I agree, except will bitcoin ever be stable, even after full adoption, etc.?  The issue with limited supply is that everyone expects the value to increase over time as the global economy expands.  This would invite perpetual speculation, which would result in bubbles and crashes.

What you're describing is a good investment, not a good currency.  Bitcoin is anything but stable.  Stable plus a little volatility is what the price of a bitcoin on Bitstamp has been for the last few days: it's oscillated only a few dollars around $621 or so.  For normal currencies, a 1% change is big deal.  Look at that article about Venezuela.  60% inflation is insane.  Compare that to the 7000% that bitcoin has gone up in the last 2 years.  You can't tell me that bitcoin is stable.

The fact that bitcoin has been so volatile with lots of bubbles and crashes makes it very bad money.  You want money to be stable.  Yes, the bitcoin bubble may never deflate, but it easily could.  Right now, bitcoin is acting much more like a speculative investment than a currency.

Edit: I also think that bitcoin is likely going to have a lot of problems with ever becoming stable because of its limited supply.

In one sentence, you say that fiat can't be used as a store of value, and then in the next, you talk about the stored value of fiat being halved.  So can fiat be used as a store of value or not?

I think fiat can be, and is, used as a store of value.  The stored value does fall over time with inflation, but it is still used as a store of value.  When you save money, you're storing something of value that can be exchanged for goods and services.

If bitcoin stabilizes in price and becomes an ingrained global currency, then its limited supply might make it a better store of value than fiat.  But for now, fiat is a better store of value because of its stability.

I'm a little confused here.  You say that bitcoin and fiat have no value for direct use, with which I agree.  You then say that fiat does not work as a store of value.  But then you imply that bitcoin can be a store of value that will suck in all of the extra stored value of the housing market.  Why wouldn't bitcoin and fiat be the same in this regard?  Yes, bitcoin has limited supply, but why does that mean that it should be considered a safe store of value (it would have to be considered even safer than real estate to suck in its stored value)?  Or are you thinking of a future in which bitcoin basically becomes the reserve currency of the world, or at least the dominant currency of a particular country or region?

The only way I could see bitcoin being a store of value is if people simply decided that it would be.  As you pointed out, you can't use bitcoin for anything but payments, whereas real estate is quite useful--people will always want real estate.  If people simply decided that bitcoin would be a store of value (and it would appear that they have for right now given the price), they can also simply decide that it won't be anymore (which is something that concerns me about bitcoin, but that's another topic).

Sounds great.  What are your plans?

Can the owners of the chickenstrips and hashing pools please take a look at them?  Neither is working atm, which means I don't think we have any functional SPN pools.

Given how slow things have been lately, I could see it going this way.  I think it mostly depends on when the next big investor opportunity occurs, whether it be an ETF launching or a large market opening up (Russia?).

I'm surprised it's still trading.  But it looks like there's a significant amount of price oscillation still.  Does the network even exist anymore?

But because real estate stores value, there's plenty of demand for it most of the time.  Yes, when bubbles pop, real estate prices can drop below their direct use value, as you put it.  But they usually don't stay there for long.  What's the issue that you see with this?  If real estate bubbles didn't cause the economy to crash now and then, then some other important asset would.  That's the nature of capitalism--boom and bust cycles.

I'm curious: how do you think bitcoin would help solve this?

Yes, the relationship is complex.  It's probably more appropriate to talk about transaction cost as a function of bitcoin price.


What exactly do you mean by valuation?  Are you talking about the dollar amount for which you can buy something, or a value that can be used to compare it with other similar things (e.g., you talk about market cap)?  I assume you mean the latter because you obviously couldn't just go out and buy all bitcoins for the current market cap of about $8B.  Nor would it cost you that much to go out and buy all the network mining equipment.  Market cap can be useful for comparing with things like stocks and commodities, but it's too simplistic to be used as an accurate "trade-in value."

I like the way you broke this down.  It made me think in ways I hadn't.

So let me try to approach this a little differently.  It seems like the ideal for a currency is to have it backed by something tangible that just about everyone agrees is valuable, like gold.  Being able to trade in your currency for that commodity gives the currency a lot of stability as the supply of gold is stable and known.  The backing of a currency can also be abstracted the way USD is now, where its value is basically attached to the economic output of the country.  As the economic output of a country varies, the value of such a currency is less stable and less predictable.  So then we come to bitcoin.  I can attach at least a conceptual value to a currency backed by a commodity or economic output, and I can understand the factors that determine that value.  But with bitcoin, I have no idea how to value a mining network and the ways in which it changes.  This concerns me because without some way to judge the value of the network, there's nothing to give bitcoin stability, which makes it impossible to predict where its price will go.

Do you have any thoughts on this?  I can see how you could look at the total amount of money invested in mining hardware and electricity, but I don't see the need for any specific correlation between money spent on building the network and the price of a bitcoin because it seems very fluid to me.  As I said before, the bitcoin protocol will work just fine whether you have a 1-terahash network or a 1-exahash network.  The only difference is security.  Some people may be willing to "pay extra" for more security, but I don't know that that's something many users are truly concerned about (meaning they won't use bitcoin unless the network is a least as large as X-hashes/sec).

I guess what this comes down to is that I'm trying to figure out if there are fundamental reasons that will "force" the price of bitcoin to increase over time (all other things being equal).  Just like with a stock, if a company continues to grow their profits, the price of the stock will eventually go up.

I thought you might find this December 2013 article interesting: http://www.computerworld.com/s/article/9244836/Solar_power_installation_costs_fall_through_the_floor

Particularly this part: "The cost of installing photovoltaic solar arrays has dropped to $3 per watt of electricity they produce - about the same as coal-powered plants cost to build ..."

So it sounds like the cost is quickly becoming less of a factor.

Three reasons: up-front cost, inability to transmit electricity very long distances, and cost of nighttime energy storage.

Wikipedia (http://en.wikipedia.org/wiki/Electric_energy_consumption) says that worldwide electricity consumption in 2008 was 20,279,640 GWh.  Even if you  make an optimistic assumption of 12 hours of perfect sunlight per day and $3 USD/W installed in 2013 (so 365 x 12 / 3 = 1460 Wh/yr/USD), that would still be 20,279,640,000,000,000 Wh/yr / 1460 Wh/yr/USD = $13,890,164,383,562.  So $14T.

You can transmit electricity for a number of miles, but the farther it goes, the more you lose due to resistance of the power lines.

And you need a huge amount of electrical capacity (batteries) to store such large amounts of power for nighttime use.

That would help green energy.  But the government won't do that, at least not in the US.  There would be a huge public outcry if they tried.  Plus, the government is in bed with the oil companies, so there's no way they will anyway.

Edit: It is noteworthy that while I don't think the US government would raise the cost of non-green energy, they do have a lot of incentives that promote green energy, like grants for research, tax breaks for building and installing green energy infrastructure (like adding solar panels to a home), etc.

I know there are lots of people trying to pay off their miners, which, I'm guessing, is one of the big reasons we haven't been able to break through 700.  But if we could smash through 700 (if we do break 700, I doubt it will be slowly), a lot of miners may start to put off selling their coins, hoping for higher prices.  If the sells dry up, it could move very fast, like it did in the latter half of May when it went from 450 to 685 in only two-ish weeks.  It might pause or stop at 800, but after that, 1k looks to be the next major resistance level.

Edit: And if there's enough momentum when running into 1k, it may break that quickly, too.  I think a lot of people are expecting ATHs in the next few months.  If enough people believe it will happen, it will.

Unfortunately, if we stick to "we can't afford this now," then it will never happen.  Solar energy is not the full answer anyway.  It's just one of a number of clean energy sources that needs to be developed.  Like many technologies, the more solar is used, the more incentive there is to research improved cells, which will further bring down the cost.  Additionally, it's very likely that fossil fuel energy sources will continue to increase in price.  Solar may be more expensive now, but further development will make it cheaper in the future.

How do you figure that $1k could happen but no higher?  $700 is setting up to be huge resistance, and it seems like a lot of pressure is building below that level.  If we don't break it, then we'll probably eventually drop a ways.  But if we do, I think the potential exists for a very quick run-up that could easily test the all-time highs. 

The problem is, how can they really prove that they own the passwords to the wallets they supposedly own without divulging those passwords?  I can maybe think of a way or two, but they'd be very complicated and still not completely foolproof.  Or they could show the auditor that they control those wallets, but then how do you fully trust the auditor?  And even if a person/company has a pristine record, that doesn't mean that someday they won't disappear with all the funds.  In the end, I guess you just have to decide to trust someone.  It may be risky, but life is full of risks.  You can only try to minimize them.

Just about everywhere I go, I see people on their smartphones...on the bus, walking down the street....  A couple weeks ago, I saw someone sitting on their front porch in the middle of a beautiful day, just staring at their smartphone.  It's so sad--people miss so much beauty because they're buried in their phone.

I agree.  It does have a similar feel to $450.  And I like the way volume has been dropping on the successive dips that have occurred in July.  That would seem to suggest less selling conviction.  News seems to be pretty positive lately, too.