I believe that bitcoin will eventually be worth a lot.  However the key word is "eventually".  If you are hoping to make money any time soon you are just as likely to lose your money.

So now we're all trying to buy low and sell high.  There is always a winner and a loser in these sorts of trades.  Oh and MtGox wins too.  Anyway, the current price doesn't matter.  We aren't going to see growth until we finally get the software ecosystem correct.  I'd give it two years.

When miners refuse to sell a low prices then we can safely categorize them as speculators.  They aren't really mining at that point.  Many have said it before: Miners do not affect supply.  Difficulty does not affect price.

Bitcoin is not deflationary.  Bitcoin will be inflationary for about two decades.  Currently the inflation rate is about 16% (someone correct me if I am wrong), which is pretty high.  It it were just a question of inflation/deflation we would expect bitcoin to gradually drop in absolute value.  However inflation/deflation is not anywhere close to being the main cause of bitcoin price fluctuations.  Right now the number of people involved with bitcoin and their predictions for its future are the main causes of price flux.

As I discussed in another post there are four potential groups of bitcoin users.  The geometric growth that we saw was the result of adoption by the second demographic: libertarian engineers.  We have achieved significant penetration in that market.  Next we have to get young hip people with fancy smart phones who eat at ethnic restaurants and buy things online.  Once we breach the demographic we'll see geometric growth again, and the price will soar into the hundreds, maybe thousands.  After that market is penetrated we'll see linear growth, as old people (who don't use bitcoin) die and are replaced by children who do.

However until we can hook that demographic we are going to see the price drop gradually.  People who need their money now will sell to people already in the market.  We aren't getting any new bitcoin users until bitcoin is a lot more polished and user friendly.  This requires new clients, smart phone support, and a decimal point shift.  This might take a long, long time.  However I believe that it will be done.  Right now many people are significantly invested in bitcoin.  There are people who stand to be millionaires if bitcoin succeeds.  I can see these people putting time and money towards making bitcoin succeed.  Those of us who are smaller players can play smaller parts.  We just need to penetrate into the next market and we'll all have money, until then we have a bunch of poker chips.

This is already being done, at least to the extent that it can be done (in the US): http://freestateproject.org/

Also keep in mind that it isn't exactly easy to start a new society completely from scratch, especially with unbalanced demographics.

Bitcoin has the potential to be the global currency.  However it has several usability issues.  One such issue is the minimum transaction size and the non-proportional fees.  (Speaking of fees, is there a single sentence explanation?)

I have seen some discussion on micropayments.  I believe that eventually everyone will come around to the idea that we need micropayments.  However I want to speed this consensus up by basically remarking that there is no such thing as a micropayment.

40% of the world population lives on less than 0.1B per day.  Ok so these people are probably too poor to use bitcoin anytime soon.  What about....

Israel, Czech Republic, Portugal, and Poland?  The median income in all of these countries is less than 2B per day.

In Turkey and Mexico the median income is less than 1B per day.

We don't need more time, we need more people.  We need consumers.

You have it backwards.  The economy will support BTC when the decimal point moves.  Bitcoin simply cannot attract casual users at the current price point.  Pricing things in decimals is insande.  A song should cost 10 BTC.


I completely agree.  I think that we need the guy who runs Betco.in starting threads on this forum.  I also agree that we don't want to make them worthless.  I believe that a bitcoin should always be worth at least a penny.  In order to be sure of that we should aim for a target of around 10 cents per bit coin.

We need more threads discussing this.  This is the issue.  Right now people are speculating (sort of bad) and day trading (bad) rather than saving (good) or trading (better).  Why?  Part of the reason is that there isn't an economy but there won't be an economy until we get some consumers.  We're not going to have an economy until bitcoin is consumer-friendly.  Regular "smart" (dumb) people won't use bitcoin until it deals with the decimal place.

I really don't have the time to write a new bitcoin client, and I probably don't have the skills (I'm a programmer but I'm rusty).  The only way that I can make this happen is by convincing you.  Once I have convinced you, then you can start a thread to convince others.  Once everyone is convinced the change is likely to be made.

Splitting the chain would probably destroy bitcoin.  Right now everyone on this forum is on the same team.  We all want bitcoin to do well.  We need to keep that unity.  All that I am asking is for the display and terminology to change.  That would require coding to change the client and all of the other bitcoin software/sites out there, but it would not change the underlying protocol.


They aren't.  Most people don't buy silver.  Perhaps 1000 years from now crytocurrencies will be in the same league as precious metals, but for now they don't have that tradition.  Of the people that do buy silver many of them only have an intuitive sense of how it works.  These people will go on about how the dollar isn't real money because it isn't backed by anything but that silver is real money, despite the fact that silver is not backed by anything either.


Please reread my posts and ask for clarification about anything that you do not understand.



We aren't at that stage and are not likely to be at that stage within our lifetimes.  Nearly all commerce is conducted in non-bitcoin currencies and it will be that way for a long, long time, even if bitcoin eventually becomes the global currency.  People will operate in both economies and will constantly be making the comparison.  Should I buy this with USD or BTC, which is it cheaper in?


I agree, we don't need a 1:1 but I believe that we need something between 10:1 and 1:10

Imagine that the creators of the currency decided to call the currency "milibitcoin".  Do you think that they would have been as popular?  Right now I can mention bitcoin to people in real life.  Some percentage of these people will go on to google "bitcoin" and some percentage of them will purchase bitcoins.  If I tried to talk about milibitcoins with people they would be less interested (the name is not as pleasant sounding to the ear) and they would not have the confidence to make a google search.  People would have taken the currency less seriously.

Ok so now imagine that I still talk to people about bitcoin and then the research it a little.  They then encounter milibitcoins.  "Wait what?  Wasn't I trying to learn about bitcoin, ok so milibit coins 1000 = 1 bitcoin..  Ok I can sort of understand that EXCEPT that I am also trying to wrap my head around the idea that this thing is not controlled by a government or a corporation."  You see it is just too much for a normal person to handle.

The reality is that people are dumb.  You can blame it on nature or nature or both, but in the end it is reality.  In order for bitcoin to be successful it must be adopted by people who are essentially stuck at the 5th grade level intellectually.  Maybe 10% of people have a solid understanding of fractions, and another 10% have a little bit.  I am not talking about widespread acceptance either, then we would have to lower our standards to 4th grade.  Newspapers are written at the 4th grade level.

Branding matters.  Keeping the words and the numbers simple matters.  The value of a single bitcoin (not a milibitcoin or a microbitcoin) MUST always be reasonable.  This requires that we actually shift the decimal point one place at a time, without pretending to do so while merely adding an SI prefix.

You didn't address my points at all, it seems that you are assuming changes within a bitcoin-centric economy.  In order for people to get into bitcoins they need to actually buy bitcoins with dollars (or whatever).  People are not willing to pay $100 for "$1", even if it is a super magical internet dollar that is worth $100.  People are willing to pay $10 for 100 internet dollars.  This is what I mean by human psychology.  We need for people to be able to put $20 in and get 87 bitcoins to spend, rather than getting 0.87 bitcoins.  It makes a huge difference.

As for math, people really cannot compare 0.00006 and 0.0001.  Most people would tell you that the first number is bigger.  If you did a poll you would get maybe 10% saying that he second is bigger, 20% saying that the first is bigger, and 70% telling you that they don't know and that they HATE math.

> We can't move the decimal place, thats too confusing

Why?

Right now the bitcoin community is small enough that we can make any changes we want and have it communicated quickly.  Then as bitcoin grows:

The bitcoin client(s) would clearly announce to the user that there has been a decimal place shift.  There would be a popup, a yellow banner at the top, and a warning message with each send transaction.

Shopping cart code would be aware of the shift and automatically update display prices.  It would also provide an explanation to the customer for at least a month.

> We need to make a new word for it though, a milibit is good?

Not likely to work.  Most people are not smart enough to understand decimal prefixes.  How can adding letters mean that something is worth less?  People can understand kilocoins but not millicoins.  Also if the unit changes people are likely to get confused and angry.  "Why are things priced in millicoins now?  Why aren't we using good old centicoins?  I don't trust this damn currency, I HATE MATH!!!!!!"

Also we don't have enough prefixes.  If for some horrid reason we go with SI prefixes we have to move three decimal places at a time.  So if we started that system when BTC = $20 we would end up with the unit of exchange being somewhere between $0.02 and $20.00.  That is way too much range.  We really need to go one decimal place at a time.

You are completely discounting human psychology and massively over-estimating the mathematical ability of mankind.

For the purpose of bitcoin adoption let's divide the world into four groups:

Community Founders (CF): these were the first miners and merchants.  These people got into bitcoin when bitcoin was worthless.  These people are few in number and by definition we have recruited as many of them as we are going to.

Savvy Early Adopers (SEA): these are the people that jumped in in the last two months.  Most of them are programmers, mathematicians, or engineers.  Most of them are libertarians of one sort or another.  These grognards are willing to put up with user-unfriendly software.  Most of these people have been recruited into the bitcoin community.  These people got in because they wanted bitcoin to succeed AND they believe that it has a chance.

Hip Young People (HYP): these are the people that read all of the recent articles.  They have gadgets and are comfortable with the internet.  Unlike the SEA these HYP are "tech savvy" but don't really know much about computers.  They have iPads and Twitter but are too scared to backup a wallet.dat.  These people are also not interested in bitcoin for its foundation in Austrian Economics, in fact they often progressives.  These people just want to be hip and maybe make online payments easier.

Regular People (RP): everyone else.  Many of these people think that we need the TSA in airports, want to censor the internet, think that young people just need to work harder, etc...

So why am I describing these groups of people?  Well we have to if we want to understand the price dynamics at work here.

The CF got into bitcoin for whatever reasons, often the same reasons as the SEA.  However the key difference is that the SEA were skeptical or hadn't heard of bitcoin.  When bitcoins were less than a penny you pretty much had to be an enthusiast to get interested.  Eventually bitcoins hit parity with the dollar.  Then people got interested.

Suddenly people like me (I'm a SEA) got interested.  I knew about bitcoin for two years but I didn't get involved because I believed that the government would shut it down before it got too big to shut down.  This group became interested in bitcoin because of the price point.  It was clear that serious money was backing this thing and that it had a chance.  This group has no problem with the decimal point.  We are comfortable enough with numbers smaller than one.  We can work with decimals.  We drove the price to $19 and then once media attention hit we foolishly drove it to $30, thinking that people would join in.

However all of the SEA are already in, now we have to recruit HYP.  If there is one thing I know about Hip Young People it is that they don't know math that well.  Most of them can't multiply fractions, much less add them.  Do you really think that they are going to understand that the price of bitcoin doesn't matter?  They saw that the price was $30 and decided that they couldn't justify spending $100 for a measly three coins.  These people would have paid $100 for thirty coins.  They would have paid $100 for three hundred coins.

Xbox live has points.  80 points cost $1.  Nintendo Wii has points 100 points cost $1  Isn't it logical to suggest that a bitcoin should be worth LESS than a dollar?  Wouldn't it be great if a bitcoin was worth $0.10?  Then one bitcoin would be an excellent "tip" for a website that you liked.  It would also be an excellent chip size for online poker, and you could download a song for 8 of them.  Maybe you could play a game online and each time you download a new part of the game you would send 3 bitcoins to pay for it.  No fractions, no decimals.

So... what am I proposing?  I am proposing that anytime the bitcoin hits one dollar the decimal point moves one place.  We would start by moving it two places.  We might never have to move it again if bitcoin stabilizes.  Even if it does keep moving it would just be a thing that people get used to.  If we do it would be built into the client by then and there would be a huge announcement screen when you opened up the client.

The simple reality is that people can't handle decimals, and that people would be much more willing to buy bitcoins that are worth less than a dollar that are usable for micropayments.  People are much more willing to use kilocoins than they are millicoins.

I believe that bitcoin is a fundamentally sound idea, but that it will languish until the decimal point is dealt with in a way that seems sensible for people who cannot understand math beyond the 4th grade level.  I believe that bitcoin will NEVER get to $100 (nominally), but that its value will continue to grow each time the decimal point is moved.

Log scales are appropriate, however a base 10 log scale isn't appropriate unless there is some underlying reason.  For most processes the natural log is more appropriate.

The recent drop in bitcoin prices was partly because of Dwolla but also partly because of the $30+ price.  Bitcoin really won't ever be able to get to $100, because to do so it needs more users and it can't get more users if the price is high.

What most of you don't realize is that most people cannot handle numbers smaller than one.  Even zero is a tricky concept for normal people.  SI prefixes don't work either.  You are all naive to think that some "nice" solution will work.  No, what we need is an elegant solution.  Just move that damn decimal point.  Mexico did it: http://en.wikipedia.org/wiki/Mexican_peso#Nuevo_peso

Guy's you are missing the point.  NO_SLAVE doesn't understand economic theory as well as you.  On the other hand, he has a superior understanding of the psychology of regular people.  From a mathematical perspective moving the decimal point is the same as a stock split, an event that happens with little fuss in the investment world.  However regular people do not have that perspective.  They will see prices rising and will assume that hyper-inflation is coming.  Logically there is no reason to fear, because your balance and income will also be increasing.  However people are inherently irrational and they will lose confidence in the currency.

We need to move the decimal place NOW (two places?) before bitcoin becomes popular.  We probably shouldn't fuss around with micro this and that, we should just redefine BTC for psychological reasons.  In fact every time it gets to $10 the decimal should shift one place automatically, and BTC would be redefined.  This would be just one of the "cool things about bitcoin: they reproduce!!!!"

Keep an "average" price.  Every time a new price comes out average this price with the old price.  You will end up with a price that cuts fluctuations in half.  If you want to further reduce fluctuations make it a weighted average, with only 10% or even 1% coming from the latest price.

While writing this someone mentioned the geometric mean, I *love* the geometric mean.  I use it for situations where you are selling to a friend instead of a store.  It is a way for the savings to be proportional.