand at this moment.

If we don’t manage to continue this influx of new users we had, a continuing price reduction would be unavoidable as we are in a highly inflationary phase. A further devaluation and volatility could lead to less trust in Bitcoin, causing it to devaluate at an even faster rate.

I believe one of the coming features on MtGox is automated ACH transfers, but don't quote me on that.

edit... Quote Jed instead:

I agree it needs to be a lot easier to move money in and out and spend it.
For me it's not hard to grasp but it's still a lot to learn.
The average user is going to want to have something as easy to use as paypal.
I think you'll see more businesses adopting it at that point too.
As far as my business goes if I sell something I need to convert it back to fiat so I can buy more supplies / eat.
I'm happy to take btc but I've gotta dump it until it gets to the point where I can use it for something I need which shouldn't be too far.

The average user will want to use a brand name they're familiar with; if we can continue to convince early adopters that bitcoin is a good idea, eventually PayPal or one of its competitors will start supporting it.  I hope.

I agree, I think it will somewhat take care of it's self.
If someone can benefit from making it easier / simpler / shiny or whatever they'll do it and it will spread.
I hate the idea of something like paypal being how people know bitcoin but as long as you can still do your own transfers outside of it then I guess it doesn't matter.

Paypal would be the easiest as it already has enough links to solid currencies and could hold a virtual wallet safely.

Even if they don't do it, all we really need is a user accessible and friendly site that could partner with a company like VISA or MasterCard for some solid currency backing. Paypal had to start somewhere.
I currently would assume after a while, MtGox would serve that purpose if nothing else came along, as it is the most popular exchange market got Bitcoin, and using existing accounts it could easily evolve into a major player between Bitcoin and USD(or other currencies).

I took the time to figure out the inflation rates about a week ago.  Year over year inflation will probably not beat the FDR inflation rate until around 2017 (assuming average inflation of about 5%).

2009   N/A
2010   100.00%
2011   50.00%
2012   33.33%
2013   12.50%
2014   11.11%
2015   10.00%
2016   9.09%
2017   4.17%
2018   4.00%
2019   3.85%
2020   3.70%
2021   1.79%
2022   1.75%
2023   1.72%
2024   1.69%
2025   0.83%
2026   0.83%
2027   0.82%
2028   0.81%
2029   0.40%
2030   0.40%
2031   0.40%
2032   0.40%
2033   0.20%
2034   0.20%
2035   0.20%
2036   0.20%
2037   0.10%
2038   0.10%
2039   0.10%
2040   0.10%
2041   0.05%

Looks like you forgot to consider that every four years (approximately), the inflation rate is reduced by 50%, so inflation in 2013 would be around 8.5% etc. – check this graph (http://upload.wikimedia.org/wikipedia/en/5/54/Total_bitcoins_over_time.png).

Sorry to break your hope, but I would not count on it.
Paypal sucks, and sucks big. Credit cards too.

They are both monopolistic, and they will not share a piece of the pie.
Bitcoin must break that evil circle to be successful.

Diferentiating, not associating.
We need an exchanger in every single city of the world.

+1 for cigar shops on the street corners exchanging Bitcoins.

You cant walk into a shop and spend paypal nor would it be wise to spend paypal at silk road   ;)

What is actually needed are market makers such as big miners who can supply btc to agents in different countries so they dont have to buy them through a middle man which increases cost for end users.

If I had large miner supplying me with bitcoins at market rates I could setup a thriving market in Australia quite easily using bank deposits then settle in large amounts which reduces costs dramatically .

I cant do so while I need to convert currency to USD ,buy liberty reserve or send bank checks.

Maybe this is the real way forward.

The number of bitcoins introduced per block decreases by 50% every 4 years, but that does not take into account the coins already in circulation.  Here is the spreadsheet if you want to check my work.

http://dl.dropbox.com/u/903803/Book1.xlsx

Well, it's good to have hope but i seriously doubt that the "old" financial institutions such as classical Banks and institutions connected to them such as Paypal.
As soon as they will realize that Bitcoin is a serious threat to all fiat currencies, they will start fighting. Not soon, i hope.

Some of us don't believe that bitcoin is a massive threat to all other currencies, just an alternative that will exist in parallel to them based on its comparative benefits.  Paypal, MasterCard, Visa, AmEx all exist alongside each other; so does gold and USD; so do hundreds of world currencies and USD.  For the one reason alone that no central authority is likely to issue BTC-redeemable bank notes it is unlikely to me and others that BTC will completely replace/disrupt fiat currency.

Personally I think the best way to understand bitcoin's future role is through market segmentation.  The reason paypal accepts mastercard and visa is that while they are in some sense competitors they are also focussed on a different market--the credit and borrowing market.  Similarly USD, CAD, EURO, etc are accepted because those currencies are focussed on cash and banking rather than digital transfer.  Bitcoin is quite different from other currencies and payment methods, and for that specific reason it is likely to segment rather than destroy the payment market.  People won't likely want personal credit in bitcoin, business loans in bitcoin, etc.  Some people will probably always want government-backed cash.  Some people will want systems that allow and include chargebacks.  But what bitcoin does do, it does better than any previous system or technology.  Thus if it reaches critical mass, payment systems in parallel segments would do themselves significant harm both financially and in lost customers by not accepting it.

Visa, Mastercard, and Paypal all deal in U.S. dollars, which are controlled by the Treasury and Federal Reserve bank. Based on our government's debt, and the method by which they choose to "help" the economy (inflation), the dollar is heading for a crash. I don't have any doubt that the current course is unsustainable. When the inevitable happens, who's going to accept fancy pieces of paper for real goods? Not me, but I'll take Bitcoin instead.

I agree with you to an extent but you can't compare paypal / visa / mastercard / Amex etc to bitcoin from a currency perspective. They all use USD except BTC. Of course they're not going to have a problem with each other or the government. Where BTC is against all of them.     If you want to compare based on ease of use / flexibility / safety  / acceptance and other things that's fine.

These are just examples of market segmentation within a relatively similar category.  As payment methods others were already comparing these earlier in the thread, which is why I used them.

If the American dollar crashes, it won't be because of bitcoin.  So that could definitely expand the demand for bitcoin, but that's just a natural consequence of segmented markets.  When one category goes down, others pick up the slack.  If Visa, Mastercard, etc. all survive such an event, they'll probably just switch their US operations to one of the many other currencies they do business in--and bam! market segmentation scenario for payment methodologies again.  Predictions as to the failure of USD are an entirely independent question to bitcoin-directed antagonism, imho.

Theory: part of the problem is that MtGox market is assumed to be the value of BTC. As more people are trading outside of MtGox (plus the difficulty in getting MTGUSD), that market has grown less stable, bringing it down. So Bitcoins might be retaining their parity value (or slightly below) in practice, but the effective canonicalization of MtGox market value makes everyone feel it is less. This results in buyers not wanting to pay the asking price, leading to less movement overall, and it all spins downhill...

I agree with everything you said in that above post and btc won't kill the USD. I still wouldn't call btc and visa different segments, I think they're more different than that. Especially at this point. But I'm with you on your way of thinking and we don't need to nit pick that one. Still going to be interesting to see the industry / government response when btc grows. I don't see it being too far off. If you remember paypal went from small potatoes to household name in no time. I'm comparing them as methods of money transfer not as currency so I'm not contradicting my previous statement  ;D

Yeah, unfortunately with legal tender laws, we're suffering from the effects of Gresham's Law (http://en.wikipedia.org/wiki/Gresham%27s_law)

Why is this in the technical forum?

lol, good question.

Gonna have to Ask Mahkul on that one. Guessing he was browsing this forum and posted here on accident. Oh well.

In fact, there is nothing preventing PayPal from writing their own version of the client that adds a lot of user friendliness and integrates into their system. Bitcoin is just a standard for issuing and validating transactions. It's not about the user interface or where the wallet is stored.

If PayPal can charge for the use of its client, then bitcoin is not even a competitor.

It's a scary thought that a company that sucks as much as paypal could take the bitcoin concept and with their resources tweak it to suit them better and make it known.
Of course it would lose a lot of benefits like anonymity that we want.

Not so scary as you think.

Paypal probably would never make such thing Open Source. In that case people wouldn't trust it as they trust BTC.
If they did make it open source though, all possible innovations could be implemented in Bitcoin.

Again: Problem solved.

I think you are overestimating the % of the world that cares if something is closed source. Look at the iphone.
Closed source projects are huge and most people don't care. For us yeah, it's a big deal though.

Still I'm not that worried.

What does it even mean for a company to use something like Bitcoin of their own? If the company has a secret backdoor then it isn't like bitcoin at all. If they don't then why not just use Bitcoin itself?

So they can get a bigger cut would be my guess.

For example we send btc for free or a very very small % fee. Paypal on the other hand charges a substantial fee especially when it's not paypal to paypal.

Yes, this is spot on. Bitcoin could come a long way just catering to just people concerned with personal integrity (especially on the Internet). There's a rapidly growing amount of those these days, especially over here in Sweden. But there has to be real goods and services for them to buy.

It's growing though, it takes time. Since it started there's been quite an increase in real goods sold for btc.

Bitcoin is growing at a phenomenal rate.  The drop from parity over the past 2 months is a healthy correction.   We need more goods and services in direct exchange for BTC.   That is coming that a healthy organic pace and Android apps for person-to-person transfer are under development).    But it will be quite some time before Amazon.com takes bitcoin directly

For more explosive growth what we need is more convertability.  it is too hard to get fiat money in and out of bitcoin.  That is the bottle neck that is preventing the rise to $5/BTC  and higher.  More exchanges much like Mt. Gox will help. Mt. Gox helped get us to  where we are today but something that is easier to use needs to come out.   Just saw an announcement today that britcoin was released to the public for sterling conversion.        That will help. 

the key to explosvie growth is more fluid exhcange between fiat and BTC.  Fiat will continue to co-exist with bitcoin for a long time to come.     What we need is someone to develop a financial service or mechanism to convert BTC and fiat "on the fly" so that a merchant like Amazon.com doesn't even know what you are really paying with.   


Ideally you would have a BTC account that fueles a virtual (or physical) VISA/MASTER card that you could use anywhere.   Think of it has adding backward compability (fiat convenience) to BITCOIN the future of currency.   

Just think.  If you started out with a 100k BTC and BTC maintained a 50% average growth rate relative to USD you could spend more than 25K USD a month and never deplete your stock of BTC.  Weird but true. 

I agree 100% and think it could be a profitable and successful business. I'm just concerned there might be legal issues with the anonymity of btc. I suppose no one stops you from depositing cash in to an account or western union though.

Anonymous Debit Card
http://www.asset-protection-international.com/offshore-banking/anonymous-debit-card.php

I think you could do it in the US.  You would just run it out of a offshore juridiction where the rules are looser and VISA TOS compliance is not strictly enforced.   In the US the VISA would look no different than other offshore debit cards. Nobody would know what currency is backing the transactions here.   These offshore debit cards anonymous and you can load it with whatever fiat currency you want.  They need to add BTC to the list of currencies they support and do the conversion on the fly. 

If we could get one of these offshore debit card outfits onboard  with bitcoin it would be huge.   A lot of people that aren't into bitcoin would immediately jump in as soon as they heard about it.

Man that would be perfect. Essentially you'd be able to buy anything with it that accepted Visa. Naturally you'd lose a small % but it would be worth it. I don't think it would be so hard to get them to accept it if BTC was traded on a major exchange / bigger.

Schedule Of Fees
Anonymous Card Fees:   €EURO   $US DOLLAR
Set Up Fee:           €1350   US$1500

man, even for drug dealers, few can afford these fees

Jesus that's just to get the card?
I'm assuming you get charged a pct etc too.
What else goes with it?

P.S. drug dealer is pretty general, the guy you buy your rocks from would have trouble but Scarface could afford that.

What you are getting for this amount of money is anonymity and offshore protection.   The card is not in your name.   This is one way how wealthy people protect their liquid assets.    I think it is no unreasonable to have this high of a set up fee.  The people who use these cards load them up with a lot of cash.    To make it worthwhile someone would load the equivalent of $25k on these cards.   The bitcoin market isn't there yet but it will get there.   For one person to buy $25k on Mt. Gox would clear out the order book in th currrent market. 

What could happen now is that someone could create these cards with a lower price by leaving out the anonymity and offshore protection.   You would still have transaction fees but as you have said it will be worth it.   

I can envision a day when the wealthy people will load these cards with $100,000 worth of bitcoins iinstead of Euros and use that. At the rate bitcoin is increasing you may not be able to deplete the card.

 

Makes sense, if you're going to put 20k or 100k on there then the setup fee is pretty minimal.
I would assume if there is demand then competition will cause other banks to offer lower setup fees.

You make a great a point though.  The setup fee is too high for most users except very wealthy or for people who just got to have total anonymity (no paper trail with offshore).  These people will come with time but right now we need to get BTC-powered VISAs to the masses.    We need competition to bring it down.   This is a good business opportunity for someone to exploit.     The average the guy would be willing to pay less for a VISA that may not be anonymous but was still linked to a BTC address that did on the fly conversion.   

I just skimmed through this thread; interesting stuff.

I think you need the support of the Hawala network. Fuck paypal, fuck credit cards, court the people who are remitting 40% of Kazakhstan's GDP back home.

Excuse my cursing. I think some of you are ignoring what bitcoin is really, really good for - small-scale drug dealing, small-scale money laundering and moderate anonymity. It frustrates me.

Correct me if I'm wrong but there's no real way this thing can be revoked, right? If there are two nodes left on the network to verify transactions then bitcoin still exists. Let's make it three - one at the cigar stand in New York, one in the banking district in Almaty, and one in Moscow where the e-criminals buy internet services with bitcoin. It seems logical to me that this is the direction for bitcoin - not that it should be aimed there, but that it directs itself there.

http://en.wikipedia.org/wiki/Hawala (http://en.wikipedia.org/wiki/Hawala)

I totally agree with the hawala part.

Imagine if you paid someone Aussie dollars but got a credit at mt gox without the local exchanger actually sending the cash but just keeping a record. If another aussie wanted to withdraw then mt gox sends an email to their aussie agent to deduct from the balance. The agent never actually sends any money except if there is a massive balance which to transfer would not be as costly as sending multiple small amounts.

A wire transfer of 10 000 dollars is cheaper than one of 100 dollars.