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Author Topic: Selling goods or services with a fixed bitcoin price  (Read 1028 times)
R2D221
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April 14, 2013, 04:18:19 AM
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Right now, when you want to sell something with Bitcoin, what you're actually doing is setting the price in a fiat currency (such as USD or EUR), and only then converting to Bitcoin using the current exchange rate. This has the consequence that you have to constantly verify the price because the exchange rate is very unstable.

But what would happen if someone started selling using a fixed Bitcoin price? For example, let's say that I want to sell my computer at BTC20, and always at BTC20 regardless of the exchange rate. Would it be a good or bad idea? What consequences would this have?

I personally think that if more people sold with fixed Bitcoin price, the currency would be more stable; but then I'm no expert.

An economy based on endless growth is unsustainable.
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April 14, 2013, 04:26:35 AM
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That would set a limit on how valuable bitcoins could become. Not a good idea for a growing currency.
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April 14, 2013, 05:16:03 AM
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by doing this, you'd sell a lot of your product when coins are cheap, but won't be doing too good when they rise in value.
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April 14, 2013, 05:20:49 AM
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Right now, when you want to sell something with Bitcoin, what you're actually doing is setting the price in a fiat currency (such as USD or EUR), and only then converting to Bitcoin using the current exchange rate. This has the consequence that you have to constantly verify the price because the exchange rate is very unstable.

But what would happen if someone started selling using a fixed Bitcoin price? For example, let's say that I want to sell my computer at BTC20, and always at BTC20 regardless of the exchange rate. Would it be a good or bad idea? What consequences would this have?

I personally think that if more people sold with fixed Bitcoin price, the currency would be more stable; but then I'm no expert.

Since the amount of bitcoin is always fixed and your production capacity can increase forever, if you don't continuously lower the price, people will hold the coin instead of spend them to buy your products. They will select another inflative currency e.g. USD/EUR to buy your product, since the price stability of USD/EUR are very high

If you only accept bitcoin payment, then your customer must convert the USD/EUR into bitcoin, so they will continously check the exchange rate. If the exchange rate rises quickly, it means your product becomes expensive quickly, they might cancel their buying decision. If the exchange rate drops, that means your product becomes cheap, they will buy your product. As a result, you only get paid when bitcoin price crashed

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April 14, 2013, 05:29:43 AM
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Basically, what you would do by doing this is set an anchor. Not a very solid anchor, but it would "drag" on the price, especially if you offered a good, rather than a service. Basically, you're telling the market that you think that X amount of bitcoin is worth Y good or service. Market information only works in aggregate, so it would take a good many people doing this to stabilize the price.

This is tricky, though, because you're basically taking a guess at not only what the market would value your good or service at, but also what the market would value Bitcoin at, in relation to what they value your good or service.

My suggestion is to offer a good or service that you can provide at little to no overhead, something like artwork, or web design, and be willing to adjust your price up or down to meet demand. When you get to a price where your work is selling, but you're not swamped, you've found the right price.

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April 14, 2013, 05:49:13 AM
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Since the amount of bitcoin is always fixed and your production capacity can increase forever, if you don't continuously lower the price, people will hold the coin instead of spend them to buy your products.
According to this, the value of something can never exceed the total number of existing bitcoins. Seems like a trap...

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April 14, 2013, 06:28:23 AM
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Right now, when you want to sell something with Bitcoin, what you're actually doing is setting the price in a fiat currency (such as USD or EUR), and only then converting to Bitcoin using the current exchange rate. This has the consequence that you have to constantly verify the price because the exchange rate is very unstable.

But what would happen if someone started selling using a fixed Bitcoin price? For example, let's say that I want to sell my computer at BTC20, and always at BTC20 regardless of the exchange rate. Would it be a good or bad idea? What consequences would this have?

I personally think that if more people sold with fixed Bitcoin price, the currency would be more stable; but then I'm no expert.

Probably an auction is a better idea to sell something in BTC without referencing yourself explicitly to any fiat price.

Then you will have a price discovery of exchanging this specific computer against BTC, without the forementioned pitfalls of pricing yourself out of the market. Of course, amongst other (dis)advantages, you won't have a fixed price when auctioning items.

;-)
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