Where does the price come from when communication is shut down?

[Matthew N. Wright]

I understand the somewhat naive reasoning that "if the government shuts down the internet, you can still trade bitcoin locally so it's unstoppable!!!11" but I'm concerned with the value at that point. In talking with Erik Voorhees before, he explained it to me that people in the local area would decide their own rates and such which sounds alright but it's also highly impractical.

The day that mtGox was being DDoSed, an artist asked for payment for an illustration for a project I was working on. She was in a hurry to get paid, so I sent her what I believed to be fair (a little more than the spot price) and it was actually less than what I owed her by the time it confirmed in her wallet. Now let's assume that mtGox, BitStamp, and every bitcoin exchange are outlawed as money laundering facilitators or terrorist SilkRoad enablers or some bullshit (pick your conspiracy). Where does the *price* come from?

A centralized IRC server with fake accounts trying to manipulate the price?
Email from strangers promising to pay?

We'd need some sort of broadcast of the current price from somewhere, and I am having a hard time understanding how that can be decentralized in the current bitcoin implementation. Is this why we need a decentralized exchange badly?

[1714126747]

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[1714126747]

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[solex]

Matthew, how long have you been active with Bitcoin? Why worry now  that the internet might be switched off?

This is really a scenario to stick in the doomsday basket, like what happens if a large asteroid hits the planet, or Iran nukes Israel or global warming melts Antarctica. The internet becomes a more persistent structure every day, and meshed into everyone's lives. Any government which tries to cut it off has to be in a life-or-death situation, like in Syria or North Korea. There would be mass-starvation and social breakdown first. People would be bartering food for guns, petrol for medicine.

The beauty of Bitcoin is that any post-disaster society would have a currency ready for use when their internet was stable again.

[Matthew N. Wright]

Matthew, how long have you been active with Bitcoin? Why worry now  that the internet might be switched off?

This is really a scenario to stick in the doomsday basket, like what happens if a large asteroid hits the planet, or Iran nukes Israel or global warming melts Antarctica. The internet becomes a more persistent structure every day, and meshed into everyone's lives. Any government which tries to cut it off has to be in a life-or-death situation, like in Syria or North Korea. There would be mass-starvation and social breakdown first. People would be bartering food for guns, petrol for medicine.

The beauty of Bitcoin is that any post-disaster society would have a currency ready for use when their internet was stable again.

It's not just about the government shutting down bitcoin. I'm sorry for not making that clearer in my OP. It's about every exchange being DDoSed too. When the price coming in unreliable, how does one decide what is a fair price?

[Ekaros]

It's not just about the government shutting down bitcoin. I'm sorry for not making that clearer in my OP. It's about every exchange being DDoSed too. When the price coming in unreliable, how does one decide what is a fair price?

The problem is fiat-connection. There isn't much to do untill you can acctually use BTC locally for whole economy. You would just need to consider what the amount of BTC cost to mine or trade for you and then what the service you get is worth for you. Fair price is the price both parties agree on.

[The 4ner]

It's not just about the government shutting down bitcoin. I'm sorry for not making that clearer in my OP. It's about every exchange being DDoSed too. When the price coming in unreliable, how does one decide what is a fair price?

The problem is fiat-connection. There isn't much to do untill you can acctually use BTC locally for whole economy. You would just need to consider what the amount of BTC cost to mine or trade for you and then what the service you get is worth for you. Fair price is the price both parties agree on.

+1

[DeathAndTaxes]

fair is what a good or service will sell for.

I will sell you a widget for 1 BTC.  You either think that is a good deal or you don't.  It really is that simple.  If the last known exchange rate is 5 minutes old and is ~$150 and you think $150 is a good price for a widget you might buy.  If the last known exchange rate is 37 days old and is $200 and you think $200 combined with the currency risk is too high then you might not.  If enough people don't buy I will have to lower my price.  Maybe you buy at 0.75 BTC.

Now without reliable quotes there will be less liquidity and less liquidity means more "friction".  Less deals get done, deals are smaller, higher currency risk, etc.  Commerce can still happen.

[Matthew N. Wright]

fair is what a good or service will sell for.

I will sell you a widget for 1 BTC.  You either think that is a good deal or you don't.  It really is that simple.  If the last known exchange rate is 5 minutes old and is ~$150 and you think $150 is a good price for a widget you might buy.  If the last known exchange rate is 37 days old and is $200 and you think $200 combined with the currency risk is too high then you might not.  If enough people don't buy I will have to lower my price.  Maybe you buy at 0.75 BTC.

Now without reliable quotes there will be less liquidity and less liquidity means more "friction".  Less deals get done, deals are smaller, higher currency risk, etc.  Commerce can still happen.

Your response actually made me reconsider my original stance that "lack of communication would cause the price to be unstable". In effect,it could cause it to be even more stable as people would have less means to communicate price differences. I imagine this is true for some disconnected island nation that uses a currency at face value that has since been devalued heavily, or who still thinks a certain rock is worth a lot even though it's freely available anywhere else in the world. I'm not sure of any real life examples, but it seems to stand to reason that without communication, people would be following a "price ghost".

[chmod755]

I came here to say something, but it has been said already.

fair is what a good or service will sell for.

I will sell you a widget for 1 BTC.  You either think that is a good deal or you don't.  It really is that simple.  If the last known exchange rate is 5 minutes old and is ~$150 and you think $150 is a good price for a widget you might buy.  If the last known exchange rate is 37 days old and is $200 and you think $200 combined with the currency risk is too high then you might not.  If enough people don't buy I will have to lower my price.  Maybe you buy at 0.75 BTC.

Now without reliable quotes there will be less liquidity and less liquidity means more "friction".  Less deals get done, deals are smaller, higher currency risk, etc.  Commerce can still happen.

The problem is fiat-connection. There isn't much to do untill you can acctually use BTC locally for whole economy. You would just need to consider what the amount of BTC cost to mine or trade for you and then what the service you get is worth for you. Fair price is the price both parties agree on.

[ManBearPig]

How do we set a price for anything? Start somewhere and haggle up or down. I'm guessing the arbitrary point would be somewhere between the low and the high, a mean of $100 sounds good right?

It would happen, there would be opps for arbitrage to keep the offline markets roughly in sync.

Much like traders crossing the continent hundreds of years ago I imagine.

[Matthew N. Wright]

How do we set a price for anything? Start somewhere and haggle up or down. I'm guessing the arbitrary point would be somewhere between the low and the high, a mean of $100 sounds good right?

It would happen, there would be opps for arbitrage to keep the offline markets roughly in sync.

Much like traders crossing the continent hundreds of years ago I imagine.

The problem with that is that there is no tangible value nor real inherent value to bitcoin other than as an arbitrary storage of said value (catch 22). This is why I'm confused a bit about where the price would come from when bitcoin's price is currently a number on a screen telling us how many others believe it has value enough to pay us for it.

Something tells me if the internet were not available, pricing would be a nightmarish prospect.

[Ekaros]

How do we set a price for anything? Start somewhere and haggle up or down. I'm guessing the arbitrary point would be somewhere between the low and the high, a mean of $100 sounds good right?

It would happen, there would be opps for arbitrage to keep the offline markets roughly in sync.

Much like traders crossing the continent hundreds of years ago I imagine.

The problem with that is that there is no tangible value nor real inherent value to bitcoin other than as an arbitrary storage of said value (catch 22). This is why I'm confused a bit about where the price would come from when bitcoin's price is currently a number on a screen telling us how many others believe it has value enough to pay us for it.

Something tells me if the internet were not available, pricing would be a nightmarish prospect.

Without Internet, it's not much. Without exhanges it can be still something...