Bitcoin Forum

As a newbie, however, I have to wonder out loud why a community that trumpets the independence from "central authorities" as one of the merits of its alternate currency is obsessed with chaining it back together with some form of government-backed currency.  I mean, everyone is worried about its (declining) exchange rate with the US dollar.  Or when I look around, any kind of services or goods that can be bought with bitcoins is always converted to its US$ equivalent.  Unless I misread the part that reads: Why aren't many more services and goods being offered without having to reach for the calculator and plugging in the current USD:BTC exchange rate?

I'm not worried at all :)

True, it would be desirable to have more goods and services priced independently from the current BTCUSD rate, but that's not something you can have overnight.

Think about this: last year, somebody bought a pizza (http://forum.bitcoin.org/index.php?topic=137.0) for 10.000 BTC and he even had some problems finding a seller. This was before there was an established BTCUSD market. Now if back then some restaurant started selling Pizza for 10.000 BTC apiece, they probably wouldn't have sold a single pizza since then. There are a few people who tried fixed BTC prices, but they were often highly overpriced.

The Bitcoin economy is not yet large enough to justify prices completely decoupled from any fiat currency, simply because for the most part merchants have to pay their own bills in fiat.

This will change however, once more and more things are available for Bitcoin and maybe merchants start to use time-averaged exchange rates as basis.

Give it some time, young Jedi :)

No worries here, bro.

As for being tied to a fiat currency... it has to be. All currencies are tied to each other just like its value is tied to a commodity, good, or service... That is, it takes $20 USD to buy a pizza (or whatever).

I care about having a stable value store.  If I spend a good part of this year earning 10,000 BTC I'm going to be very unhappy if it only buys me a pizza later.

USD's value is orders of magnitude more stable than BTC right now.  As such, the exchange rate is a pretty good measure of BTC's value.

Bitcoin is still in it's developmental phase. It has a long way to go to realize its mature potential. There are amazing possibilities that even VISA cannot compete with. They will be a dinosaur that will not survive the economic climate change that awaits it. Bitcoin is an evolutionary step in adaptability. Wait for it.

I can be patient but I'm also new and I'm not as heavily invested as some of you.  I like the 10KBTC pizza.  Even though it took him 5 days to get it, he was able to put a value on an object and somebody else was willing to sell it to him.  And that was when the exchange was much higher.  With the exchange being down, will somebody else sell a pizza for, say, 20K BTC?  Probably not but it won't be because the value for one pizza is now 60K USD; more likely people won't want to trade their 20KBTC.   (Or I could be wrong.)

Here's another question, would it be different if all 21M BTC have been mined and no new BTC will be found?  Sure, by that time another currency may have been found and people would have flocked there but would everyone's mind be at ease and start using bitcoin?

It depends on what you are selling. Most merchants will have direct expenses in a fiat currency for what you are buying so they will need to update the prices and sell there BTC right away to avoid exchange risks.

Only people now that wouldn't need to pay that much attention to the USD exchange ratio are people selling services like programming and what not part-time for Bitcoin and have enough fiat income from elsewhere to pay rent and food and stuff...

It's not that people think the USD is superior.  

The USD is just a convenient proxy for the value of a basket of common goods, since the USD price, priced in terms of that basket, is pretty stable and only drops a few percent per year, not 50% in a single weekend.  

I try to run BitBrew with as little influence from the exchange rate as possible. I trade the BTC I earn from selling coffee for other bitcoin related goods and services when I can and only buy USD when absolutely necessary.

Unfortunately, this means that BitBrew, at this point, is more of a hobby than a business. While I don't envision quitting anytime soon and I've turned down more than one offer to buy me out, I've yet to convince my utility providers or the bank that holds my mortgage to accept bitcoins as payment.

Most of the places I spend my BTC are like BitBrew and are very independent of the exchange rate.  I understand that this is not the norm, but places like that certainly do exist.  They change their prices up maybe once a month to make sure that they are about in line with exchange rates, but other than that they just a Bitcoin be a Bitcoin and not xx.xxxxx USD.

The retailers may use exchange rates as a guide for price levels but ultimately they will respond to the actual amount of demand and their inventory.

My business doesn't care about the rate.

Slight exaggeration maybe, but we've never changed 'prices'.

There isn't really any need for you to, unless bitcoins suddenly jump in price to the point that .001 bitcoins is too much to bet on a single hand of poker.

If you made a chip worth .0001 bitcoins, you would have to multiply everyone's chips by 10 to ensure that they didn't lose value.

You could measure it up to € or £ or any other currency, or even a commodity.

Dollars are just the go-to indicator of value, not just for bitcoins, but for everything around the world.

Kudos! You earned 10 kBTC. That's a feat. May I ask by what means you acquired such an amount?

That was a hypothetical.  Alas, I'm stuck doing business in USD.  Aside from the volatility, there's not enough international market depth to absorb my transactions.  I'm only doing small things in BTC for now.

I'm only curious as to when this sort of pure BTC-trade market would arise? A safe bet is that it'll occur sometime when the coin reaches a larger userbase, and if then, it will still need to prove it's value beyond how we've traditionally pegged all trade value at BTC. By the time it makes it's way into every economically viable nook-and-cranny, the value of BTC will have probably risen so that we start trading on the base value of 0.01 or possibly lower.

Again, this would not eradicate exchanges. With taxes still requiring a person's fiat income, then there will be no true incentive to produce goods and services to keep the Bitcoinomy alive. Because effectively, we need fiat in our country to live.

If someone doesn't mind, however, the life of a rummaging self-sustained recluse, then they could probably make a healthy living buying liquidation bulk and selling it off for BTC with which to trade for fiat to sustain themselves.  ;D

So really, until the ability to sustain ones self on the BTC alone is feasible, a true all-encompassing economy will just not exist. Sorry to say that, even as much as I like the idea behind the bitcoin, there's just no way I could do anything with it besides small-scale trade. All products we get with bitcoin ATM, still have some form of fiat involved. There's just no way. (not now, anyway! Forgot to reiterate that :P)

These are just my ideas on the situation. Agree or disagree on some of it if you will, but one has to admit that the coin is still stuck at the airport due to bad weather.

It's impossible NOT to have an exchange rate between USD and BTC.

All things in an open economy have an exchange rate, whether directly or by proxy of a money substitute.

I thought I came to that conclusion, no?

 (rereads post) hmm, guess not. You make a good point, and really yes, when it comes down to it, currency change will occur (read: MUST occur). I guess what I mean to say is that the bitcoin would at least reach a state where all trade based on the coin alone, will eventually factor into the whole of trades which will be available in the currency, solely.

 Exchanges will still occur, but I'm hoping it'll eventually transcend currency exchange for the common consumer (and producer, who must exist for this to even work as I think of it) in the Bitcoinomy. Business? No, exchanges will need to occur until the country of Bitcoinia is proclaimed in an abandoned military base somewhere... >_>

(and thats obviously not the point of the Bitcoin; it transcends nationality and borders)

And in the end, we'll see how things truly go. This is not really how I think things will be, but I'm not confident in my theory of what will actually occur. Speculation is for the traders, not the grassroots consumer that I intend to be mostly.