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Author Topic: How serious is BitCoin - strong points  (Read 1471 times)
Batouzo
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June 01, 2011, 03:33:07 AM
 #1

Hello.
So we had discussion with business&tax advisor - that where new to the idea of BitCoin.

What could be the main "defending points" to prove that BitCoin is a real thing?

Please fill in / append, comment, etc Smiley

Question: so why is everyone calculating "nothing" on thoes radeons -> to have scaricity/run transactions -> ok but then you create currency with no backing at all [normally currencies are tied to something, at least say state *buy* homes/loans from banks and pays them therefore introducing new/printed money to the market
Answer: Because then someone will use these bitcoins as means to buy a real thing say a web hosting, and then our just-mined currency becomes backed by real value?


Q: how big is the economy?
A: Around 5,000,000 BTC in currency. But the market is still small...  How small?
A: we could instantly sell, say at mtgox.com perhaps 10,000 USD easly. This is the market's easy liquidity. Selling perhaps x5 more is possible with some moving of the price and over a day, perhaps x2 more with other exchanges and OTC and individual buyers... what besides that?
Apart from buying 100,000 socks Wink

Q: is it all legal?
A: there are no regulations to forbid it.  
A: It can be seen as barter (payment in commodity).  Others...?
A: I will make it Illegal! In dollar only we trust. Wink
A: Mtgox operates are "money exchange" under corresponding JP regulations so its all fine at least at that point?

Q: who will buy bitcoins from you
A: mtgox, around 4 other exchnages (which ones?) plus communities (#bitcoin-otc, this forum, ... others?), plus individual looking (where, how many people?)
A: ......... people use bitcoin overall (around 10,000 from number of nodes? where is some URL with exact number of stats/"official")?
A: I can buy goods with it (list of traders is from wiki page, what others)? How many places total? 100 world-wide?

Q: who can sell you bitcoins
A: same exchange services
A: individual miners
A: produce yourself
A: earn it

Q: is it usable long-term, the price is volatile
A: .................. ?

Q: how long will it run before the project "falls part"? Why you think it really should survice say next 5 years?
A: .................. ?
A: because there are tens.. hundreds people behind it doing marketing, real newspapers etc write about it.... more?
A: because it has unique properties like easy use, privacy, uncorruptability;) etc?
 
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Batouzo
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June 01, 2011, 10:41:16 AM
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No reply? Questions where not clear? Everyone agrees? Disagrees? TL;DR?
LobsterMan
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June 01, 2011, 11:37:50 AM
 #3

I don't claim to be correct in most of my answers and this is purely my take on things (I also have minimal formal education in economics), but I'll gladly add my 2¢   Cool




Question: so why is everyone calculating "nothing" on thoes radeons -> to have scaricity/run transactions -> ok but then you create currency with no backing at all [normally currencies are tied to something, at least say state *buy* homes/loans from banks and pays them therefore introducing new/printed money to the market

Well technically there is nothing to back them aside from their perceived worth, and their momentum as a legitimate currency as bitcoin (hopefully) gains more widespread acceptance.
Also one could argue that they are backed by the electricity used to generate each one, which is a non-negligible amount. You could even go as far as to say they are "commoditized e-tokens" which conveniently package the use of electricity for re-sale, but this is kind of a stretch and is just sort of how I look at it. I suppose the actual cost of generating each coin is indeterminate, and the earliest coins would have used significantly less energy than the ones generated after difficulty has been 400,000+


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Q: how big is the economy?

I think that most of the market force right now is speculation, as it seems there are still relatively few outlets selling physical goods and accepting bitcoins as payment; you can get lots of services for bitcoins though.



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Q: is it all legal?

I think this is still open to interpretation and depends where you live and what you're doing with your coins. If you really want to play dumb it's all just a "game" and you're sending e-tokens to other people that have no bearing in the real world. Obviously this isn't really true and I suppose there are likely tax and other legal considerations to take into mind when buying/selling bitcoins and stuff, but at the same time I think bitcoin still under-the-radar enough that you're not going to get an IRS audit for selling a few bitcoins here and there.


Quote
Q: who will buy bitcoins from you

From my own personal experience, I've been conducting a lot of my business on IRC (#bitcoin-otc on freenode), just directly selling coins to other people who will give me USD in my paypal account for said coins. Mtgox is still selling your coins to other people, but in a more indirect and impersonal way.

Quote
Q: who can sell you bitcoins

Same as above basically; or you can mine them yourself


Quote
Q: is it usable long-term, the price is volatile

Like I said above, I think the main market forces are almost purely speculation right now, and this is coupled with the large difficulty jumps recently sort of propping the price up due to short term scarcity. I don't think that bitcoins have enough real world use to really be worth $9 each at the moment, but it would seem that most of the commerce right now comes from just buying and selling the coins directly, and the market is what determines the price...


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Q: how long will it run before the project "falls part"? Why you think it really should survice say next 5 years?

"Falls apart"? I don't think anyone really has an answer to that right now. The difficulty keeps going up which seems to indicate growing interest, and the web traffic to the guides I've written to get started with mining only keeps going up and up. A lot of this may depend on the legal ramifications too, but if governments start outright banning bitcoin that is likely to just make it even more popular. But right now...with the price so high, I would not say that bitcoins are good for a long term stable investment, but they are definitely something to keep an eye on, and make some money on the side with as well if you are able Smiley
joepie91
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June 01, 2011, 11:48:54 AM
 #4

I can't answer everything completely, but I'll have a go:

About backing:
I believe fiat currencies do not have any actual backing either - and from what I know the only thing that ensures your money has any value is a government promise. Personally I'd rather rely on a currency that can not be influenced by one central entity, and whose integrity is guaranteed by an algorhithm.

How big the economy is:
Even if there is already a significant amount of bitcoins in circulation, the amount of other currencies/goods that has been "invested" in this collection of bitcoins is relatively small. If the value of a bitcoin would rise even more because more people want them (and thus more other commodities/currencies are "spent" on the entire bitcoin economy in total), the market would become bigger, even if the amount of bitcoins would stay the same. I'm not an economic so I won't be able to use the exact terminology for this, but I'm sure someone else will be able to correct me on that.

Who will buy bitcoins: http://www.bitcoincharts.com/ has a nice list of exchange rates for a lot of exchanges, you should be able to find a few exchanges there. You can always use things like OTC or even Google to find individuals that are willing to trade Bitcoins for other currencies/giftcards.

Volatile prices:
I believe that, the more "accepted" bitcoin is, the less volatile the price will be. Right now the market is small, and the fact that large groups of people can suddenly "discover" bitcoin at once, makes strong price fluctuations possible. When bitcoin gets bigger and the spikes in supply and/or demand will be smaller, the price will be less volatile. A useful method to determine pricing right now is for example using the Mt. Gox API to calculate bitcoin prices based off the current exchange rate (and actually defining your prices in dollars), and if you do not want to keep your income inside the bitcoin economy (for example, when you need USD to pay _your_ service provider when you are a hosting company) you could even sell it off on Mt. Gox directly against the current exchange rate.

Project falling apart:
I don't believe Bitcoin will ever completely fall apart. The only way for Bitcoin to die completely would be because of lack of interest, or because a better alternative is presented. Bitcoin does not rely on a single point of failure; Bitcoin is basically what people make of it. You don't need a central entity to arrange things for you, so if a large entity (say, Mt. Gox) disappears, someone or something else could simply take its place. If a better system is designed and people flock to that system instead, then it would be possible for the Bitcoin economy to fall apart - however, would that be any more likely than the dollar economy falling apart?

TL;DR Yes, it's (relatively) new, and it's experimental... but it is technically sound, and I do not believe it to be any more risky than using fiat currencies. In fact, I think the Bitcoin economy would be less risky, as there is not a single point of failure.

EDIT: Legality.
I believe that unless Bitcoin would be acknowledged by an organization like the IMF as being a "real" currency, trading Bitcoins would be considered barter in most jurisdictions. Barter tax may apply; you'll have to check local laws for that. However, to my knowledge there is nothing prohibiting Bitcoin, at least not in the "western world".

Like my post(s)? 12TSXLa5Tu6ag4PNYCwKKSiZsaSCpAjzpu Smiley
Quote from: hawks5999
I just can't wait for fall/winter. My furnace never generated money for me before. I'll keep mining until my furnace is more profitable.
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