When in 2013 shall Bitcoin break its all-time-high of $31?

[goldlyre]

What are the m-of-n transactions? 

[cbeast]

What are the m-of-n transactions? 

http://lmgtfy.com/?q=What+are+the+m-of-n+transactions%3F&l=1

[Atruk]

Bitcoin won't scale to very high prices (adoption) yet, the blockchain size will explode and transaction fees will be very high if BTC adoption (and thus price) is going to grow tenfold. Adoption growing hundredfold would break the network.

Bitcoin is not a mature technology yet.

Actually, I think the intention of the mainline developers is to lower the transaction fee over time as the value of bitcoin rises relative to other currencies.

[mp420]

Bitcoin won't scale to very high prices (adoption) yet, the blockchain size will explode and transaction fees will be very high if BTC adoption (and thus price) is going to grow tenfold. Adoption growing hundredfold would break the network.

Bitcoin is not a mature technology yet.

Actually, I think the intention of the mainline developers is to lower the transaction fee over time as the value of bitcoin rises relative to other currencies.

Yes, but developers do not ultimately decide the transaction fee, miners do. And as miners' storage and network traffic costs grow, transaction fee revenue must grow to accommodate that rise in costs.

As of current implementation, between 10x and 100x current transaction volume, the traffic and (especially) storage costs will start to limit the usability of the currency.

[phatsphere]

There is a third option you're not really considering, which I find strange. There is the possibility that Bitcoin really finds some uses that make it lift off and enter mainstream.

I think we all could expect this, but it's not for certain. What I like is to compare this to existing technologies.
E.g. look at the searches for "qr code" vs bitcoin. If you remove the spike, we are now where QR codes were in 2009. For me this feels ok. Hence, it takes 2-3 years, not 6 months.

http://www.google.com/trends/explore#q=%22qr%20code%22%2C%20bitcoin&cmpt=q

[andrew12]

I don't think it'll go beyond $20 again, at least until the next reward halving. It hit $31 because of a whole lot of hype and attention out of nowhere, then it quickly went back down as the difficulty did. I actually expect its price to go down because of how affordable and efficient ASICs are in comparison to GPUs.

[thoughtfan]

I don't think it'll go beyond $20 again, at least until the next reward halving. It hit $31 because of a whole lot of hype and attention out of nowhere, then it quickly went back down as the difficulty did. I actually expect its price to go down because of how affordable and efficient ASICs are in comparison to GPUs.

Do I assume correctly that your underlying premise is therefore that that price follows cost of production - or more indirectly that price follows difficulty which follows cost of production?  Many would argue with you that it works the other way round.  I get the impression it is more generally believed that price is determined by the balance between supply and demand and that when the price goes up difficulty goes up as more hashing power comes on line until cost of production is near BTC price.  You'll also find some technical analysis on this I have found to be persuasive.

[Yuhfhrh]

I don't think it'll go beyond $20 again, at least until the next reward halving. It hit $31 because of a whole lot of hype and attention out of nowhere, then it quickly went back down as the difficulty did. I actually expect its price to go down because of how affordable and efficient ASICs are in comparison to GPUs.

Do I assume correctly that your underlying premise is therefore that that price follows cost of production - or more indirectly that price follows difficulty which follows cost of production?  Many would argue with you that it works the other way round.  I get the impression it is more generally believed that price is determined by the balance between supply and demand and that when the price goes up difficulty goes up as more hashing power comes on line until cost of production is near BTC price.  You'll also find some technical analysis on this I have found to be persuasive.

This is the general belief.

[Spaceman_Spiff]

I don't think it'll go beyond $20 again, at least until the next reward halving. It hit $31 because of a whole lot of hype and attention out of nowhere, then it quickly went back down as the difficulty did. I actually expect its price to go down because of how affordable and efficient ASICs are in comparison to GPUs.

Do I assume correctly that your underlying premise is therefore that that price follows cost of production - or more indirectly that price follows difficulty which follows cost of production?  Many would argue with you that it works the other way round.  I get the impression it is more generally believed that price is determined by the balance between supply and demand and that when the price goes up difficulty goes up as more hashing power comes on line until cost of production is near BTC price.  You'll also find some technical analysis on this I have found to be persuasive.

The efficiency of miners determining the prices makes no sense to me whatsoever.  "Oh, they just invented a superefficient miner, now I don't want my bitcoins anymore" .... wut? 
If mining is profitable because of increased efficiency, then the result will be that more people will start mining, not that people will sell off their btcs...

[World]

For me the next interesting price milestone is $17.

At that point, we can well and truly put that awful Wired article "The Rise and Fall of Bitcoin" behind us.
The one that stated:
"... but the damage had been done; the bitcoin never got back above $17."

http://www.wired.com/magazine/2011/11/mf_bitcoin/all/

for me exchange rate parity with Facebook or Silver 

[johnyj]

When there is an established exchange, there will be hedge funds enter to push the price up, price X4 is a typical campaign

[andrew12]

I don't think it'll go beyond $20 again, at least until the next reward halving. It hit $31 because of a whole lot of hype and attention out of nowhere, then it quickly went back down as the difficulty did. I actually expect its price to go down because of how affordable and efficient ASICs are in comparison to GPUs.

Do I assume correctly that your underlying premise is therefore that that price follows cost of production - or more indirectly that price follows difficulty which follows cost of production?  Many would argue with you that it works the other way round.  I get the impression it is more generally believed that price is determined by the balance between supply and demand and that when the price goes up difficulty goes up as more hashing power comes on line until cost of production is near BTC price.  You'll also find some technical analysis on this I have found to be persuasive.

No. If price followed cost of production then the price would be at least $20 right now. However, people won't be willing to sell their Bitcoins for less than what they spent to generate them, so it's partially true.

[2GOOD]

No. If price followed cost of production then the price would be at least $20 right now. However, people won't be willing to sell their Bitcoins for less than what they spent to generate them, so it's partially true.

True, but there are over 10 million of bitcoins on the market so the next that are mined now are even less part than before.

[shmadz]

In conclusion, When we look back in a few years we will see a slowly rising price, But is it BTC rising or fiat currency's devaluing?

It's both. Faith is growing in bitcoin. Faith is declining in fiat, as it very well should. All fiat currencies eventually and inevitably return to their intrinsic value, zero.

Pulling up this post from the first page as it was the gem of the thread for me, (specifically, it was the bolded part that caught my attention)

While I agree (kind of) with Bitcopia's view, I would add to that bolded statement as follows: "All previous fiat currencies eventually and inevitably return to their intrinsic value, zero."

The reason I add the previous modifier to his statement is that while most people consider fiat to be tied to government - because all previous fiat moneys have been government backed - it should be noted that a fiat money system need not be backed by government, but that a fiat money backed by a global population (i.e. Bitcoin) would be just as legitimate. (very easily argued to be more legitimate)

Add in the fact that Bitcoin (so far) can not be inflated beyond the built-in inflation designed into the system, and you can see that Bitcoin (or something much like it) has the potential to be vastly superior to the current basket of fiat moneys that are flooding the globe. (In most cases, perhaps all, it is the runaway inflation that ultimately kills such government backed fiat currencies throughout recorded history)

(* NOTE: I'm not sure that the declining rate of inflation is the best way to do a fiat money system. It has many benefits, such as promoting adoption, but has some harsh drawbacks as well... A system which tied inflation to population might be preferable, but I do not see an easy (or fair) way to boot-strap that kind of monetary system. *)

In conclusion, I consider bitcoin to be a fiat money system, backed by the fact that it is easily transferable across great distances, possibly infinitely fungible, and, (as yet) impossible to counterfeit. And yet I do not see the price rising above $31 in 2013. I have the feeling that the collapse of the current system may take longer than most of us would like.

[nobbynobbynoob]

I personally wouldn't identify Bitcoin as fiat currency, at least not in the sense of "by legislative fiat". There are no legal-tender laws granting special privilege to bitcoin. However, calling it fiat isn't strictly wrong, since fiat is Latin for "let it be done", thus the interpretation of the word can be flexible.

[bitboyben]

0.2-0.6% daily increase where does that put us?

[notme]

0.2-0.6% daily increase where does that put us?

Ask your calculator or a spreadsheet.

[Bitcopia]

I personally wouldn't identify Bitcoin as fiat currency, at least not in the sense of "by legislative fiat". There are no legal-tender laws granting special privilege to bitcoin. However, calling it fiat isn't strictly wrong, since fiat is Latin for "let it be done", thus the interpretation of the word can be flexible.

Isn't a fiat currency by definition issued by or at least backed by government?

[nobbynobbynoob]

I personally wouldn't identify Bitcoin as fiat currency, at least not in the sense of "by legislative fiat". There are no legal-tender laws granting special privilege to bitcoin. However, calling it fiat isn't strictly wrong, since fiat is Latin for "let it be done", thus the interpretation of the word can be flexible.

Isn't a fiat currency by definition issued by or at least backed by government?

That's how I think of it, yes, but the world fiat is a bit more flexible than that in its true meaning. Personally, I do not consider bitcoin to be a fiat currency at all, even though it isn't gold or silver.

[DeathAndTaxes]

No. If price followed cost of production then the price would be at least $20 right now. However, people won't be willing to sell their Bitcoins for less than what they spent to generate them, so it's partially true.

Where do you get that idea from?  For current generation hardware difficulty would need to at least quadruple before cost of production would be $20.00 and all signs indicate a slow decline in difficulty until ASICs are released.

A well built GPU rig can achieve 3 MH/J and $2 per MH/s in capital costs.  Lets amortize that over 12 months (assume zero residual value) and a moderately low power cost of $0.07 per kWh.

Hashes per BTC = (nonces per diff 1 * difficulty) / (BTC per block)
Hashes per BTC =  (2^32 * 3.4E6)/ ( 25 )
Hashes per BTC =  5.84E14
MH per BTC =  5.84E8


Power costs per BTC (@ $0.07 per kWh):
Power per BTC = (5.84E8 / ( 3 * 60 * 60 * 1000)
Power per BTC = 1351 kWh
Power cost per BTC = 1351kWh * $0.07 per kWh = $3.785


Capital cost per BTC (@ $2 per MH/s & 12 month amortization):
Lifetime MH per dollar of capital cost = (1 MH/s / $2.00) * (60s * 60s/h * 24h/d * 365d)
Lifetime MH per dollar of capital cost = 1.58E7 MH/$
Capital cost per BTC = (1.58E7 MH/$) / (5.84E8 MH / BTC)
Capital cost per BTC = $0.27 per BTC


Total Amortized Cost = $4.06 per BTC*

*Note this isn't to say one should be building new rigs today given the future difficulty may be magnitudes higher due to ASICs however I didn't want to include only the power component of an existing rig.