Describing the Value of Bitcoins

[GoWest]

Here's a simple way to explain the value of a Bitcoin to someone:

- Bitcoins derive their value from the fact that they allow slow and expensive banking fees and transactions to be bypassed completely or reduced significantly, including:
  
   - Account Fees
   - Bank Wire Fees
   - Merchant Transaction Fees
   - ATM Fees
   - The time used to travel to brick and mortar locations to conduct these transactions
   - Exchange Fees
   - Many Others
 
- There are only a limited number of Bitcoins in circulation, and their demand comes from individuals and businesses looking to save time and money when conducting financial transactions;

- As Bitcoin transactions replace more and more financial transactions, their value will continue to climb.

Simple, eh?

There's no need to explain the mechanics behind the system.  No one needs to know how a bank works either, as long as they can get at their money and their money has value.  

[nafai]

I'm not sure that's a good way to explain the value of bitcoins.  By focusing solely on bypassing slow and expensive banking fees (one of the best things about bitcoins imo), the first question they're going to respond with is, "What about the additional time/expense/effort of converting bitcoins to USD and vice versa?"

In other words, sure my tenant giving me the rent as a personal check is risky (check could bounce), takes time (has to clear), could have fees (if I want to cash his check instead of deposit it).  Great idea if bitcoins can bypass some of this, but then what about the process of converting the bitcoins my tenant pays me back to dollars?  What about the tenant having to convert his dollars into bitcoins?

[GoWest]

I'm not sure that's a good way to explain the value of bitcoins.  By focusing solely on bypassing slow and expensive banking fees (one of the best things about bitcoins imo), the first question they're going to respond with is, "What about the additional time/expense/effort of converting bitcoins to USD and vice versa?"

In other words, sure my tenant giving me the rent as a personal check is risky (check could bounce), takes time (has to clear), could have fees (if I want to cash his check instead of deposit it).  Great idea if bitcoins can bypass some of this, but then what about the process of converting the bitcoins my tenant pays me back to dollars?  What about the tenant having to convert his dollars into bitcoins?

My response would be that yes, while Bitcoins are still in the process of becoming widely adopted, they'll have to be converted back and forth in order to purchase necessities, through exchanges for a small fee (on the order of 1% or less).  As the popularity of Bitcoins grow, it will become unnecessary to convert Bitcoins to/from traditional currencies at every step.  At some point, you'll be able to take your tenant's Bitcoins and pay for renovation supplies, gas, food, etc., with the Bitcoins themselves.

(As an interesting aside - once more Bitcoin users begin to adopt Ripple, exchanges will become less necessary.  Let's say my buddy and I are going golfing, and the golf course accepts Bitcoin and my other friend is somewhere far away, but owes me $20 from last week's poker game, and I want to split the cost of the golf cart with my buddy (but I don't have any Bitcoins).  Through Ripple, my friend who owes me $20 (that I want in cash) can pay for the golf cart with his Bitcoins and we bypass the exchanges altogether). 

[ctoon6]

I'm not sure that's a good way to explain the value of bitcoins.  By focusing solely on bypassing slow and expensive banking fees (one of the best things about bitcoins imo), the first question they're going to respond with is, "What about the additional time/expense/effort of converting bitcoins to USD and vice versa?"

In other words, sure my tenant giving me the rent as a personal check is risky (check could bounce), takes time (has to clear), could have fees (if I want to cash his check instead of deposit it).  Great idea if bitcoins can bypass some of this, but then what about the process of converting the bitcoins my tenant pays me back to dollars?  What about the tenant having to convert his dollars into bitcoins?

My response would be that yes, while Bitcoins are still in the process of becoming widely adopted, they'll have to be converted back and forth in order to purchase necessities, through exchanges for a small fee (on the order of 1% or less).  As the popularity of Bitcoins grow, it will become unnecessary to convert Bitcoins to/from traditional currencies at every step.  At some point, you'll be able to take your tenant's Bitcoins and pay for renovation supplies, gas, food, etc., with the Bitcoins themselves.

you seem to be of only a few that actually understand this. sure now its expensive and not very good to convert USD<->BC, but eventually we will be able to buy and sell stuff in BC without ever actually changing to and from USD

[bitcoinmiddleman]

6 months ago bitcoins were worth .06 each. Today they are worth $14 each.

Bitcoin value explained.

[BillX]

Transaction fee's imposed on the purchaser in my mind is one the biggest deterrents to bitcoin (after the headache of being without your disposable income while you transfer your money out of the country (that also is going to raise eyebows and sound warning bells in the average persons mind) so they can buy their bitcoins). I can understand why merchants love it (reduced or eliminated fees) but to the customer they are going to cry foul and go back to using a credit/debit card where not only are there no fee's to them for use there generally incentives to use that form of payment.

[ctoon6]

Transaction fee's imposed on the purchaser in my mind is one the biggest deterrents to bitcoin (after the headache of being without your disposable income while you transfer your money out of the country (that also is going to raise eyebows and sound warning bells in the average persons mind) so they can buy their bitcoins). I can understand why merchants love it (reduced or eliminated fees) but to the customer they are going to cry foul and go back to using a credit/debit card where not only are there no fee's to them for use there generally incentives to use that form of payment.

you still pay less because merchants can charge less because they don't have to pay the fees themselves, and bitcoins fees are cheaper than creditcards/visa whatever fees anyway.

[GoWest]

Transaction fee's imposed on the purchaser in my mind is one the biggest deterrents to bitcoin (after the headache of being without your disposable income while you transfer your money out of the country (that also is going to raise eyebows and sound warning bells in the average persons mind) so they can buy their bitcoins). I can understand why merchants love it (reduced or eliminated fees) but to the customer they are going to cry foul and go back to using a credit/debit card where not only are there no fee's to them for use there generally incentives to use that form of payment.

At this point in the game (the early adoption phase), it is still quite challenging to acquire Bitcoins.  I'm lucky, being in Canada, because I can send money to the major Canadian exchange in 20 minutes from my savings account, buy Bitcoins at a rate comparable to MtGox, and have them in my wallet, all in under an hour.

Everyday we see more and more services come online that make this process easier.  Just look at what Dwolla is doing with their FiSync process.  In the not-too-distant future, someone holding money in a USD bank account will be able to instantly fund their MtGox account.

Again, as more and more people get Bitcoins, the process of moving them around gets easier and easier.  At some point we'll hit critical mass, and this thing will take off like nobody's business.

[TraderTimm]

Even if banks managed to catch up in transaction speed and security, I wouldn't use them. Screw them, honestly. I'd rather give a miner a fair transaction fee than pump up a banks stock because I do business with them. I'm tired of 'too big to fail', hands out for money in times of trouble -- all of it.

Executive summary:

Fuck banks, viva bitcoin.

[BillX]

Transaction fee's imposed on the purchaser in my mind is one the biggest deterrents to bitcoin (after the headache of being without your disposable income while you transfer your money out of the country (that also is going to raise eyebows and sound warning bells in the average persons mind) so they can buy their bitcoins). I can understand why merchants love it (reduced or eliminated fees) but to the customer they are going to cry foul and go back to using a credit/debit card where not only are there no fee's to them for use there generally incentives to use that form of payment.

you still pay less because merchants can charge less because they don't have to pay the fees themselves, and bitcoins fees are cheaper than creditcards/visa whatever fees anyway.

Merchant fees are higher with visa, ect not consumer fee's.  Do you really think a merchant is going to charge a 1/2% - 1% less on an item that has a value of $9.99 or just pocket the small difference?

[Weaver]

"Remember back when you were a kid and all the cool kids would pay anything to get a Charizard... And then three weeks later it was worth about 1/3 the value? Bitcoins are like that."

[ctoon6]

Merchant fees are higher with visa, ect not consumer fee's.  Do you really think a merchant is going to charge a 1/2% - 1% less on an item that has a value of $9.99 or just pocket the small difference?

we live in the wonderful world of capitalism, if they want your money they will cut costs. for example if we lived in a world where we just switched over to bitcoin and i was doing what you just said, and so was everyone else. i sell cars. if i instantly want an advantage over my competitors i can will make exactly the same amount of money as before and get more sales by simply eating the difference.