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Author Topic: How the hell do you measure how much goods are worth in Bitcoin?  (Read 2903 times)
Lethn
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November 02, 2012, 10:09:22 AM
Last edit: November 02, 2012, 10:45:19 AM by Lethn
 #1

I'm aware of the basics before the economists here rant at me, the premise is very simple in that you just let the market decide how much your product is worth, lots of sales? Keep it at the same price, if everyone is ignoring you? Lower the price and hope they'll be attracted.

What is throwing this logic out of whack though and making me shit myself is inflation, I'm trying to think of how you would fairly price something like manga for instance ( usually $3 - $5 per volume at most ) that's fine on it's own with the usual currencies but what happens when you throw bitcoin in the mix? ZOMGWTFHELL! While this is exaggerated I can easily see bitcoin jumping up to $16 for 1 bitcoin! How do you price bitcoin on something like that? This may be what is partially scaring the living daylights out of people with bitcoin because you can see it on the exchange now in my usual currency for £6.

Surely you can see where I'm coming from, I would of course being a believer in Austrian economics measure against precious metals like gold, but there of course you have the exact same problem with the inflationary currencies throwing everything out of whack, gold is going crazy high because of the way the federal reserve is printing. Is it a case of having to detach yourself entirely from the other markets when dealing with bitcoin or is there some kind of system people can follow? My manga is going to be about 100 pages long for the first volume, so it will be worth something but I want to make sure I don't rip people off for wanting to use bitcoin.

There is of course the problem where you have bitcoin falling in value as well so would that justify a price increase? Or do you just simply keep everything the same to provide some kind of stability for your customers?
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November 02, 2012, 03:10:05 PM
 #2

I would expect that as BTC becomes useful for more purposes, there will be less need to convert to some other currency.  That seems to be quite a ways off yet though.  In the meantime, since BTC is an electronic currency it isn't very difficult to have the BTC derived "on the fly" from the exchange rate with some other currency.  So a customer is quoted a BTC price that is good for the next few minutes while they make their decision.  If they come back later in the day, they will be quoted a different price.  The window of time that the quoted price is accepted would be dependent on the amount of risk the merchant is willing to accept.

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November 02, 2012, 03:13:01 PM
 #3

I guess I'll sell for 1 bitcoin then and and just see how that goes Cheesy
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November 02, 2012, 03:24:01 PM
 #4

I guess I'll sell for 1 bitcoin then and and just see how that goes Cheesy
You could try that, but I'm not sure why you would set the price so high.  I don't know much about the product you are offering, but it seems that you said:

. . . manga for instance ( usually $3 - $5 per volume at most ). . .

So I would think that using today's exchange rate you would either sell a volume for approximately 0.3698 BTC or you would offer a set of 3 volumes for 1.1 BTC?

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November 02, 2012, 03:40:31 PM
 #5

That's high? Holy cow, I guess I'll sell it at 0.3 - 0.5 bitcoin then, I'm just going by the Mtgox exchange rate but this is what I'm talking about, if it's high now then what happens if someone decides to sell a ton of bitcoins and then the price drops massively?

What I plan on doing is to sell one volume and to encourage people to come back and buy more existing customers will get the next volume free, so if you come later and buy the second volume then you'll get the third volume free and so on. As I said before I'm not interested in ripping people off, I'm still trying to grasp how much bitcoin is worth and the way the economy for it works. There is of course going to be no DRM on the thing so you can store it offline and read it whenever you want or share it with friends, in fact I plan on also putting it on bittorrent as I've said before so you can see the full product and know I'm not conning you lol.
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November 02, 2012, 04:15:53 PM
 #6

That's high? Holy cow, . . ., I'm just going by the Mtgox exchange rate
I think the current MtGox exchange rate is somewhere around 0.09248 BTB per USD, so if you sell for 1 bitcoin, then you are looking at a value of approximately $10.81 for your volume.  I don't know if this is high, but you were the one who said that manga is "usually $3 - $5 per volume."

. . . what happens if someone decides to sell a ton of bitcoins and then the price drops massively? . . .
As best I can tell, it seems that the exchange rate has been somewhere between 0.07704 BTC and 0.10267 BTC per USD for the past month.

You said that manga is usually between $3 and $5 per volume.  Lets assume you want to receive approximately the equivalent of $4 which would leave some room for exchange rate fluctuation within the "usual" price of manga.  $4 * 0.09248 is approximately 0.3699 BTC.  If you adjusted your prices monthly, (and kept an eye on the exchange rate every few days to adjust for unexpected large swings in exchange rate), then a price of 0.37 BTC would have gotten you somewhere between $4.80 and $3.60 on any given day in the past month.  I'd say that all those prices fall within your $3 to $5 range, so your customers aren't getting ripped off.

If there is a large sudden change in exchange rate, you could end up with a price that either offers your manga for REALLY CHEAP, or REALLY EXPENSIVE.  If it becomes really expensive, it seems unlikely that your customers would get "ripped off".  They would most likely notice that your manga costs more than they want to pay, and they'd simply not buy it until you adjust your price downwards.

The real risk you run is if the exchange rate suddenly makes your manga really cheap.  In this case you have a few easy options.  The first and easiest is to accept the risk under your own personal belief that the exchange rate will eventually recover and just hold on to your bitcoins until it does.  The sudden "cheap" price might encourage individuals who hadn't quite made up their mind to make the purchase.

How do you plan to handle price listing and payment processing?  Are you creating a website where purchase of your manga will be automated?  Will they email you with a request to purchase?  Will you simply post a donation address?  Will they contact you via phone?  Your other options for quickly adjusting to sudden changes in exchange rate will depend a lot on the systems of transaction coordination you are planning on using.

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November 02, 2012, 04:29:46 PM
 #7

Thanks for the detailed response! In my signature I have the website, I'm going to be making it like your average digital store, so think GOG.com in terms of how it will operate, you set up an account, download the file you bought and you can get it as many times as you like, the product itself will be a bit like an ebook, I'm making all the images myself in photoshop and putting them into a .pdf file so people can just easily flick through them on their computer.

If you want an example It will work a lot like this: http://mangafox.me/manga/black_lagoon/v01/c000/4.html

Thanks for the information on the prices, I think I have a good idea now of how things will work, I guess this is the risk of entering an entirely new economy.
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November 02, 2012, 04:38:56 PM
 #8

With so many conversions available to various fiat currencies, BTC value for goods is usually tied to the exchange rate.

In the absence of fiat exchanges (yes, yes I know) you'd be on your own to figure it out.  It's called Auction Market Theory.
It starts out with a loaf of bread that someone with BTC wants.  If he has lots of BTC and starts haggling for the bread, the bread's owner is going to start fishing for how high the buyer will go.  After thousands of such transactions the price settles around some mean which is "the price".

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November 02, 2012, 04:47:22 PM
 #9

. . . so think GOG.com in terms of how it will operate . . .
I just took a (really quick) look at GOG.com.  I see a list of product, and next to each item I see a button with a price on it.

It seems that if you want to ensure that you get somewhere close to $4 worth of bitcoin for each sale, you could have your website look up the exchange rate every few minutes.  Then you could display the price in BTC as of the last exchange rate lookup.  This way if there is a sudden shift in exchange rate, only the few people who happen to visit your site in the next few minutes will see the really cheap price. By the time most people come rushing to your site to see if they can get a great deal, your prices will have already adjusted to the new exchange rate.  You can then adjust your risk exposure by adjusting how often you look up the exchange rate.

Of course you are also going to have to decide how long you want to hold on to the BTC that you are receiving.  Will you keep them indefinitely to eventually spend directly on products and services that can be purchased with BTC, or will you exchange your BTC for some other currency on a regular basis?  If you plan to exchange for other currency, you can adjust your exchange rate risk by adjusting the frequency that you make the exchange.

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November 03, 2012, 03:20:33 AM
 #10

Same as always, see what the lowest price you can find is.

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November 03, 2012, 04:28:51 AM
 #11

http://btcticker.appspot.com

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November 03, 2012, 09:19:51 PM
 #12

i would keep the price fixed in BTC

when the price moves down, your products become cheaper and is more likely to sell.
when the price moves up, your products generate more profit per sale.

every so often lower the price to keep up with deflation.
like they do with now with $; every so often they rise prices to keep up with inflation....

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November 03, 2012, 10:54:27 PM
 #13

I think that's what I'll go ahead and do Adam as I've said, not interested in ripping people off what I'll do is probably keep it at 0.5 BTC and see what happens, if people seem happy with that then I don't think I'll change it, pretty much the equivalent of the price I was planning in the normal currencies anyway according to Mtgox Cheesy

Now I've got that absolute headache out of the way I just need to focus on drawing my manga and trying to figure out all the Opencart options without throwing my computer out the window, I couldn't figure out the PhP thing for bitpay so I'll have to use the simpler option instead.
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November 04, 2012, 04:02:28 PM
 #14

I think that's what I'll go ahead and do Adam as I've said, not interested in ripping people off what I'll do is probably keep it at 0.5 BTC and see what happens, if people seem happy with that then I don't think I'll change it, pretty much the equivalent of the price I was planning in the normal currencies anyway according to Mtgox Cheesy

Now I've got that absolute headache out of the way I just need to focus on drawing my manga and trying to figure out all the Opencart options without throwing my computer out the window, I couldn't figure out the PhP thing for bitpay so I'll have to use the simpler option instead.

Just to say, there's always the "pay what you think it's worth" option. Especially if you're going to put it out for free on bittorrent anyway (Hmm, did I misunderstand that?)

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November 04, 2012, 04:13:32 PM
 #15

Wink marketing Richy_T, marketing Wink Cheesy
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November 10, 2012, 05:57:40 PM
 #16

Just to say, there's always the "pay what you think it's worth" option. Especially if you're going to put it out for free on bittorrent anyway (Hmm, did I misunderstand that?)
And if you beat the average, you also get the extra limited something edition Wink

Re: how you measure prices in Bitcoin? For now, like others mentioned, measure them in fiat and use some currency exchange site rate to calculate prices in BTC.

I guess the alternative is to find some goods and services that you use and you can buy in BTC. Make a common sense comparison between their perceived value to your product perceived value and the ratio should help you price your goods directly in BTC. Like going back to the basics and how all currencies started ... back in the days when Anton the bread maker issued 1 voucher (aka BTC) that said it was good for 1 bread. Since Anton was trustworthy, the voucher was also accepted by Claire the shoe maker, but on a different ratio (you needed 20 bread vouchers to pay for a pair of shoes).

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November 11, 2012, 05:01:29 AM
 #17


This. Figure out what price you're looking to get in your local fiat, and then just plug it in to the image url.

If I were selling something for €3.00...


Or $5.00...


Alternatively, if you're going to keep it in BTC (buying something elsewhere, for instance), then just pick what you think is a fair price, and adjust as necessary.

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December 02, 2012, 01:15:03 AM
 #18

Simple, bitcoin isnt designed to be a store of value, infact by virtue of the fact that it will almost certainly return to its intrinsic value of 0 some day it is terrible as a store of value. bitcoin is designed to be the ultimate medium of exchange, nothing else. What this means for you is that you should price your items in something thats primary function is as a store of value like ounces of gold but require payment in something thats primary function is a medium of exchange like bitcoin.

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December 02, 2012, 10:55:21 AM
Last edit: December 02, 2012, 11:39:29 AM by wareen
 #19

Simple, bitcoin isnt designed to be a store of value, infact by virtue of the fact that it will almost certainly return to its intrinsic value of 0 some day it is terrible as a store of value.

I beg to differ - Bitcoin is a near perfect "store" of value, albeit the value in terms of other commodities/services will vary, but there is nothing that is immune to these changes. Bitcoin has near zero storage costs regardless of the amount, it can be backed up, making it impervious to theft or loss, it can be encrypted, making it impervious to confiscation and its scarcity is guaranteed by mathematics.

Oh, and there is absolutely no such thing as "intrinsic" value - value is a purely subjective term to express peoples wants and needs at a particular point in time. Yes, gold has a long history of being valued highly by people, but would you really bet the life of your grandchildren that despite all technological advances, 1kg of gold would still make somebody a wealthy man 100-200 years from now?

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deepceleron
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December 02, 2012, 11:30:49 AM
Last edit: December 02, 2012, 11:43:19 AM by deepceleron
 #20

If you are selling something, how much is a Bitcoin worth to you?

One could use such a motto, but for day-to-day transactions, the valuation in Bitcoin that most sellers use is the current or recent average price on exchanges, just because of how fungible they are (your Bitcoin payment can be turned into dollars or yen within an hour on an exchange). Most people know how much a comic book is worth in government currency (price printed on item, eBay auctions, value guide, predictable inflation), and will immediately look up today's Bitcoin price on an exchange to see if you are offering an item at a fair or comparable value.

As a seller, you should think more about how much you would buy Bitcoins for yourself. If you have all you need right now, but would buy more Bitcoin if the price drops to $10, then that's how much a Bitcoin is worth to you (realistically exchange value since you can just sell them). However, buyers of merchandise also might not be willing to part with their own Bitcoins for less than $15 each, so they would look for something that seems worth around $15 for their Bitcoin. The price you would pay for Bitcoins isn't likely to change much based on daily fluctuations on somebody else's exchange, so pricing your item at a set Bitcoin price is better than an auto-calculated BTC->Dollar price like bit-pay or other payment processors offer. You will also be stabilizing the currency if 1 BTC will always get you one logo design, one month of VPS, or one sock.

Online Bitcoin gambling is probably a success in part because there is no mental gymnastics involved in thinking about value, you bet Bitcoins and might win Bitcoins.
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