Bitcoin Forum

Heard about Bitcoin recently.  Seems I missed the gravy train on this one.  Looking over at mtgox it seems like speculators are driving the price of bitcoins up.  Also it's hard to get in since they don't accept pay pal :P

Anyway the actual worth of bitcoin I think for now is over valued because how few places they can be spent and the speculators.  However if this currency goes mainstream and it starts to be accepted everywhere on the internet, it's value will be huge.  I came up with an equation that gives a rough estimate of value (a kind of absolute measure of value).  It helps me see if a currency is over valued or under valued.  Assuming we had the total supply of 21 million bitcoins today and the number of internet users was where it is now at about 2 billion, one bitcoin would be worth about $250,000 USD.  The problem is the value is only going to go up from there.

Lets imagine 50 years from now bitcoin has become the universal currency and there are 8 billion users, but still only 21 million bitcoins (assuming all the bitcoins are still around).  Each bitcoin would be worth about 1 million in USD today!  This would make transactions with bit coins ridicules. A hambuger off the dollar menu would cost 0.000001 bitcoin.  The solution may be presentation however.  So a hamburger on the dollar menu would be 1 Millibitcoin, which could be shortened to 1mB.  That may solve the problem, but the way the system is now seems like a scam to make billionaires out of the early adopters to me (if it works).

Just thinking out loud here, but a better system I think would automatically set set the bitcoin creation difficulty based on the current usage.  That way the currency would always have a rock hard steady value.  If someone horded a bunch only to release them all at once, the creation of coins would automatically become almost impossible until the market absorbed the extra currency.  Just an idea, athlough it may be more hackable I don't know.

I'm doing a post about this on my blog tomorrow: http://www.thefashionablephilosopher.com/

You can move money to MtGox using Dwolla, it's pretty easy to set up, though it might take a week or so to complete your first transfer.

As far as early adopters unfairly benefiting, think about it this way...

Back when bitcoins had never traded above $0.06/BTC, what would you have said if someone suggested that you invest a couple thousand dollars into this currency, or infrastructure to support this currency? Most likely you would have called them insane. Today, that doesn't seem like such a bad idea now that we have a history of an uptrend.

Early adopters took large risks, and if bitcoin succeeds in becoming a widely adopted currency, will reap large rewards. I see absolutely nothing wrong with that.

Anyway, if you think about it in the terms you have mentioned, that each bitcoin could be worth much more in the future than it is today, even if you buy at $9/BTC, you're still an early adopter.

I say this as someone who first bought bitcoin around $0.50 and has a respectable amount of savings (and investment) held in BTC.

Might sound like a good idea at first, but assuming you want to calculate current usage based upon the weighted amount of transactions there will be incentive for hoarders to simply send all their bitcoins back and forth between their own wallets to avoid generation of new bitcoins.

A thing about early adopters:

2 things can attract you to Bitcoins:

1) The outstanding price: You are mainly showing interest in Bitcoin because of the value it managed to cumulate. As such, you wouldn't have bought in when pizza's were being sold for tens of thousands of BTC, so you don't deserve to rant about it nor do you have any right to pretend to that profit.

2) The usefulness: You see Bitcoin as proper store of value and a potential currency that is both economically sound, technologically innovative, and may very well change the face of the world. As such, you understand that early adopters deserve their profit, that the time at which you bought into Bitcoin is not relevant to your ability to use to its full potential, and that even today, you're still an early adopter and you're in for a ride.

the program allows you to trade in bitcoins many magnitudes lower than 1BTC if necessary

Bittertea -
true, but basically what I'm saying is I think it will go down before it goes up by the values I listed.  Unless the speculators never cool off.  If I big time investor like George Soros finds out and jumps in it could wreck the whole thing.
I see a growing problem with deflation over the long run with this currency.  Can the Bitcoins continue to be replenished even after the 21 million mark is reached?  If not the currency is doomed to die.

TheKoziTwo -
You would have to make the algorithm only count for total numbers of coins in and out of the system.  Maybe the people who programmed Google's web ranking algorithm for detecting web farms would be able to come up with a way where the system would be hard to fool.

Goatpig -
true if I had come in and saw them languishing at a few tenths of a cent for months I may not be as interested.  However I still would have been able to see the potential.

Indeed it might look like that, but how is it different from IBM, MS, Google, Facebook, Paypal, Visa, Mastercard, Intel, Wallmart and any other successful company out there. Why all of the sudden do they not look like scam carried out to make  billionaires out of their founders?


Just consider the implications of a scenario where you are wrong on this one.

Then you know you're in for a nice ride.


There has been a legion of thread discussing deflation, you should look those up before thinking deflation is outright bad. There is not limit to the divisibility of BTC, so I don't see how a 21M cap would doom the currency.


Mixing "cosmetic" decision making rule in the core code based on user action is a good recipe for security holes

How could Soros "wreck the whole thing", and how would that benefit him?

The deflation thing has been mentioned.  What's the problem?  No, the current implementation does not allow for more than 21 million and this is intentional.

What problem do you expect to happen by not having inflation?

Deflation slows the economy.  It's psychologically bad to constantly getting pay cuts, because currency values are going up.

So the maximum amount that can be made throughout time is 21 million?  What happens if I have 5 million bitcoins and my house burns down and the 5 million bitcoins are destroyed with my computer?  Big time deflation if the supply can't be replenished to 21 million.

I agree at this point making any changes to the code for the currency would be near impossible.  A new currency would have to be created.

Soros could wreck the thing because he has enough money to buy out the whole market pretty easy.  He is adept at currency manipulation: http://en.wikipedia.org/wiki/George_Soros#Currency_speculation
It would benefit him because he wants a one world currency under control of certain groups.  Bitcoin would put the kibosh on that.

It's still a psychological issue. If one unit of currency exchanges for say, $1000 USD, many people will say "oh that's too much" without regards to the actual currency. The same sort of thinking is sometimes a factor in splitting a stock- it's not as though any individual really wants or needs to purchase Intel Corp in $20 increments, it's just that people feel better about a stock being in a certain range.

Maybe for a debt based currency, like the dollar.


This is balanced out by the psychological good of decreasing prices.


First, you'll never have 5 million bitcoins, nobody will. Even those with large amounts will eventually sell them to new users as the price increases. Second, there are two options here... if you were actively trading that 5 million, then as soon as the market "realizes" that that money is gone, deflation will occur and prices will take into account the smaller number of bitcoins. If you were just holding that 5 million indefinitely, then nothing has really changed.


This idea comes from a fundamental misunderstanding of currency exchanges. Every bitcoin he buys must be sold buy a current holder. As he starts buying up bitcoin, people are going to realize this and increase their selling prices comparatively. Eventually, he'll be paying millions of dollars per bitcoin. This would be a great way for him to distribute his wealth to users of a comparatively worthless crypto-currency. Thanks, George!

How does him buying all the Bitcoins harm anyone?

Oh noes, we have something we voluntarily traded and valued more than Bitcoins.

Deflation only occurs when the economy expands.  The economy only expands when people become more productive (or there are more people).  Oh noes, people's feelings might be hurt by being able to buy more stuff.

By slowing the economy, you mean it will make it harder for people to buy a bunch of useless junk on credit, yes.  Instead, resources will be used for investment and we become richer over time.  Oh no, how horrible.

If your house burns down and you lose your bitcoins, then everyone else becomes richer.  Oh noes, how horrible (except for you, where you would be hurt).  Everyone else benefits.

How is he going to speculate upon anything if he's the only buyer in the market for the prices he himself pushed upwards. If he drops his BTC, the prices will only go down. Unless his master plan is to throw his money at BTC holders. In which case, I say go for it.


And your savings valuating just by sitting there.

re Soros: why don't you get together 100k$, find a tiny penny stock, and try to buy all the shares. Nice experiment, which would closely emulate your proposed course of action for Soros. Please report back the results.

I don't think it would



I was using an exaggerated example.  I was almost assuming that it was a 5 million average, that you would be buying and selling actively with the money.


True, but he could buy the vast majority of them for not too much money, then crash the system at a time of his choosing, which he has done to national currencies before.

My conclusion, or without currency speculators bitcoin is going down in the long run.  It could be a stable currency for awhile, but with no additions after 21 million and accidents causing the loss of currency, the deflation will be really bad.  If the total currency supply gets down to a low value, than an accidental discovery of an old HD with thousands of bitcoins on it could rock the whole market.

I mean I like the idea a lot, because I don't like the idea of central banks playing the system like they do today.  I just don't think this will be a stable currency in the long run.

Man, if he does that, buys up a bunch, then crashes it, it sure would suck to sell to him for a high price and then buy back when low.  He'll sure show us!

Right now it wouldn't do much since not many people use the currency in real world transactions.  Also if he had most of the money he could control the price.

He would never have most of the money. If he tried to buy it all, the price would skyrocket, he would make us all rich and he would hold a bunch of bitcoins that nobody else used. If he then tried to sell them, he would have to do so an absurdly low price. Essentially, he would make himself doubly poor and us doubly rich.

You should read about him.  I'm sure he could come up with a way where the opposite was true.

If he was not self-interested, he of course could destroy the currency.

But Bazil needs to research the Hunt Brothers and how that worked out for them before thinking it will work.

Most manipulation works by scaring people into doing stupid things.  Say he wanted to buy a lot of bitcoins for cheap.  He buys a lot at the market rate over time.  Then he sells them all at once to drive the price down to extremely low levels.  Everyone else freaks out and thinks that they better sell now before they are totally worthless!  This drives the price even lower.  Eventually he buys them back up.  It's tricking people into selling when they shouldn't, or buying when they shouldn't.  For example, on his buying rush, he might have a lot already that he purchases.  Then buy a bunch all at once to drive the price up.  People might think it's going to continue forever, so they start buying more and more after the catalyst kicked it off.  Then he sells when it was driven up even more at a slower rate until he makes profit.

This only works if people are too slow to act or they can get scared into doing something stupid.  Or if he wants to give up a lot of money just to destroy it.

Bazil is just using boogeymen though "I'm not sure how he'll do it, BUT HE WILL FIND A WAY BECAUSE HE IS AN EVIL GENIUS!"

You're right, he's a super villain with super currency manipulation powers. The laws of supply and demand do not apply to him.

From the Wikipedia article you linked...


Also, perhaps your bias prevented you from noticing this part of the article (http://en.wikipedia.org/wiki/George_Soros#Philanthropy).

What bias?  All I'm saying is I don't think this currency will be stable over time.  I only used Soros' antics as an example.

What y'all seem to be ignoring or understating is the utility to CRINIALS. Don't get me wrong, I see a huge difference between "illegal" and "immoral" so I'm not using the term pejoratively. Just as the internet itself and VCRs before that were largely technologies first adopted by the pornography industry, it will be criminals who will use Bitcoin first on a large scale. By the time the governments of the world get serious about stopping it, it will be far too late. This is a very, very good thing. Markets want to be free. We have a rare opportunity to profit tremendously by doing the right thing here and taking Bitcoin mainstream.

The caveat is that speculation can be overdone when leverage is used. BTC is definitely not ready for primetime yet and wide use of margin can collapse the price if liquidity is rapidly removed. selling into a bidless market is every investor's nightmare. When you get your margin call, you are wiped out. I suggest any leveraged speculators to Google "Bunker Hunt" for a specific cautionary tale concerning this peril.

Everyone is a criminal. There are 10k+ laws and you don't know them and can't follow them. Criminal has been synonymous with person for a long while now.

Unless you mean something else by crinials. I don't know what it could be, but I also don't know how you can misspell a word you put in all caps.

Somebody needs to place an order on Silk Road. ;)

Who is buying on margin?  How can you even do that?  As I understand it the exchange does not allow for margin, is there something I am missing?

You can have your own entire bitcoin-type currency, all 21 million coins of it all to yourself, for only a few programmer-hours, maybe even less than one programmer-hour (if programmer knows exactly what to do and how to do it and is willing to sell time in blocks of a few hours or less), and many programmers still accept PayPal as far as I know.

So you have not in fact missed the gravy train, you have failed to buckle down and build it. :)

(If you think you'd simply be scamming people to make yourself into a billionaire though I suppose you might be doomed to not only missing gravy trains but failing to create gravy trains too.)

Canadian Digital Notes (CDN), United Kingdom Britcoins (UKB), Bitnickels (NKL) and others along those lines can still be had for as little as one CAD, GBP, or actually-made-of-nickel old U.S. nickel though I think, and some seem to think those are a buyer's market right now (as in, they doubt anyone will even buy any so aren't busy driving the price up so fast that you are about to miss the gravy train on those too...)

-MarkM-

P.S. if you think a bitcoin shortage will be a problem some day, get in on alternatives before that day comes! :)

Yep, I plan to ride the train as long as it still on the tracks.  Even if Bitcoin does become a big time world currency it will have to be replaced by something eventually.

There is a client being developed that is agnostic as to various details about the blockchain-based currency it works with, you tell it about them using config files giving it details such as what port to use for that currency, what genesis block to use, how many coins if any it mints per block and so on. Initial testing and ddeveloment is being done using original bitcoins, testnet bitcoins, beertokens and so on. Once it is nice and easy to install and use likely we'll be spammed with endless streams of config files for more and more new currencies one could choose to use it with if one so desired.

Various Freeciv Galactic Milieu nations are already brainstorming about how much of their own various currencies to offer for how many of each of the various new currencies this new client will allow to proliferate they should consider buying to add to their own currency reserves as diversified backing for their own currencies...

-MarkM-

I am think that there is 2 outcomes for BTC if it becomes popular.
First (less liked) - regional banks that have contracts with regional services, so BTC will stay inside the bank system mostly.
Second (more likely) - used only for currency-BTC-currency transactions.

it's simple, you borrow money and invest in bitcoin. Put on your credit card or a signature loan. or rather don't, because that's how the real estate market crashed.