Bitcoin Forum

Imagine such a use case:

Bob is a bitcoiner, he spend $300 to buy 1 bitcoin from exchange A, then he pays a merchant in another city to buy some car parts, and that merchant sell the bitcoin to exchange B to get dollar back

Looking at the whole process, the action has no net effect for the market: The bitcoins on exchange first decreased by 1 bitcoin and then increased by exactly 1 bitcoin. However, the details are more interesting

After Bob bought his coin, he need to transfer it to his wallet, this will take an hour. Then it takes another hour before his coin reach the merchant's wallet, and another hour before the merchant could send coin to exchange and sell it. So this trade makes one bitcoin disappear from the exchange for 3 hours. If Bob make one trade every 3 hours, one bitcoin will permanently disappear from the market, not available for purchase at any moment

If there are millions of users doing one such purchase every 3 hours, then there will be millions of bitcoins disappear from the market, thus make the coin extremely difficult to get, and its value will skyrocket

This process does not cost anything, and it does not hurt anyone:
- Bob does not take any risk since he immediately spend his coins and he might even get some discount
- Merchant get increased income due to lower fees and more customer
- Exchanges earn commission both ways
- Bitcoin become more scarce and more valuable
- Dollar is not affected since same amount of fiat money are still needed to initialize and finalize the transaction

It is an all-win situation

From Bob's point of view, he has motivation to make all his daily consumption pass through bitcoin, since that will make his coin more valuable. Some other people might choose to purchase in batch, and spend after a long time, from weeks to years, that will generate the same effect. Holding a bitcoin indefinitely is the same as using it every day, it just make this coin occupied and not available on market forever

So, increased usage will make bitcoin more scarce and raise its value, and raised value will increase its usage, a positive feedback loop. This could be the trend for the coming years



We all know that MV=PQ is a formula for quantitative theory of money. But what is the effect of above case on this formula, e.g. by converting dollar first into and then out of bitcoin during a trade?

It seems nothing changed for dollar: You still need same amount of dollar to do the trade, and the speed that dollar flows is the same (Dollar settlements between banks are done once a day)

This means, if we could make all the economy activity pass through bitcoin, it will make bitcoin economy exactly the same size as existing economy without affecting the original one, just like duplicating the whole economy into bitcoin monetary system


(Edit: 2015-03-17, added some calculations)

Suppose that 2 million bitcoin users, average monthly spending is $3000, they buy $3000 worth of bitcoin (10 bitcoin at today's price) when they receive their salary, and spend them during a month. But this means that they would have to buy 20 million bitcoins, which is impossible: The coins in circulation is around 1 million maximum. So, bitcoin's price will have to increase at least 20 times to reach $6000 to make that happen

This purchase happens during the beginning of the month, and later the price will fall back due to more and more coins flowing back to market. Average holding time for these coins can be regarded as 15 days, if people don't all buy at the same time, it will cut the coin demand by half, so a price of $3000 is more likely

If the user base increase to 2 billion, then price will be at 3 million per coin. Notice that no matter how high the coin price is, most of the coins would still be held as long term storage, the coins in circulation will never be above 2 million

And this is all very rational calculation, in reality the market can be more crazy than people can imagine when the shortage of coins are overwhelm, I'm not surprised to see a price of 1 million with much smaller amount of users

I'm sure there are collieries that go with this thought, but it is extremely creative nonetheless and I encourage more thinking of the sort. Efforts like these breed ingenuity.

The issue is that while theoretically this would work, in reality it wouldn't. People would speculate. They would dump. They would manipulate to boost their values, then drop them back down to re-buy (like we already see).

Bitcoin is likely not to become a true currency. Think of it as being more like gold, an investment vehicle. Does it have value? Yes. But you won't take gold to the store to buy things. You'll convert to cash first. Same with Bitcoin. It's simply not feasible for me to stand at a gas pump for over an hour waiting on confirmations.

What you are suggesting is reducing the velocity of bitcoin (that is the v part in the MV=PQ equation).

In theory, it would do exactly what you say, because there is less bitcoins available to be transact3ed at any particular point in time the equation rebalanced itself to make each unit 'cost' more.

Unfortunately, all the applications that take advantage of the extremely fast velocity of bitcoin compared to other mediums (FIAT) get tanked.  Not a present side effect reducing the usefulness of bitcoin.  

For small consumptions like gas pump you might not need confirmation, and I suppose that you have already stored your bitcoin before you go to gas station, so average holding time is already longer than 3 hours, mission completed ;)

Holding it long term like gold works the same as spending it around all the time. but the weakness of holding method is that eventually you must spend it, and that will cause an excessive supply on market, but when you spend it all the time, it just never become available on market

Speculation just add another layer of volatility above fundamentals, the fundamental is increased consumption will decrease supply, thus create long term appreciation tendency

True, unless the price gets to where people don't feel comfortable buying in again. One of Bitcoin's biggest flaws, IMO, is the number system. People don't like the idea of spending $1000 for a single coin. But they may do $10 for a coin (if there were 100x as many coins it would work out to be the same, but we psychologically infer the values differently). I think this is one of the big hurdles.

Actually in my use case, the v is already at its highest, other usage like hoarding for weeks or years have much lower velocity. But 3 hours turn around time is still much higher than fiat money, which is days or weeks depends on where you are. Off-chain transactions can finish the trade in seconds like VISA or paypal, but there is no real money moving just numbers exchanging hands inside the same platform, and that will not affect the money supply

And you are right, the purpose of letting consumptions passing through bitcoin is not to make extremely fast deals, but make bitcoin worth millions of dollars, is there any problem for this motivation  ::)

As one member stated prior, bitcoin is more of an investment vehicle as of now. It will establish itself as a currency in the future.

The curiosity is great but the process doesn't work as you described. The coin never disappears or shortens supply.

As soon as the coin is bought its ownership changes hands, instantly. Likewise, if you pay me for services the coin becomes one as soon as you tell you wallet to send me the coin. The length of the transaction is akin to the time it takes for me to mail you a gold coin or for you to accept a Venmo payment. The coin or money doesn't "disappear". So the supply doesn't decrease, therefor price can't be moated for this reason.

It's great thinking though.

I don't think it will be a currency, though. Despite its name, it's just not viable without changes to the underlying code. I think an altcoin will take over and be the true currency, with Bitcoin being for larger transfers or just remaining an investment vehicle. A currency relies on ease of use and speed. Bitcoin lacks the latter.

Price depends on the unit you are using, you could also use satoshi, anyone with a calculator will be fine. A kilogram of gold cost 36K dollar, one share of berkshire hathaway cost 0.2 millions, no one has a problem with those

If you read my use case carefully, you will see that during the whole phase of this trade, Bob's one bitcoin is not available on market, that is the decrease of supply. This is nothing new for those who knows quantitative theory of money, I just analyzed it in a more detailed way

However, in fiat monetary system, many transactions are done inside the same banking network, banks using daily settlements to hedge the real move of the money during a day and then mail a check does not change the money supply since it never touches the real money, only changes banks account numbers, just like when you trade bitcoins in an exchange, only numbers in your account changes, bitcoin never moves until you withdraw

You can look at an extreme case: I want to transfer 1 billion dollar from US to China, and I bought 1 billion dollar worth of bitcoin on exchanges, at current market price it will be 3 million bitcoins, and I might end up bought most of the coins available on market. And during the time those coins were under transition, the exchanges around the world will have much less coin, say 1000 coins available for sell. If another user comes after me and want to transfer 1 billion dollar, he has to pay a price of 1 million per coin to achieve his goal

Actually, it is not.

What if my application need to transact the same satochis multiple times in one block?  In effect, you proposal will kill my application.

How is that possible?

How?  The normal way, create a transaction and submit it.  There is not a limit as long as they are valid transactions and any output's corresponding input is included in that or a previous block.

The applications of that are huge, it is what will enable shares to be traded in real time on the blockchain for example.

...

johnyj

Getting millions of users to spend BTC all within three hours does not sound easy to me!

On the other hand, I just did my part a little ago while spending some BTC.  When my purchase arrives, I will post my experience in whatever relevant thread at that time.

But, I will HODL most of my BTC, at least for now.

Ok I understand, you are combining multiple transactions, then you might need an extra database to track the balance of each clients. I suppose that those movements will not reduce the money supply

Indeed. If I want to reduce the money supply in circulation, the easiest way is to buy large amount of bitcoins and hoard them, thus this part of bitcoin is removed from circulation

However, that requires large amount of capital, not every one have that amount of extra reserve. But it is possible to use your daily consumption to achieve the same goal

As explained in the use case, holding one bitcoin indefinitely has the same effect as spending it again and again so that it is constantly in use. Suppose that you have a monthly spending bill of $2000, if you let all these spending go through bitcoin, then it will achieve almost the same effect as you just bought $2000 worth of bitcoin and hold them indefinitely

What if I don't want to?  You are the one wanting to decrease the already existing utility!!!!!!!!!!!!!!. 

I am not really upset about it, I am just pointing out what you propose may sound good "in theory" but the repercussions will effect a lot of things that you may not have thought of. 

I still don't understand how removing some coins from exchanges will decrease the already existing utility? what utility?

What I propose is not something new, some bitcoiners have been advocating this for years, I just got it more clearly recently. What do you think made up those large sales number that reported by those merchants? I suppose a large part of those sales consists of this kind of "pass through" transactions, and it indeed have some positive effect on increasing merchant adoption and stabilizing the exchange rate

Well, I think this is where services like BitPay is not helping at the moment. {Converting BTC directly to fiat}

The merchant that accepted BTC should not be able to convert ALL the BTC it received, INSTANTLY back to fiat. {I know they do offer the merchant the option to choose, what percentage they want to instantly convert to fiat}

Let's say BitPay or any other payment processor agree with merchants, that it would hodl the coins, until a 1% to 3% increase in the value occur and then sell it, then we would see some short term rise in the price...or even better, if they can hoard it for a longer period, until the price increase.

Yes, this is price manipulation....but it's being done will all commodities, eg. {Oil / Corn / Gold etc. etc...} ....so why must Bitcoin be any different?  

Because then merchants wouldn't agree to accept bitcoin, and then bitcoin users would never have any place to spend bitcoins, and thus bitcoin dies a quiet death?

Yeah, this is a tough area. These services hurt Bitcoin, to a point, but they are also what bring value to it. The only other way to make Bitcoin catch on would be to get merchants to accept it down the line (meaning customer -> end store -> supplier -> manufacturer -> material provider, and everyone in between each of these steps). Without this, at some point it has to be turned into fiat regardless.

that is why the infrastructure is important. To encourage spending, there must be stores accepting it. Most of the time, when I purchase 1 bitcoin, I will end up hoarding it for some time until I find places or merchants that accept bitcoin. I'm not saying the theory is not workable, in fact it is what happening right now, but instead of spending and the whole process reduces supply in the market, we ended up holding it longer, so the spending cycle is not working.

Well done, you've figured out why the USD is worth so much even though the world is stuffed with them.

USD increases in number to compensate for holding. Bitcoin is finite. Two very different things you're talking about here.

Saying this... Your method is not as easy as you think.

It would be easy if all people on the planet earth, thinks and acts like you.

True, what you suggested will increase the holding time and make those coins disappear from exchange for even longer time, and my use case just showed that even BitPay instantly convert the BTC into fiat, the bitcoin that used for transaction would still be occupied during the transition phase, which is 3 hour maximum, and 1 hour minimum. During this time frame the bitcoins for that specific transaction were not available on exchanges

In MV=PQ formula, V (money turn over times per year) is 0.05 when you hold coins for 20 years as a retirement fund, and it is 365 when you spend coins once a day, in my use case it is 365x8=2920 (8 times per day, and 365 times per year) for a immediate transaction. Then M is 21 million, Q is world GDP at 75 trillion, then you get a P of 1223 dollar per bitcoin if bitcoin is used every 3 hours, and 8x that value if used once a day, and 96x of that value if used once a year

Yes, it is possible.
Bitcoin should become mainstream.
It means that we need much more users and many more merchants accepting BTC.
But, there is no easy way to achieve millions of dollars and it's not realistic in short period of time.

I assume this is how professional traders do already manipulate the market.

That's what I, among others, proposed when bitcoin hit $100, then again at $1,000. Thus, at today's rate, ~$300 per would be ~$30 per, with 9 decimal places oppose to the current 8. Nobody measures their dick in kilometers unless joking, even though it's entirely possible. Or, what percentage, expressed in decimals, of an oil tanker's capacity does it take to top off ones fuel tank of their ride (assuming crude oil and petro are synonymous, which they're not)?

Many companies are already allowing you to do precisely that.

Fiat isn't going to exist for very long after the bitcoin moment. Even before that, you don't need to and won't convert. For transactions valued less than $100, zero confirmations is fine as long as you show that you've sent the transaction. For amounts up to $500, 1 confirmation is fine. Up to $2000, 2 confirmations. Up to 10,000, 3 confirmations. You get the idea. If a business really doesn't trust you, they can get a digital copy of your ID or similar in case anything goes wrong.

Your theory could work only to some point.

For example:
-Current Bitcoin market cap is about 4 billion dollars.
-Assume that all bitcoins are in circulation(I know it is not true, but my point is different).
-Your theory needs that every 3 hours there should be at least 4 billion dollars txs.
-And lets say there is an average 8 billions USD txs.
-So what will happen ? At first , your theory can work and BTC price doubled or tripled. But at this point total bitcoins used in txs will be decreased due to increased BTC price.
-Total real world  market txs wont change too much. Every 3 hours there will be consumed nearly same amount gasoline or bread or other things. So at first you moved 14 million BTC from the market but when price tripled the needed BTC will be 1/3 or 1/2 of total amount. So , when price increases , the needed amount of Bitcoin will be decreased.

In long term , market cap of bitcoin in real world applications will increase. Most of mall or shopping centres will accept Bitcoin and need for Bitcoin will increase. But this will take time. And also I believe Bitcoin price will be around 1 Million dollars. But not in a near future and not in your way (or at your speed).

There are not that many traders that I am aware of that are able to manipulate it and have a great effect.
Right now, I can imagine lot's of bots trading with each other in small to medium amounts that would slowly have make bitcoin
have an increasing or decreasing value.

Nice point! What you said is true, and you looked deeper than I into the sequence

Still, I don't think the effect will be totally nullified. Let's imagine, at first you have no consumption pass through bitcoin at all, and then you let all your monthly consumption of $3000 pass through bitcoin, that requires 10 bitcoins. Suppose that make the bitcoin price reach $600,  that will reduce the amount of bitcoins you need to do transaction, so later you need only 5 bitcoins to do your transaction, and the other 5 returned to market to increase its supply, so the price drops back to $450, that will  increase the amount that you need to do transaction , and you have to buy 1.67 more to do transaction ..... So after many forth and back feedback it will be somewhere around $470, not exactly doubled, but still much better than before

And you are right that the total real world consumption does not change at all, you still consume what you used to consume. So the added value of bitcoin is purely caused by transaction demand, nothing else. But this is also the theory that decide fiat money's value

The problem with spending bitcoin is it feels to valuable to the average joe. A person buys 1 bitcoin, and this person treats it like an ounce of gold, not like some coins you use to buy groceries. So people tend to hold, or dump if they dont have patience and are scared.

The people dumping btc instantly for fiat are the big ass whales like overstock (whales in the sense of people running millionaire business). Also mining whales that need to pay expenses.

You mean moving to 7 decimals, right? This would increase the pre-decimal side by one (multiplying supply by 10). Moving to 9 decimals would do the opposite, dividing by 10.

Maybe it can be bearish in the short term but I think it is obviously bullish long term.

The increase use of Bitcoin increase its price. The dollar is very volatile against most assets like gold and fiat currencies move a lot one against an other.

Possible but seriously unlikely, even if it goes mainstream that does not give us a million dollar tag does it, at the moment there is no need for bitcoin if there is finally a need for it then we will reach thousands i am sure but million lol

If the price gets too high, people will likely move to alts. Structurally, there is no difference between Bitcoin, Litecoin, Devcoin and (insert coin here). They all work in the same way for the end user. While we can theorize that people would stick with Bitcoin, that's all it is: a theory.

Suppose that Bob bought 10 bitcoins, then he hold them for 20 years as a store of value, that is the investment you described, perfectly fine. Beyond that, when Bob goes to buy some TV, he first exchange his dollar to bitcoin and then use bitcoin to pay overstock to get the TV delivered. Or, when he is buying a car, he first buy some bitcoins and use those bitcoins to pay the car dealer. These actions does not touch his original 10 bitcoins, but they reduce the amount of coins on exchanges and will raise the value of bitcoins, thus indirectly raise the value of his 10 coins

This is the confusing part:

Q: Why should I use bitcoin?
A: Because it can make you some money
Q: How come?
A: 2 steps
1. Buy some bitcoin and store them
2. Let all your monthly consumption go through bitcoin (purchase bitcoin and spend them), then your stored coins will become more valuable and you will get good profit when you sell them

And I don't think it is a pyramid or Ponzi scheme, since the process does not involve anyone else, only your own action: You first invest in some bitcoins and then let your consumption pass through bitcoin to reduce the amount of coins on market. The second action will give the coin value a permanent lift so that when you sell your invested bitcoins, you will always get a good return

If only one people do this, the result might be neglectable, but if every one is doing this, the result will be significant

Of course you can only do this once, when you already have all your consumptions pass through bitcoin, unless you further increase your spending, there is no more support that you can give it. In fact, when your coins worth more, you might have some more spending directly from your stored coins,  that might reduce the value of bitcoin

Put some numbers in:

Suppose that 2 million bitcoin users, average monthly spending is $3000, they buy $3000 worth of bitcoin (10 bitcoin at today's price) when they receive their salary, and spend them during a month. But this means that they would have to buy 20 million bitcoins, which is impossible: The coins in circulation is around 1 million maximum. So, bitcoin's price will have to increase at least 20 times to reach $6000 to make that happen

This purchase happens during the beginning of the month, and later the price will fall back due to more and more coins flowing back to market. Average holding time for these coins can be regarded as 15 days, if they don't all buy at the same time, it will cut the coin demand by half, so a price of $3000 is more likely

If the user base increase to 2 billion, then price will be at 3 million per coin. Notice that no matter how high the coin price is, most of the coins would still be held as long term storage, the coins in circulation will never be above 2 million

And this is all very rational calculation, in reality the market can be more crazy than people can imagine when the shortage of coins are overwhelm, I'm not surprised to see a price of 1 million with much smaller amount of users

I dont think majority of Bitcoins will go through exchanges in future, it is very costly option because of the exchange fees. More likely the car shop spend the Bitcoins directly, it is cheaper than paying the exchange fees

We would need a ridiculous level of cooperation and synchronization to pull this off OP if im understanding correctly what you mean, I dont see it as very realistic.

Why is it so hard to understand that you dont need to buy entire coins? You can buy fractions of a coin ffs. And why would people move to a coin when Bitcoin's got the strongest network on earth? all other coins will never be as secure.

You just need to be aware of this, nothing more. For example now some of the IT shops in my city have accepted bitcoin payment, when I purchase IT products, I always buy some bitcoin and spend there. In fact you only need one supermarket and one gas station to accept bitcoin payment, then a large part of your monthly cost can pass through bitcoin

Another way to make coins occupied is to buy the coin and hold it for years, which majority of the people are doing right now (That's the reason that most of the bitcoins are not available on market)

If the exchange rate does not change, you buy $300 worth of bitcoin each month and hold them for 20 years, after one year you will make 12 bitcoins occupied, the same effect as spending 24 bitcoins every month

This chart shows how many coins are hold for a specific length of time:
http://www.ofnumbers.com/wp-content/uploads/2014/11/bitcoin-age.png

In your example you say that "Bob" and the vendor use an exchange to facilitate the transaction. In your explanation quoted here you say that on an exchange the bitcoin never moves (until you withdrawal), this seems to contradict your original theory.

If bitcoins disappear from the system as you theorize, this would already be happening as transactions occur. So the current price should reduced the impact of your reduced supply theory. There wouldn't be a way to manipulate the current price (since it already accounts for the bitcoin taken out of supply due to transactions) unless you coordinated a significantly higher than normal number of transactions, which I guess is what you're proposing? One more point, the increased number of transactions can't happen all at once, I mean even the exchange has to take the orders one by one. So after each transaction the price would increase and increase and people at the end of the coordinated transaction series would get screwed because they'd be paying the very inflated price.

Finally, coordinating price manipulation is what the Fed and central banks do (to a extent). You're falling victim to the same price and value manipulation schemes that this system is trying to correct or escape. Perhaps that's the scariest part of this talk. The fact that someone who's devoted to bitcoin can become so fixated on the price "going to the moon" that they'd propose price manipulation to do it.

True, if the coins never leave the exchange, for example paid directly from shoppers coinbase account to merchant's coinbase account, then there will be no impact for coin supply in market. But if the shopper and merchant use different exchanges, the coin will not be available during the transition phase. As soon as you do a bitcoin withdraw to your own wallet, that coin is occupied

And just like bitcoin, no one force you to do this, it purely depends on the users to decide if they will participate. I just realized this possibility recently. Before, I don't even know why should I exchange to bitcoin and consume, but now I at least have some valid motivation

Even if everyone participate, the effect can only be felt little by little, but the end result is clear: If some day everyone let his daily consumption pass through bitcoin network, then the exchange rate of bitcoin must rise many folds. Some hedge funds draw similar conclusion after they evaluated how much coins will be occupied when used in international money remittance

this method is about as easy as saying "If every bitcoiner convinces 10 people to become a bitcoiner, bitcoin will reach mass adoption, and the price will increase accordingly"

I'd even say my method is easier.

Of course convincing other people is also a way to raise the value, but that has some kind of suspicion of being a pyramid scheme. To make your own payment with bitcoin does not hurt anyone, and is overall positive for bitcoin ecosystem, I like this approach

You may have that suspicion but it wouldn't be true. Increasing the user rate by 10 fold would increase demand by potentially the same rate and given that supply is tightly controlled the price would have to come up to meet the demand. There's nothing "pyramid scheme" about it.

The great thing is that in both options the price can increase. One option is organic. The other option is manufactured, and borderline collusion, manipulation, "Central-bank like".

In fact in bitcoin monetary system, every miner is a central banker (since he creates money), so there will be more creative idea popping up every day by these central bankers. Before, people seldom have the possibility to look from a central banker's perspective. An average Joe will never care about how to protect national currency's exchange rate, while a bitcoin miner has every motivation to protect his investment

I reallllllllly hope this post was just trolling. Otherwise I'd highly suggest you look into taking courses on business, marketing and psychological principles behind purchasing.

You're not marketing to me. You're not marketing to Theymos. You're not marketing to (insert name of someone that already knows about Bitcoin). You're marketing to people that have NO idea how things work, are computer illiterate, and just want things to "work." Learn how to run a business and then read my post again and you'll actually understand why it's true.

I'm just analyze some fact, which business school teacher and economy professor will never tell you, since they have never issued any money by themselves and can not look from a money creator's perspective

As a money creator, the most important thing is to maintain his money's credibility. An increase value of the currency is definitely going to help to gain higher credibility, while a constant decreasing of currencies value might ruin it

The use case I described here suits also on fiat money, if there is no billions of people use fiat money to do transactions, thus occupied most of those money, the demand for fiat money will be magnitudes lower

Talk to outsiders about Bitcoin and its pricing. The most common thing you'll run into (other than "it's a scam") is complaining about how much a coin costs. Outsiders don't KNOW you can break it down. They don't have that comprehension. Therefore, again, what you or I know about Bitcoin means absolutely zero. Nothing. Nada. We're already in. It's OTHERS we care about bringing on-board, therefore we have to cater to THEM. That's how markets work.

I like hot pink cars that have no windshield, 6 wheels, no AC/heater, no seat belts and no headlights. So I go make them because I like them. Does that mean they're going to sell to others? Hell no. Why? Because not everything I like is something everyone else likes/agrees with. It's that simple.

Your fundamental assumption is invalid. Maybe there are a few who will do this way, but most who transact in Bitcoin do so to spend them. Otherwise there no reason for them to do so.

Isn't making himself some money not a good enough reason ?  ;)

Just because lots of people are afraid of it, I don't think advertising it will help, since that will make them more suspicious about it. The better way is to not tell them anything and just seeing that you making money out of it, then they will become curious and come to you to discuss bitcoin

Eh, hasn't worked that way. Case in point: today someone was asking me about Bitcoin. The amount of misinformation is staggering. His understanding was that bitcoins had values that change depending on when you got them (such that the first bitcoins are worth more than the ones we get today and their value goes down as time goes on). It ended up with a discussion that led to confusion and a "I don't know why anyone would trust something that has nothing backing it" statement.

Merchants follow the money, if we start to use soda cans tommorow as a barter item, they will have to accept it too, or they would go out of business. The people decide what currency too use, the merchants just follow the most popular method of payment.

Let's not forget that there are a benefit for them in this too... if they hoard, the price goes up, and they get more bang for their buck.  ;)

They only need to sell, when the price goes up... Let's say they did this with a yearly gross turnover of  $1 000 000 and they got a average 1% profit on doing this. They would have received $10 000 more for their same money, if they only waited a few days, before they converted back to fiat.  ;)

This turns into a tricky arena, though. Small businesses wouldn't benefit. Big businesses are harder to sway. It takes money to get big business to make a switch. Such as Apple and Apple Pay.

The net result to him will still be a loss. It is a small loss but a loss nevertheless. The one making the profit will be the one sitting out.

My use case just proved that the net result is positive, because some of the coins will be permanently disappear from the market, and that will reduce the supply, even the demand kept the same

If you bought 100 bitcoins and sold it back, you will take a small loss due to commission (suppose that everything else does not change). However, if you bought 200 bitcoins, and use 100 in your daily spending, thus permanently occupied them, you will reduce the coin supply on market by 100 bitcoin, that will raise the exchange rate permanently, so that your other 100 bitcoins can be sold at a profit FOR SURE

You can achieve the same result by putting aside 100 bitcoins and never use them, but then you lose 100 bitcoins, much worse than just spending them

In fact, if you look at fiat money's value, it is mainly decided by transaction demand. If people stop using USD as transaction medium, then there will be trillions of dollar supply on market and its value will plunge to almost zero, the effect is huge

Exactly, people feel unsafe when they see some currency that has nothing backing it. Backing is a means to provide confidence, it is just a promise, never need to have anything behind it, so it is better to have some powerful entity behind it to increase people's trust

Before 1971, you can take your USD to FED and exchange gold, but now it is only backed by government bond: A promise of giving you back same amount of USD plus some interest, many years later. If one day USD becomes useless, then this promise does not mean anything

So in fact all the currency is only backed by the merchants who accept it. If bitcoin have large scale of merchant acceptance, then it is backed as good as fiat money, or even better, due to not possible to be inflated by central banks. And you can see my use case have some real meaning in increasing bitcoin's merchant acceptance: If many people are purchasing and spending bitcoin at every possible place, then soon merchant will all include bitcoin as a payment alternative

If some of the big businesses like Apple still resist to accept Bitcoin is all due ego. It's a stupid ego fight, they want their own thing.. they should learn from Microsoft.

I really hope that people can decide what currency they use, but in current system it is their boss decide what kind of currency they receive as salary, and the boss typically get new money from bank loans, in the form of domestic fiat currency

However there are some countries have a tradition of using multiple currencies due to unstable local currency, bitcoin might get a grip there much faster. In developed countries, the easiest way is to buy bitcoin with fiat money and spend, that does not impact fiat money system, thus will not result too much resistance from governments and banks

And... there's the issue with Bitcoin having been open source. Great idea. But other companies (that have money and power) are able to take the same idea, re-create it with no changes, and capitalize on it. And due to money and power, they can make the world adopt it.

Even US can not force China to use USD as currency, if you practice centralized issuance, the usage will be limited by the range of your own reach, like airline miles and super market shopping coupon. Apple could issue its own money to be used at apple shops, but android users won't bother  ;D

I think this entire thread could be summarized:
When people buy Bitcoins, price goes up.
When people sell Bitcoins, price goes down.
.. and OP's price "speculation" won't work.

Everything could be summed to supply and demand, but we can talk about theories and methods, even tho we dont need to do anything, btc is good enough withing itself to reach glory.

You missed the most important one:
When people buy and spend bitcoins forever, price goes up
So the net result is up

When you hold 100 coins indefinitely, there will be 100 coins permanently disappear from exchanges, thus reduce the supply and increase the price. When you spend them every 3 hours, there will also be 100 coins permanently disappear from exchanges, same effect. I hope this explanation can make it easier for you to get the picture

Or people will simply say "$10000 a coin? Nope. Guess I'll just use my credit card." It's all theoretical and there's no telling what the real outcome will be. You can claim you know what will happen all you want, but the simple fact is you don't.

And because of this we either need to find a steady balance, or even better: when demand outstrips demand and the price goes up because of it. There is no easy way to forcefully do this though other than getting more merchants and users involved which will ;likely be a slow and gradual process.

People don't care about one pound of gold being worth $16000, or one diamond worth millions, they also don't care about one bitcoin bit worth only $0.00027, looking at the absolute number is meaningless

Sure, no one knows what is gonna happen next month, but very likely you will have hyper deflation with bitcoin, since that is the only thing you can do with it

10K or 1 million per coin it would never be a problem since there are 1 million bits inside a coin. Once price goes that high we will use bits to measure value, not BTC.

If significant amount of coins are off the exchanges permanently, then bitcoin's value will rise

There are 2 possible causes:
1. People buy bitcoin and hold them as investment
2. People continuously buy bitcoin and through spend or transfer, send them to another exchange and sell

The first one is driven by saving and long term investment, which is most of the bitcoin's demand today. The second one is mainly driven by consumption and international money remittance, this is the part that we can research and improve a lot.

There can also be other area that bitcoin is needed to achieve certain business goal

About credit expansion


In today's fiat money system, central bank creating money out of nothing, thus indefinitely raise the value of total money supply. So, is it possible to raise the value of bitcoin money supply indefinitely by a similar practice?

Fiat money's value expands through unlimited supply, but bitcoin have limited supply, so the bitcoin's value can only be expanded through unlimited demand

Where is that unlimited demand comes from?

If bitcoin can be mortgaged and get loan, then it is possible to raise the value indefinitely due to limited supply and unlimited demand (By credit expansion)

Example:

Take $300 million loan to buy 1 million bitcoin, coin price doubled to $600

Mortgage the coins and get $600 million loan, buy another 1 million bitcoins, price rise to $1200

Mortgage the coins and get $1.2 billion loan, buy another 1 million bitcoins, price double again to $2400

Mortgage coins and get $2.4 billion loan, price rise to $4800

etc...

After a while all the coins in existence will be bought out, so the price would rise exponentially to compensate the liquidity problem, that high price give mortgage even more value to finance much larger loans, so the exchange rate will rise even quicker and easily reach 100x in a couple of years

The only question is: Would bitcoin qualify as an asset to get more loans from banks? Or, if I'm holding certain amount of twin's ETF, can that asset be used as collateral to acquire bank loans?

It's still orders of magnitude faster than credit cards or bank transfers. In fact, it faster than any known system.

Also, decreasing confirmation time like many altcoins do only result in needing more confirmations to achieve the same level of safety.

Note that your transaction can be validated instantly, but confirmation may take several minutes or hours depending on how secure you want it to be.

With credit cards your transaction may be validatd instantly but the actual transfer of money will take weeks or even months. Bank transfers will take days or even weeks. And they are way more expensive too.

For your average transaction, what you as a consumer notice will not be much different with Bitcoin from what you are used to. You can use a phone or a card to pay. Your payment will be instant. The benefits are that you have full control over your own money and do not risk a bank or a government stealing or "confiscating" your money, and that eventually things may be cheaper because stores might pass on their savings to you. And you can easily do transactions in foreign countries. A true world currency.

The benefit to the store is that they can market worldwide, have extremely cheap processing of transactions, get their money almost instantly (as opposed to having to wait for weeks), and probably more, but you get the point.

Bitcoin is designed to be a currency, and it is perfectly suited to be used as currency.