Bootstrapping the Bitcoin Economy: Attracting Vendors

[ralisse]

Hello all,

I'd like to begin my first post by saying that I'm thrilled to discover that so many people are working on a new monetary system that avoids the fraud of fractional reserve banking and a debt based monetary system.

After spending the last few days studying bitcoin, it appears that for a fully functioning bitcoin economy to develop vendors will be needed to supply goods and services. My question is: what will attract vendors to bitcoin?

Right now it appears to me that most transactions (if not all) are of the form: fiat currency -> bitcoin -> fiat currency. By this I mean the alpaca sock vendor has not truly adopted bitcoin, but is rather using them as a transfer medium. The buyer of socks is (forget mining for the moment) converting fiat to bitcoin then purchasing the socks. The vendor accepts Bitcoin but then immediately pays out expenses (labour, fuel, materials) in fiat. A fully functioning bitcoin economy will require the consumer to be paid in bitcoin and the vendor to pay expenses in bitcoin. The sock vendor needs suppliers that will accept bitcoins. The consumer needs an employer that pays in bitcoin. Governments get the system created by creating laws that people blindly follow.

How does this economy get bootstrapped?

Ralisse

[1715113974]

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[1715113974]

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[Garrett Burgwardt]

By exchanges, at first. As adoption picks up and the alpaca socks seller suddenly realizes they can buy food with their bitcoins, they stop cashing as many out. The food seller pays for hosting with bitcoins, and as volume picks up could probably convince their supplier to take bitcoins as well. The supplier can pay employees in bitcoins because it is easier to manage and the employees want the bitcoins to buy alpaca socks, food, etc with bitcoin.

It's a slow process, but it seems to be working so far.

[ralisse]

Thanks for the quick reply. I agree with you. For the time being it seems like bitcoin adoption will be a very slow and gradual process.

Perhaps one way of accelerating the process might be to entice vendors though higher margins. Do you think sufficient community commitment exists to the ideals of the bitcoin that people will consider paying slightly more for bitcoin products? Nothing would attract a supplier more than knowing they could make more money in bitcoins than in fiat...

Are people willing to part with their bitcoins, with the intent of starting an economy, even if that means paying a higher price?

[FooDSt4mP]

Thanks for the quick reply. I agree with you. For the time being it seems like bitcoin adoption will be a very slow and gradual process.

Perhaps one way of accelerating the process might be to entice vendors though higher margins. Do you think sufficient community commitment exists to the ideals of the bitcoin that people will consider paying slightly more for bitcoin products? Nothing would attract a supplier more than knowing they could make more money in bitcoins than in fiat...

Are people willing to part with their bitcoins, with the intent of starting an economy, even if that means paying a higher price?

Look at the prices on his food link and answer it yourself.  That site is new, but so far has been fairly successful.

[kjj]

Holy shit!  I got my new source for condoms!

[FreeMoney]

Holy shit!  I got my new source for condoms!

Bad move, going to hurt his diaper sales.

[JA37]

A problem for a vendor is the rapid change of value for bitcoins.

I have something to sell, it cost me $5 to produce. I want some profit so I'll sell it for $7 in my shop. Now to sell it for bitcoins I want some insurance because the risk is still high, and I need to convert it to other currency as described above, and there are fees. I'll set a price of 1BTC which just happens to be $9 right now.
Tomorrow it seems that 1BTC isn't worth $9 anymore, it's worth $12 and my products are now very expensive, so I adjust price to 0.75BTC, and the day after that BTC has dropped to $6 and I'm now losing money on each sale. Time for another adjustment.

This takes time and isn't as fun as you'd like to think.
I think this is something that will make vendors think twice.

[error]

A problem for a vendor is the rapid change of value for bitcoins.

I have something to sell, it cost me $5 to produce. I want some profit so I'll sell it for $7 in my shop. Now to sell it for bitcoins I want some insurance because the risk is still high, and I need to convert it to other currency as described above, and there are fees. I'll set a price of 1BTC which just happens to be $9 right now.
Tomorrow it seems that 1BTC isn't worth $9 anymore, it's worth $12 and my products are now very expensive, so I adjust price to 0.75BTC, and the day after that BTC has dropped to $6 and I'm now losing money on each sale. Time for another adjustment.

This takes time and isn't as fun as you'd like to think.
I think this is something that will make vendors think twice.

Intraday changes of that magnitude are quite uncommon. Though any online store can do realtime currency conversion.

[FreeMoney]

A problem for a vendor is the rapid change of value for bitcoins.

I have something to sell, it cost me $5 to produce. I want some profit so I'll sell it for $7 in my shop. Now to sell it for bitcoins I want some insurance because the risk is still high, and I need to convert it to other currency as described above, and there are fees. I'll set a price of 1BTC which just happens to be $9 right now.
Tomorrow it seems that 1BTC isn't worth $9 anymore, it's worth $12 and my products are now very expensive, so I adjust price to 0.75BTC, and the day after that BTC has dropped to $6 and I'm now losing money on each sale. Time for another adjustment.

This takes time and isn't as fun as you'd like to think.
I think this is something that will make vendors think twice.

Check out the latest Bitcoin Sun. I have an article explaining how an options market will help merchants solve this more easily.

[Anders]

A problem for a vendor is the rapid change of value for bitcoins.

Exactly. Shameful plug about how to solve that problem: http://forum.bitcoin.org/index.php?topic=9923.0

I have made a lot of stupid mistakes in that thread, but the main idea is to create a new digital currency that is totally backed by bitcoins and that is pegged to the U.S. dollar so that it becomes very convenient to use, both for consumers and sellers. The new currency is called bitbacks or bitdollars, I don't know which is the best name for it yet. 1 BitDollar = 1 USD. Simple!

[ene]

I have made a lot of stupid mistakes in that thread, but the main idea is to create a new digital currency that is totally backed by bitcoins and that is pegged to the U.S. dollar so that it becomes very convenient to use, both for consumers and sellers. The new currency is called bitbacks or bitdollars, I don't know which is the best name for it yet. 1 BitDollar = 1 USD. Simple!

You're actually a loon.

[Anders]

I have made a lot of stupid mistakes in that thread, but the main idea is to create a new digital currency that is totally backed by bitcoins and that is pegged to the U.S. dollar so that it becomes very convenient to use, both for consumers and sellers. The new currency is called bitbacks or bitdollars, I don't know which is the best name for it yet. 1 BitDollar = 1 USD. Simple!

You're actually a loon.

Prove it. Just because my mind hasn't become fixed like concrete by too much social inbreeding on Facebook doesn't mean that my points are invalid.

[ene]

You're actually a loon.

Prove it. Just because my mind hasn't become fixed like concrete by too much social inbreeding on Facebook doesn't mean that my points are invalid.

I've already shown all your first points are invalid and you have huge fundamental misunderstandings about how economics works. Just because you've invented some new points doesn't mean I have to debunk those too; I have better things to do.

You still haven't explained your "decentralized, faster than Bitcoins and more computationally  light-weight" system. Satoshi knows a lot more about this than you, so don't you think he would have made that if it were possible? Don't you think anybody with crypto knowledge would have already explained how to do that, if it were possible? But you have no crypto knowledge, "just a guess" which you parade around the forum as though it is worth anything.

[Anders]

You're actually a loon.

Prove it. Just because my mind hasn't become fixed like concrete by too much social inbreeding on Facebook doesn't mean that my points are invalid.

I've already shown all your first points are invalid and you have huge fundamental misunderstandings about how economics works. Just because you've invented some new points doesn't mean I have to debunk those too; I have better things to do.

You still haven't explained your "decentralized, faster than Bitcoins and more computationally  light-weight" system. Satoshi knows a lot more about this than you, so don't you think he would have made that if it were possible? Don't you think anybody with crypto knowledge would have already explained how to do that, if it were possible? But you have no crypto knowledge, "just a guess" which you parade around the forum as though it is worth anything.

So, if there are a lot of crypto experts out there, then why didn't they invent something similar to bitcoin? Let me answer: because most people are not entrepreneurs. Most people are afraid of making mistakes. Most people need to listed to 10 of their Facebook friends before they can have their 'own' opinion. Entrepreneurs do what is called pivoting instead of being afraid of making mistakes.

[kiba]

So, if there are a lot of crypto experts out there, then why didn't they invent something similar to bitcoin? Let me answer: because most people are not entrepreneurs. Most people are afraid of making mistakes. Most people need to listed to 10 of their Facebook friends before they can have their 'own' opinion. Entrepreneurs do what is called pivoting instead of being afraid of making mistakes.

No. It's because cryptographers want their cryptocash system to be "elegant". http://bitcoinweekly.com/articles/bitcoin-is-worse-is-better

[ene]

So, if there are a lot of crypto experts out there, then why didn't they invent something similar to bitcoin? Let me answer: because most people are not entrepreneurs. Most people are afraid of making mistakes. Most people need to listed to 10 of their Facebook friends before they can have their 'own' opinion. Entrepreneurs do what is called pivoting instead of being afraid of making mistakes.

So none of the crypto experts are enterpreneurs, and you're an enterpreneur who isn't a crypto expert? Then why are you even talking about a new system when you can't put it together?

So in other words the only thing preventing you from building your new system is that you have none of the knowledge required to implement it.

[Anders]

So, if there are a lot of crypto experts out there, then why didn't they invent something similar to bitcoin? Let me answer: because most people are not entrepreneurs. Most people are afraid of making mistakes. Most people need to listed to 10 of their Facebook friends before they can have their 'own' opinion. Entrepreneurs do what is called pivoting instead of being afraid of making mistakes.

So none of the crypto experts are enterpreneurs, and you're an enterpreneur who isn't a crypto expert? Then why are you even talking about a new system when you can't put it together?

So in other words the only thing preventing you from building your new system is that you have none of the knowledge required to implement it.

To be honest I think the system would be tricky to implement as a peer-to-peer network. Some clever crypto experts and software engineers may be able to do it, I don't know. To implement it as a centralized system would be very easy, but that's not as interesting as an open source P2P solution.

I have read the Bitcoin paper but only briefly and have been too lazy to learn all the details. Plus I don't know how to start an open source project. So it would take a long time for me just to start the project.

[Garrett Burgwardt]

So, if there are a lot of crypto experts out there, then why didn't they invent something similar to bitcoin? Let me answer: because most people are not entrepreneurs. Most people are afraid of making mistakes. Most people need to listed to 10 of their Facebook friends before they can have their 'own' opinion. Entrepreneurs do what is called pivoting instead of being afraid of making mistakes.

So none of the crypto experts are enterpreneurs, and you're an enterpreneur who isn't a crypto expert? Then why are you even talking about a new system when you can't put it together?

So in other words the only thing preventing you from building your new system is that you have none of the knowledge required to implement it.

To be honest I think the system would be tricky to implement as a peer-to-peer network. Some clever crypto experts and software engineers may be able to do it, I don't know. To implement it as a centralized system would be very easy, but that's not as interesting as an open source P2P solution.

I have read the Bitcoin paper but only briefly and have been too lazy to learn all the details. Plus I don't know how to start an open source project. So it would take a long time for me just to start the project.

Impressive. You propose a bitcoin-like currency that is centralized, and has magical properties that you have no idea how they would work?

Good job.

[Anders]

So, if there are a lot of crypto experts out there, then why didn't they invent something similar to bitcoin? Let me answer: because most people are not entrepreneurs. Most people are afraid of making mistakes. Most people need to listed to 10 of their Facebook friends before they can have their 'own' opinion. Entrepreneurs do what is called pivoting instead of being afraid of making mistakes.

So none of the crypto experts are enterpreneurs, and you're an enterpreneur who isn't a crypto expert? Then why are you even talking about a new system when you can't put it together?

So in other words the only thing preventing you from building your new system is that you have none of the knowledge required to implement it.

To be honest I think the system would be tricky to implement as a peer-to-peer network. Some clever crypto experts and software engineers may be able to do it, I don't know. To implement it as a centralized system would be very easy, but that's not as interesting as an open source P2P solution.

I have read the Bitcoin paper but only briefly and have been too lazy to learn all the details. Plus I don't know how to start an open source project. So it would take a long time for me just to start the project.

Impressive. You propose a bitcoin-like currency that is centralized, and has magical properties that you have no idea how they would work?

Good job.

No, the centralized version kind of sucks. At the same time, a peer-to-peer solution may be too difficult to implement. The main point is that the problem with bitcoins changing in value all the time can be solved I think by treating the bitcoins as an asset to back up other currencies that are more stable, similar to how gold has been used in the past to back up currencies. Another problem that can be solved is the slow transactions bitcoins have. Several minutes! That's usually too slow for online transactions.

[Garrett Burgwardt]

So, if there are a lot of crypto experts out there, then why didn't they invent something similar to bitcoin? Let me answer: because most people are not entrepreneurs. Most people are afraid of making mistakes. Most people need to listed to 10 of their Facebook friends before they can have their 'own' opinion. Entrepreneurs do what is called pivoting instead of being afraid of making mistakes.

So none of the crypto experts are enterpreneurs, and you're an enterpreneur who isn't a crypto expert? Then why are you even talking about a new system when you can't put it together?

So in other words the only thing preventing you from building your new system is that you have none of the knowledge required to implement it.

To be honest I think the system would be tricky to implement as a peer-to-peer network. Some clever crypto experts and software engineers may be able to do it, I don't know. To implement it as a centralized system would be very easy, but that's not as interesting as an open source P2P solution.

I have read the Bitcoin paper but only briefly and have been too lazy to learn all the details. Plus I don't know how to start an open source project. So it would take a long time for me just to start the project.

Impressive. You propose a bitcoin-like currency that is centralized, and has magical properties that you have no idea how they would work?

Good job.

No, the centralized version kind of sucks. At the same time, a peer-to-peer solution may be too difficult to implement. The main point is that the problem with bitcoins changing in value all the time can be solved I think by treating the bitcoins as an asset to back up other currencies that are more stable, similar to how gold has been used in the past to back up currencies. Another problem that can be solved is the slow transactions bitcoins have. Several minutes! That's usually too slow for online transactions.

It could be solved that way, if you want to make it far more complex than needed.

Or shop owners could just take out futures, or sell instantly.