So, to summarize:
Fundamental hurdle for Bitcoin:
That people perceive it as a way to get rich on the expense of others.
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How does btc escrow work? Are there well enough known entities out there that are trusted enough to be an escrow service?
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I can think of two things applying upward pressure on the price:
1. Speculation. This has probably been decreasing and will continue to decrease as the price stays stagnant. But there are still a lot of people holding out for that glorious (fantasy) day in which they get to bask in great wealth when the price goes up to a gazillion. Over time they will bleed off.
2. Commerce. There's a real economy to bitcoin. In order to do business with the coin, you have to hold some amount of it. This is the one that's supposed to grow to make #1 rich. However, this is also the one that will not grow because of #1 -- how many merchants want to price their stuff in bitcoins only to have the value double or halve overnight and all their goods are mispriced? Not going to happen until #1 mentality goes away. I don't think #1 mentality is going to go away so long as the design of bitcoin is to have a fixed number of coins.
Downward pressure:
1. miners. I'm guessing this is pretty much constant, but I don't know for sure.
2. Speculators throwing up their hands. You would expect this to happen slowly over time, as people gradually get tired of waiting for that glorious day. I think this explains the gradual decrease.
My prediction is flat to slightly negative for a while, unless either (1) bitcoin devs decide to remove the 18 million coin cap (not likely), in which case bitcoin would take off but it's hard to say what would happen to the price, or (2) a competing currency pops up that solves the speculation problem, in which case a dramatic flight from bitcoin is possible.
All this to say.. be very careful if you're going long bitcoin in order to make a profit..
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Good and bad are in the eye of the judger, but I'll spout some words. I believe 21 million coin limitation is the central reason for bitcoin's stagnant adoption rate. The lack of a stable value (not to be confused with a stable exchange rate!) is keeping people from using the currency. The reason is that there's always this spectre of radical price appreciation. And whenever there's a spectre of radical appreciation, there's also downward risk. The problem is value instability, and bitcoin has a lot of that because of the 21 million thing. Cryptocurrency will really take off as more people recognize this and start moving towards new designs with value stability in mind. One such coin in the design stages right now is EnCoin, a coin based on the value of 10kwh of electricity. Another idea is HashCoin, one based on a particular # of ghash, which could be achieved by simply increasing the payout-per-block based on the difficulty of solving that block (and having on limit on the number of coins). I suspect bitcoin is not the future of money, but something like it is going to be a major player. Whether or not that's bitcoin itself will depend on bitcoin's ability to own up to it's 21-million-coin flaw. If it does not, it probably will lose to a competing currency that deals with value stability. If the bitcoin developers agree to fix the 21-million-coin problem, then bitcoin could become a big deal. However, in that case you're not going to get rich off of it because in fixing the 21-million-coin problem you've remove the "radical-upside" (fantasy) that so many are talking about with bitcoin. You may want to think twice if you're buying bitcoins as an "investment" and holding them on the expectation that they'll make you a lot of wealth.  You're taking a very big risk. |
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Why invest in bitcoins when you can get in early on one of the alternate chains? Really, what makes bitcoin so special anyway? From what I can see, it has a network effect monopoly and the strongest core dev team and that's about it. One of these days one of the alternate chains is going to take over. However, I suspect you won't be able to get rich off of it. That's because I think the one that's going to take over will have value stability built into it's design, and that's the whole reason it will take over. See http://www.phauna.org/papers/freecoin/freecoin.pdf for more. |
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Of course it's possible. All that is necessary is for the government to be unable to pay the next bill, and the federal reserve is unwilling to bail the government out.
I'm not saying that's how it would go down, but the question is whether or not it's possible.
With increasing political pressure to "Audit the fed" or "end the fed" in the US, it's a real possibility that the fed could be under too much political pressure (or be shutdown, replaced, etc.) to bail out the treasury.
It's always a good idea to be realistic about what is possible. Don't think that just because a thing has never happened before that it somehow will not follow the laws of physics. It can happen.
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Part of the problem with a currency that is suspected to gain value is that people are less willing to spend it. I think people would be more willing to accept it as a currency if it made some attempt to maintain a constant value instead of an increasing value. Yeah, that's actually a major issue IMO, and the worst part of that problem is: it seems that a lot of people very involved in BTC think that this on the contrary is a strength. This can even be read it the FAQ (not with those words, but that seems to be the idea): "don't worry, there won't be inflation but rather deflation, it's a great thing". No, it's not. If BTCs keep gaining value, clinging to your BTCs instead of spending them is actually a profitable investment. Since I don't think anyone will put all their money or even the majority of their money into BTC, noone will be forced to spend them, ie it's possible that everyone just cling to their BTCs. How useful is a currency if noone is willing to spend it? Real world money keeps losing 1-2% value every year, and when you think about it, that's definitely a strong incentive to either spend it or invest it, and not to keep it dormant in your safe like you'd do with, say... gold? Which leaves to my next question: are you guys willing to create another currency or to create another gold?If you're willing to create another gold, then there's a problem: real gold actually has an intrinsic value, ie it is required to build some electronics components, and lots of people women  want jewelry made of gold. The same is not true of BTCs. BTCs serve no component-building purpose nor decorative purpose. If all the BTCs of the world end up in a forgotten stash on a forgotten hard drive, noone will miss it. At best maybe someone will create another BTC-like e-currency. I'm actually mining at the moment, but have no plan of selling or spending my BTCs any time soon... Increasing value is a problem, but I can't think of any good way to solve it. They need to be percieved as limited in number because they have no value otherwise. Miners don't need both an increasing difficulty and decreasing value of thier product over time. I'm planning on selling games for SC/BTC, but i suspect I'll have to sell them for less than they're worth in those currencies because customers will factor in the currencies potential when deciding to exchange for goods. Still, I love the idea of cryptocurrency, so I'm going to give it a shot. I believe this is the biggest issue with bitcoin's acceptance right now. There's a catch-22 in which, as the currency gains in acceptance, it also goes way up in value. As it goes way up in value, it is perceived (rightly so) as unstable, making it less attractive to being accepted in the first place. Sure, we have merchants out there accepting bitcoins for payment, but almost nobody is *pricing* in bitcoins. That's because it's so obvious to everyone that the value of bitcoins is a big question mark. You would have to be pretty bold to price your goods on your store in bitcoins and then go to bed, when overnight the value could fall 50% and somebody could buy out your entire store at half price. I suspect we could do better, but we are going to have to let go of the "fixed-number-of-coins" love affair that we currently have going on. I'm just as much of a libertarian-leaning gold-standard Austrian nut as the next bitcoin guy, but I think in this case we need to see past the fixed-number-of-coins limitation. Slowly people are starting to catch on. Over in the Alternate Cryptocurrencies forum there's a proposal for "EnCoin" -- somebody's idea of how to design a coin which targets a number of KWH worth of electricity as it's value. That proposal may or may not work, it's got a lot of details to hash out. We could also have a coin that targets a number of ghash as it's value, by simply having the number of coins per block be proportional to the difficulty of the block and never capping the number of coins. We may also need to have transaction fees that are destroyed or something similar to keep some upward pricing pressure; I haven't worked out all the details, but I have yet to hear a convincing argument for why this or something like it wouldn't work. People say that nobody will adopt such a coin because it cannot promise to make them rich. I say, the promise of making you rich is exactly why bitcoin took off with early adopters AND is exactly what holds it back from more mainstream types. We have to let go of getting rich off the currency. That's the whole problem with govt-backed currencies anyway -- some minority gets rich off the currency at the expense of everyone else. Bitcoin is no better in this regard, but we CAN do better. |
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Hello.
Bitcoins are neat.
I'd like to post a question elsewhere on this forum, so I guess I need to post here first.
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