Bitcoin Forum

This questions has been debated in other threads but as it comes up frequently with people recently introduced to bitcoin, I find it useful to gather answers here.

The value of bitcoin stems from scarcity and usefulness. Scarcity is set form the word go (21 million) and hoarding just increases the perceived scarcity.
Now does hoarding hurt the usefulness of bitcoin ?

Bitcoins are useful to transfer value from A to B over the internet.
To transfer value requires a certain amount of bitcoins, corresponding to a price denominated in central money.

Let's say a buyer wants to purchase a 10-dollar item using the bitcoin network. He/she buys 10 dollar worth of bitcoin, say 1 bitcoin for simplicity, from a bitcoin payment processor that will send it to the seller. The seller in turn may want to cash out the bitcoin for 10 dollars after x number of confirmations i.e x times 10 minutes.
The processing of the transaction has created a demand for 1 bitcoin for x times ten minutes.
The more transactions are processed using bitcoins, the higher the demand for bitcoins.

Therefore hoarding has no effect on the ability of the bitcoin network to process transactions: volatility does. If the exchange rate varies wildly in a 10-minute interval, then the payment processor cost of hedging the exchange rate risk goes up. The payment processor passes the cost of hedging in fees applied to the sellers: the cost of accepting payments through the bitcoin network goes up.

In the end, if the hedging fees become higher than the bank card fees, then the seller may end up refusing payments through the bitcoin network. However the likelihood of the bitcoin volatility becoming so high is rather thin: even with the small volume and active speculation that we experience today, the volatility is perfectly manageable over a period of 1-hour (6 confirmations) with fees far more attractive than the bank card fees.

Hoarding only hurts Bitcoin by increasing volatility. When new people start hoarding, they push the price up. When hoarders panic and sell, they push the price down. A large number of consistent hoarders, buying a consistent amount of Bitcoins on a regular basis, however, help by stabilizing the demand for Bitcoins. A more stable value for Bitcoins will help to make Bitcoins more useful as a medium of exchange which is vital for long-term success.

If it weren't for hording BTC would still be at sub dollar prices.

But it's the same thing for Gold.

True, and at sub-$1 prices, every $.10 change in the price would be 10% or more.

I don't think that's true because of gold's ornamental and industrial uses. But certainly the price would be much less.

at the moment ,there is so little places accepting BTC ,what else can you do with them ?

almost every place i spend money everyday still only accepts money ........


going to take a while before btc is usable for daily stuff

you can still wear an indestructable pair of jeans for many years before they fall apart

but the fashion industry works hard to make people think they need to be stylish and new  stylish clothes

are released every season every year ,and famous people wear them so everyone else wants to wear the latest fashionable item


very clever ......

What you can do with them pretty soon is use them to process internet transactions.
My point is bitcoin development will unfold in three phases:

1/ store of value (hoarding today)
2/ meta-currency (using the bitcoin network to process transactions denominated in fiat currency)
3/ full fledged currency (using the bitcoin network to process transactions denominated in bitcoin).

Step 2 is made more difficult by volatility but this is not a show-stopper. I don't believe we can go from 1 to 3 without going through step 2.

I'm not sure how saving money hurts an economy.  Whether bitcoins are increasing or decreasing in value, I still have to purchase food, water, etc.  Even for luxury items, I'm not sure if it makes much of a difference.  If prices are rising, I may believe they have plateaued & choose to buy my boat now.  If prices are falling, I may believe they will continue to plummet so I want to buy my boat now.  Assuming bitcoins increase in value forever because they are deflationary, there are other factors that will make me want to purchase the boat.  Summer may be coming, the family would really enjoy it, or I'm about to retire/quit my job, etc.

There are also huge benefits to hoarding/saving.  The inflationary nature of dollars force people to make risky investments to fight inflation or risk their savings becoming worth nothing.  So people either lose their money in risky investments or decide to spend their savings now before it buys even less.  Now none of these people have any savings for retirement or hard times.  Maybe a deflationary currency is exactly what we need to spur savings & eliminate the need of so many welfare programs.


I agree with CoinCidental that it is easier to hoard bitcoins right now because there's not much to spend them on.  And if anything this is driving the price up which is giving bitcoin more attention.  But just like the bubble last summer, there will be a value where people will stop hoarding & start selling.  Is this creating a lot of volatility now?  Sure.  Will this get ironed out?  Absolutely.  The higher the price, the more attention, the more merchants start accepting bitcoin, the less volatility there will be.  This is all part of the chicken & egg situation new ideas face.

Ain't that the truth.  We did some spring cleaning and my wife donated almost 20 pairs of shoes which had never be used to Goodwill.  Indestructible or not there would still be demand for women's shoes.  Now an industructable (and remained forever comfortable) men's dress shoe.  Oh forget about it.  They likely would be passed down as heirlooms. :)

Isn't ornamental use just a form of hording combined with occasional bragging (wearing it)?

For some people to an extent, but gold-plated items, for example, are purely ornamental.  There's a market for shiny things that stay shiny independent from hoarding.

Is the SR escrow system considered hoarding?

Thread title should be changed to "Does SAVING hurt bitcoin"

"Hoarding" is a term used by commies to justify stealing from people. It implies that anyone who saves money is a greedy bastard.

Do the places you spend money at accept Zimbabwean dollars, INR or Yen?

Bitcoin is being used for exactly what it should be used for and has the right attributes for, direct person-to-person trades over long distances & transactions that require anonymity. I honestly don't see it replacing cash, but thats just my opinion.

Majority of them only accept cash tbh
but then again most of them give discounts for cash anyway
any place that does accept cards has a 3% surcharge  and the purchase must be over a certain size
cash is still king

Perhaps when used in a monetary context, but it can also be a disease frequently inflicting people who have suffered great losses:
http://en.wikipedia.org/wiki/Compulsive_hoarding

Hoarding hurts the individual, not bitcoin in general.

Imagine an individual owns 99,999 bitcoins. He can acquire the 100,000th coin for $9.40 right now easily. However, at what price can he sell his 100,000th coin? -- About $7.50. The more coins he owns, the harder it is to receive equal value when converting into goods (USD in this case).

Ask him if he can afford to hoard them for 5-10 years THEN start selling

That's not hording, that's investing :P.

I guess it's a matter of definition. "Hoarding" is kind of a useless, loaded term anyway. It implies that deferring consumption somehow deprives other people of something when in fact it does precisely the opposite. It's based on the myth that consumption drives the economy when the truth is that production drive it. A hoarder still produces, otherwise they would have no way to acquire the thing they are hoarding. A hoarder simply doesn't consume, which just leaves more for everyone else.

Hoarding = terrible
Saving = awesome

 ::)

I both horded and saved the BTC you paid me for myraidcoins.com :).

Does that mean I'm terribly awesome?

Speculators = terrible
Investors = awesome

That's right: the word "hoarding" is commonly used to justify non-sense meant to prevent it, like the "demurrage" gloobiboolga.

However, "saving" is just to vague. Hoarding applies nicely to "commodity" money. So , for lack of a better word...

Correct.

All money is a commodity. Commodities are simply goods demanded by the market. Money are commodities with wide enough demand to be used as a medium of exchange.

Because of the potential upside I am willing to horde my coins at the risk of losing the negligible amount of fiat I have invested in it. Moreover, I will never sell my coins for fiat. I will only ever use my coins to buy items. Due to the limited items available to me, I can only horde.

If you will -never- sell coins for fiat you've got way to much fiat sitting around. Get rid of some of it and if things go worse with your earnings and/or expenses than you currently project move some back into fiat.

That's right only because some crooks have commoditized fiat money. Today 4000 billion USD worth of fiat money is traded DAILY on global forex markets (I know, it's hard to believe). Some people get rich just trading on the forex. How pathetic. This kind of volume only shows the extent to which fiat money has been hijacked by banksters and speculators for their own profits to the detriment of creative, productive people.

Bitcoin is a digital commodity that can be used as money. So the term "commodity" money is a short cut. In fact, I am referring to "inelastic" money vs elastic money. However "inelastic" for most people will signal something cumbersome and hardly adaptive. Hence the term "commodity money", again for lack of a better word...

I think you are using some bastardized definition of "commodity". Something that is "fiat" is inherently NOT a commodity. The definition: In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs

"Fiat" means its not marketable or produced to satisfy wants or needs because its only value is imposed by the government.

Bitcoin DOES fit the definition of "Commodity".

I am not following you.

a commodity can not be increased artificicialy ,you can leave the printing presses on all night and print an extra billion dollars if you want

You can not do this with gold ,or diamonds or bitcoins

i think he means that ......

Something that is fiat is given value by a government. Commodities are valuable because people want them. There is no actual demand for little pieces of green paper with magic symbols on them to satisfy needs or wants, they're demand in dependent on their FIAT status.

Commodities are things that need no government intervention to be desired by people. People want sugar, coffee, and bitcoins NOT because the government said they were valuable, but because of their own utility.

You can leave the printing presses on all night and print an extra billion copies of any book, but books are a commodity.

yes ,but if you print a few billion extra copies of any book ,you let me know how the sales go   ;)

The same thing would happen with dollars. Like anything else, their value is dependent on the supply and the demand.

correct ,but since its not possible to print up an extra few million diamonds or gold bars or even  bitcoins they have a value in their scarcity that printed money does not

thats why i think of bitcoin as a commodity as much as a currency ........but theres no reason it cant be both :)