In central bank's view, the total amount of money supply can grow exponentially with economy, price level should be stable
In bitcoiner's view, the bitcoin exchange price can grow exponentially with economy, money supply should be stable
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Bitcoin can be both a store of value and a medium of exchange. People will hoard many bitcoins but a bitcoin economy can exist with a small fraction of bitcoins in existence. The key to bitcoin succeeding is to first be used in functions with little exchange risk. A remittance is the first thing that comes to mind. A person can send bitcoin to an exchanger in a foreign country as collateral who thens quickly sells btc in the market and gives the proceeds to the recipient of the remittance.
Yes, crossboarder transfer is another advantage, a store of value that can be send to anywhere on the planet quickly and safely
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The latest crash proved that people's mindset has not been adjusted to bitcoin at all ![Tongue](https://bitcointalk.org/Smileys/default/tongue.gif) In a traditional economy, when something's return is highly above average (e.g. more than 100% per year), people will start to believe this is a bubble, and sooner or later, this bubble will burst and the return will eventually fall back to a reasonable ROI, like 10% per year This wisdom have fundamental theory support: In a world where capital is largely available, if some products' return is very high, there will be more and more capitals attracted to produce this product and increase the supply, and earning will eventually drop to the cost of the capital (loan interest). Means high return will never last for too long But for bitcoin, it is totally different. No matter how much capitals are added into bitcoin mining, the total amount of coins generated per day will never change (and just get less and less). The added capital just increased number of miners and raised network difficulty, reduced the production of each miner, thus increased the per coin value, instead of decrease it like in a traditional economy So, in theory, bitcoin's valuation model is totally different than any of existing financial/economy model, and the anticipation should also be totally different. The price can rise quickly and forever, if there is a limitation on how high it can go, that will be available fiat money supply But why people are still shouting this is a bubble when they see the price doubled in less than a month? The old mindset still rules, they are not confident at all in this new technology
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Right now, when you want to sell something with Bitcoin, what you're actually doing is setting the price in a fiat currency (such as USD or EUR), and only then converting to Bitcoin using the current exchange rate. This has the consequence that you have to constantly verify the price because the exchange rate is very unstable.
But what would happen if someone started selling using a fixed Bitcoin price? For example, let's say that I want to sell my computer at BTC20, and always at BTC20 regardless of the exchange rate. Would it be a good or bad idea? What consequences would this have?
I personally think that if more people sold with fixed Bitcoin price, the currency would be more stable; but then I'm no expert.
Since the amount of bitcoin is always fixed and your production capacity can increase forever, if you don't continuously lower the price, people will hold the coin instead of spend them to buy your products. They will select another inflative currency e.g. USD/EUR to buy your product, since the price stability of USD/EUR are very high If you only accept bitcoin payment, then your customer must convert the USD/EUR into bitcoin, so they will continously check the exchange rate. If the exchange rate rises quickly, it means your product becomes expensive quickly, they might cancel their buying decision. If the exchange rate drops, that means your product becomes cheap, they will buy your product. As a result, you only get paid when bitcoin price crashed
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When it comes to financial stability, it's all about the confidence, currently there is just not enough confidence in the market and there are many speculative move. Since bitcoin have a very steep learning curve, it will take some time for majority of people to realize its true potential
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A very deep learning curve make sure that everyone always have something to learn (and become attracted more) ![Grin](https://bitcointalk.org/Smileys/default/grin.gif)
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People always raise the example of IT products (even you know you can buy same product with less money in the future, you will still buy it today) and claim there is no problem for a deflative currency to become a medium of exchange
That is the wrong way to look at the problem, since in this example you have no alternative payment method. If you have another inflative currency which lose its value as fast as IT products, you would definitely spend that currency to buy IT products and hold the deflative currency
And this is what will happen, people will spend fiat and hold bitcoin. Even if they ran out of fiat, they could possibly take a loan to spend, since the interest of the loan is much less than the value appreciation of bitcoin, they only need to sell small amount of the coin each year to pay back the loan when exchange price is favorable
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Catch-22
BTC is too volatiles to use for commerce so it has no exchange value. BTC's store-of-value is based on its ability to be exchanged, it only has store-of-exchange-value If it has not exchange value then it has no store or value.
Normally you can't have both. USD can not work as a store of value since it inflates continously, but it works as a medium of exchange. Gold do not work as a medium of exchange but they hold value And, low liquidity does not mean no exchange value, if price greatly swing between 30-300, it's just high volatility, you have to either deleverage or buy some derivatives to hedge the risk, if you don't have the time to care about exchange. I have explained before that majority of people will not pay bitcoin for daily consumption, since fiat money already works enough good A retirement saving medium is where bitcoin will succeed first, if you have started to save in bitcoin each month since last year, now your retirement saving account is worth many times more than a fiat money saving account, even after this crazy rally and crash
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The latest several ASIC announcements have one thing in common: They did not show any enthusiasm in bitcoin itself
Look at Dr.Zhang, Friedcat, Josh, they are not only hardware maker, they are interested in bitcoin itself since long time ago. It's difficult to imagine that some people just took opensource code and then they will go make ASICs out of it without understanding how bitcoin works
Without that enthusiasm, they will never get there. And when bitcoin price crashed hard, they will face a risk that no one will buy their machine, if they don't have belief in bitcoin, how dare they setup a project that require at least millions of dollars investment and could possibly end up with nothing?
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Gold really collapsed ![Shocked](https://bitcointalk.org/Smileys/default/shocked.gif) I think many people are moving here...
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Even if you distribute the wealth evenly to everyone on the earth, after a while, some of them will go broke and some of them will become super rich
Even if everyone start the mining at the same time, after a while, some of them will quit mining and some of them will accumulate large amount of coins, especially when bitcoin still worth nothing at the first year (There are many altcoins started later and everyone had a even chance to mine from the beginning, but still most of the people quit because they worth almost nothing in the first year)
I do think that the coin generation speed could reduce 25% per year instead of 50% per year, so that total coin will be 3x the amount of the first 4 years' coin supply and it will give more chance for late adopters
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Cute, that is the single in the back row: Two mini single connected together with a water block ![Grin](https://bitcointalk.org/Smileys/default/grin.gif) ![](https://ip.bitcointalk.org/?u=http%3A%2F%2Fphoto.mystisland.org%2Fbfl_water.jpg&t=664&c=uRCDnslFfry0GQ)
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I made 2.5 times my initial investment; I don't need to complain about money. I'm just calling it like it is.
Smart people bought up more coins, while impetuous people sold their coins to those smart people. Do not be an impetuous short term investor. Be a prudent long term investor and that is when you'll gain more than you lose on Bitcoin. I've lost not a penny and I've gained. I'm not bragging, just saying if you take the long view no one really has lost a penny. If you take the short view you lost everything. The prices are now more than they where when I bought my first coin. At the lowest low of 77 I bought more coins, that was today. I knew it wouldn't last that low and if anyone were smart they'd have bought at those prices. Some people got coins at $50. Honestly if I had more money I would have bought hundreds of coins, but unfortunately I only had a couple hundred bucks. These "Smart people" are smart enough to start a DDOS to create panic sell and buy low, this is a new way of market manipulation. By normal means, they could never buy so much coin (more than 2% of total coin) without push the price above $1000
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I'm almost sure that's some one missed the train and played a trick to scare the others out so that they can buy at much lower price. Other wise they don't need to initialize a DDOS to create panic
If they just want to cash out, they will make sure MtGox work flawlessly, they need as many as possible buy orders in the market so that they can sell more at a higher price. I guess they have tried to push down the price several times, all without luck, the price bounced back immediately, so this time they started the sell together with a DDOS, finally created the panic effect. Of course people's fear at high price also helped to achieve their goal
Look at the heavy volume when price are between 70 to 120, almost 400,000 coins are bought, that's 4% of total coins, who do you think are buying like crazy now? Before crash, these amount of bid volume could possibly send the exchange rate to $1000+
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This kind of large price swing will create huge uncertainty for the merchant and anyone who doing trade using bitcoin as a currency. For a currency, the most important character is stable exchange value
For a limited amount of supply, this kind of fast price swing is expected. So it will not be suitable for use as a transaction medium, if the merchant who receive the coins don't exchange the coin to USD immediately, he might lose 2/3 of it's exchange value overnight, it is clear none of the merchat will accept this kind of risk
So, currently the most possible use for bitcoin is act as a store of value, or the base currency. As a store of value, people tends to hold it for a long time, and in long term the price will always rise due to limited supply, the short term price swing will be irrelevant
Only when bitcoin first successfully established itself as a reputable digital asset, it price will stablize and then it can slowly becomes a widely used medium of exchange. Currently the people's confidence are still very weak and the large price swing is unavoidable
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Eleuthria, can you explain why the Current Shares jump from a high number to 0, but the shares in Open Shifts and Open Shift Earnings do not change. I suppose that when a high number in Current Shares turns to 0, it means the current shift is over and the shares in open shifts will change?
Yes when the current shares drop down to 0 or a low number it means a shift ended and a new one started. If the open shift earnings doesn't change it means we're having bad luck (a lot of that the last few days) an did not find a block in the last shift. But when I look back at each shift, none of them has 0 blocks, currently around 15 blocks each shift. And there is a statement: "Open shifts continue to receive payments until 10 additional shifts have completed."
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I understand the "lets engineer for the far future" ... but, frankly, I think too much of that is dumb. Successful projects and products engineer for the next year or two, and re-engineer when they run into issues.
I guess when Satoshi laid out the framework for bitcoin, he looked forward for at least 100 years Of course the fee problem will only appear after 100 years, enough time to discuss ![Smiley](https://bitcointalk.org/Smileys/default/smiley.gif)
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As long as bitcoin exchanges with fiat currency, it should cooperate with fiat way of working, that is a centralized exchange (because fiat money is centralized). Bitcoin is a completion of existing financial system and provide another alternative, not to replace the existing sytem. Today's financial system exists for many reasons, and in many cases a centralized system has its benefit
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