Can someone smart teach me the concept of fiat currency vs. virtual currency?

[Dafar]

This will sound stupid but I'm just gonna be blunt...

How is bitcoin different than transferring dollars through Paypal? They say bitcoin is instant, and there is no cost... isn't transferring money through Paypal instant too? When I transfer money to my friend online from my bank to their bank... isn't it instant too? Why does transferring money require transaction fees but transferring bitcoins don't? Is it because money from different banks and corporations actually need to be physically delivered at some point, where bitcoins are virtual? How can money be manipulated and the bitcoin cannot? Is it because the value of bitcoins depend on the free market aka supply vs demand of the people who own it... as opposed to the dollar that is inflated by the gov/federal reserve?

Serious and simple answers would be appreciated. I want to grasp the concept on how bitcoin is revolutionary... I sort of see it but I'm kind of confused at the same time, maybe because I know jack about money and finance.

Thanks

[hlynur]

i'm far from being an expert, so i don't feel confident enough to wrap it up into one post.
any longtime member can help out much better here.

i recommend documentary thread for the first start: https://bitcointalk.org/index.php?topic=268955.0
there's a list with many useful vids and talks.

[lukestokes]

I put together a video recently you might find useful: http://www.youtube.com/watch?v=JJljgM6TSu8&feature=youtu.be

We're coming up on almost 4,000 views since it was uploaded on November 9th.

[Dafar]

Thanks for that link!

and lukestokes, your video is very helpful! I'm still watching it right now

[AnonyMint]

A fiat is a currency and so far no virtual crypto-currency is a currency:

https://bitcointalk.org/index.php?topic=341594.msg3660007#msg3660007

Just because you call it a currency, doesn't make it so.

[darkmule]

A fiat is a currency and so far no virtual crypto-currency is a currency:

https://bitcointalk.org/index.php?topic=341594.msg3660007#msg3660007

Just because you call it a currency, doesn't make it so.

A currency is anything used as a currency.  It's as simple as that.  Just because you say otherwise based on your own made-up definition doesn't make it so.

[benjamindees]

Bitcoin doesn't have anything to do with dollars.

Okay, honestly, I had to read your post a few times, because your questions do seem rather dumb.  But here's the answer.  Bitcoin is revolutionary for basically one reason.  It isn't centrally controlled.  All of the other revolutionary design characteristics of Bitcoin flow from this.  For instance, it is limited in quantity because, in a decentralized currency, no one can set an inflation rate.  So once all 21 million Bitcoins are mined, there is no inflation.  As you pointed out, the value fluctuates as determined by the free market.  This is also revolutionary in a way that fiat currencies are not.  Limited, free market currencies efficiently transmit pricing information so that all sectors of the economy can work together optimally.  Because Bitcoin is decentralized, there are no banking monopolies.  Fees are determined by the market, so they approach cost.  Bitcoins are completely digital.  Unlike previous limited, free market currencies such as gold and silver, Bitcoin is extremely liquid.  It can be near-infinitely divided to use in everyday trade.  Because of it's decentralized design, there is no need to trust centralized entities such as governments or companies such as Paypal that can, and frequently do, arbitrarily disrupt trade.

[BurtW]

In almost every way Bitcoin is exactly the opposite of Government issued fiat currency:

Code:

Peer-to-peer            Centrally controlled
Open source             Closed doors
World wide              Each country
Outside government      Government
Outside banking         Banking
Free market             Manipulated every day
Limited supply          Infinite supply
Irreversible            Reversible
Reward savers           Punish savers
Necessity economy       Consumer economy
Yours to posses/own     Bank posseses/owns

[AnonyMint]

A fiat is a currency and so far no virtual crypto-currency is a currency:

https://bitcointalk.org/index.php?topic=341594.msg3660007#msg3660007

Just because you call it a currency, doesn't make it so.

A currency is anything used as a currency.  It's as simple as that.  Just because you say otherwise based on your own made-up definition doesn't make it so.

I suggest you try to survive in a small town in Canada carrying only Mexican pesos.

More saliently I challenge you to buy 20 BTC and then spend them without wasting your money. I mean buy only the things that you would normally spend your money on daily without converting to a fiat. And don't use any fiat at all.

In almost every way Bitcoin is exactly the opposite of Government issued fiat currency:

Not. The difference between fantasy and delusion, is only the whether the hair grows on the palm of your right or left hand.

[AnonyMint]

Inflationary vs Deflationary

One is set up to lose value over time (the US$ has lost 99% of its value in the last 100 years) and the other is set up to rise in value over time as supply is managed to a fixed endpoint

Bitcoin is going to destroy all the value just the same. It is proven pyramid scheme.

[lindatess]

Inflationary vs Deflationary

One is set up to lose value over time (the US$ has lost 99% of its value in the last 100 years) and the other is set up to rise in value over time as supply is managed to a fixed endpoint

I call BS due to the fact in most countries you get a real return of around 1% a year in fiat by keeping your money in the bank. Even more if reasonably invested.

Furthermore, for people stating that there is an unlimited supply of dollars, that's BS too. Central banks can forcibly take Money out of the system when inflation happens by increasing the cash rate, selling back government bonds, leading to a reduced money supply. This all happens transparently. BS on the closed doors. Good luck holding inflationary bitcoins when the united states starts tapering. Bitcoins are to be continuously produced for over 100 years still to come , meanwhile dollars are going to be constantly destroyed in the near term due to the taper. Then money supply will converge to mean values dictated by average interest rates. Those averages are much higher than rates today. Thus cash will become more valuable in the long term compared to now, provided it is hedged for inflation either through term deposits or inflation linked bonds.

[BurtW]

Inflationary vs Deflationary

One is set up to lose value over time (the US$ has lost 99% of its value in the last 100 years) and the other is set up to rise in value over time as supply is managed to a fixed endpoint

Bitcoin is going to destroy all the value just the same. It is proven pyramid scheme.

There is a reason your ignore button is glowing.  On the ignore list you go.

[AnonyMint]

Inflationary vs Deflationary

One is set up to lose value over time (the US$ has lost 99% of its value in the last 100 years) and the other is set up to rise in value over time as supply is managed to a fixed endpoint

Bitcoin is going to destroy all the value just the same. It is proven pyramid scheme.

There is a reason your ignore button is glowing.  On the ignore list you go.

I consider it a badge of great honor. It means I am saying what you don't want the others to know.

My ignores appear to be about 0.001% of the users on this forum. That is hardly a lot. Can't you muster more than that?

[Dafar]

Bitcoin doesn't have anything to do with dollars.

Okay, honestly, I had to read your post a few times, because your questions do seem rather dumb.  But here's the answer.  Bitcoin is revolutionary for basically one reason.  It isn't centrally controlled.  All of the other revolutionary design characteristics of Bitcoin flow from this.  For instance, it is limited in quantity because, in a decentralized currency, no one can set an inflation rate.  So once all 21 million Bitcoins are mined, there is no inflation.  As you pointed out, the value fluctuates as determined by the free market.  This is also revolutionary in a way that fiat currencies are not.  Limited, free market currencies efficiently transmit pricing information so that all sectors of the economy can work together optimally.  Because Bitcoin is decentralized, there are no banking monopolies.  Fees are determined by the market, so they approach cost.  Bitcoins are completely digital.  Unlike previous limited, free market currencies such as gold and silver, Bitcoin is extremely liquid.  It can be near-infinitely divided to use in everyday trade.  Because of it's decentralized design, there is no need to trust centralized entities such as governments or companies such as Paypal that can, and frequently do, arbitrarily disrupt trade.

Yeah thanks, for calling me dumb and partly answering my question and mostly reiterating what I said

Inflationary vs Deflationary

One is set up to lose value over time (the US$ has lost 99% of its value in the last 100 years) and the other is set up to rise in value over time as supply is managed to a fixed endpoint

Bitcoin is going to destroy all the value just the same. It is proven pyramid scheme.

Please gtfo... I'm pressing the ignore button on you

In almost every way Bitcoin is exactly the opposite of Government issued fiat currency:

Code:

Peer-to-peer            Centrally controlled
Open source             Closed doors
World wide              Each country
Outside government      Government
Outside banking         Banking
Free market             Manipulated every day
Limited supply          Infinite supply
Irreversible            Reversible
Reward savers           Punish savers
Necessity economy       Consumer economy
Yours to posses/own     Bank posseses/owns

This is perfect, thanks!

[deisik]

Bitcoin doesn't have anything to do with dollars.

Okay, honestly, I had to read your post a few times, because your questions do seem rather dumb.  But here's the answer.  Bitcoin is revolutionary for basically one reason.  It isn't centrally controlled.  All of the other revolutionary design characteristics of Bitcoin flow from this.  For instance, it is limited in quantity because, in a decentralized currency, no one can set an inflation rate

There is nothing revolutionary about Bitcoin for not being centrally controlled. In the medieval times you would bring a gold (or silver) bullion to the mint and for a small fee had official coins hammered from it. You could take coins and melt them into a gold ingot as well

[AnonyMint]

Bitcoin doesn't have anything to do with dollars.

Okay, honestly, I had to read your post a few times, because your questions do seem rather dumb.  But here's the answer.  Bitcoin is revolutionary for basically one reason.  It isn't centrally controlled.  All of the other revolutionary design characteristics of Bitcoin flow from this.  For instance, it is limited in quantity because, in a decentralized currency, no one can set an inflation rate

There is nothing revolutionary about Bitcoin for not being centrally controlled. In the medieval times you would bring a gold (or silver) bullion to the mint and for a small fee had official coins hammered from it. You could take coins and melt them into a gold ingot as well

But you couldn't teleport across the world in 10 minutes.

[deisik]

I consider it a badge of great honor. It means I am saying what you don't want the others to know.

My ignores appear to be about 0.001% of the users on this forum. That is hardly a lot. Can't you muster more than that?

Do you really think anymore users on this forum are reading your posts? I'm not ignoring you (not anyone) but I personally skip your posts for the most part because you can't express your thoughts in a lucid and concise manner

[deisik]

There is nothing revolutionary about Bitcoin for not being centrally controlled. In the medieval times you would bring a gold (or silver) bullion to the mint and for a small fee had official coins hammered from it. You could take coins and melt them into a gold ingot as well

But you couldn't teleport across the world in 10 minutes.

If this remark of yours refers to Bitcoin, there is nothing new or revolutionary in this either...
In any case this is not currency's fault or virtue

[AnonyMint]

There is nothing revolutionary about Bitcoin for not being centrally controlled. In the medieval times you would bring a gold (or silver) bullion to the mint and for a small fee had official coins hammered from it. You could take coins and melt them into a gold ingot as well

But you couldn't teleport across the world in 10 minutes.

If this remark of yours refers to Bitcoin, there is nothing new or revolutionary in this either...
In any case this is not currency's fault or virtue

Well true on currency's local purpose, although that is starting to change a bit with internet.

[deisik]

<Bitcoin> is limited in quantity because, in a decentralized currency, no one can set an inflation rate.  So once all 21 million Bitcoins are mined, there is no inflation

This is also not true for obvious reasons. Inflation is determined not only by the amount of money in circulation but also by the velocity of circulation, i.e. the frequency at which one unit of currency changes hands within a given time period. Increasing the velocity of money would in effect be equal to additional emission of currency into circulation, which can bring about inflation even if the amount of money remains constant. As simple as that...