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Author Topic: Slow News Month For Bitcoin?  (Read 3899 times)
jgarzik
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March 16, 2011, 06:40:11 PM
 #21

Onto the topic, we should offer goods and services that are uniquely advantagous when using bitcoin. To a certain extent this means offering goods or services that are illegal or banned in many if not most countries.

I disagree.  That's a good way to make bitcoin fail, early in its life.


Jeff Garzik, bitcoin core dev team and BitPay engineer; opinions are my own, not my employer.
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kiba
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March 16, 2011, 10:21:15 PM
 #22

Onto the topic, we should offer goods and services that are uniquely advantagous when using bitcoin. To a certain extent this means offering goods or services that are illegal or banned in many if not most countries.

Here's what we really good at:

1. Making possible an international information economy. There is no need to mess with bank accounts and national currencies when selling information for bitcoin. Bitcoin is bitcoin no matter where you are on the planet.

2. Capital formation. You can form a bitcoin corporation with stock holding and such, with capitals being dispersed across the globe. All you need is a stock market to trade in and the institution/rulebook that everyone can follow. Anybody buy and sell stocks anonymously.

3. Completely open market. A computer of some kind and an internet connection is all you need to start making a living. Doesn't matter if you're old or young. Who care the fuck about minimum wage law and all sort of regulations? If you're good, you will get paid.


In short, the lack of artificial barrier and regulations will make bitcoin one of the most powerful economy in the world.

andrew.skretvedt
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March 20, 2011, 06:43:44 PM
 #23

Hey everybody! I have 0.02631579 BTC to contribute. It's probably only worth that!

I have been lurking around here for a few months now, and it has been interesting for me, watching the forum activity.

I noted with interest the aggregate hashing level surge and now recently settle back some. It had been around 185 GHashes/s in early February, before Steve Gibson's Security Now! podcast featured it. Around that time too, it was just making it's most significant push toward USD parity.

I don't know what the high in hashing rate was, but I think it got as high at 700 GHashes/s. High enough that in its redesign, bitcoincharts.com decided to present the figure as Tera-Hashes/s, thinking it would soon get that high. As I write, it's settled back to 475 GHashes/s.

I think the higher-profile media coverage of bitcoin has obviously been a driver in this, and too in its recent pop above dollar parity. Quite a few new people have come into the community, regardless of their motivation. Even off the highs, the current hashing rates show a 2.5-fold increase the in the amount of computing power in the network so far in this first quarter of 2011. That's impressive.

I think many people in the recent hash rate and parity pop were new folks merely curious as to what this bitcoin thing was all about. They read up, came in, played about a little, maybe tried a miner or briefly joined a mining pool, then...got bored and left the network.

To me, this is really not a big deal for bitcoin's future. These are short-term trends. I myself, joined in the 4th quarter of 2010 after catching some minor comments about the system in the forum on mises.org. It was a curiosity for me, and I was (and still am to a degree) very skeptical about its potential for ultimate success, bitcoin being a unique sort of decentralized fiat currency. However, it has some unique elements that are also very similar to a commodity money like gold. It's a weird fusion. And so I just couldn't turn away. I wanted to see how this could play out. It's really innovative.

There is much potential for this system to develop, as has been mentioned by many here. There are also significant competing factors which threaten it. To name one: Just the past week or so, VISA announced plans to develop an electronic person-to-person payment system to compete with PayPal and Square (seeing as PayPal has been so successful in diverting the fee-stream of a certain class of transactions away from companies like VISA and toward itself).

Some of bitcoin's aims are, admittedly, very different. But long-range, the real story will be one of convenience. Barring a major currency devaluation situation (a still small yet increasing risk), dollars are just so damn convenient. We're increasingly cashless, opting-in to VISA and the like because for many of us, the value proposition is just right. This should make bitcoin competition stronger, as we might see with VISA's new project.

Anybody intrigued by bitcoin must first acquire some. The best way to do this is by buying BTC in one of the many new markets which have sprung up. But these markets are not very efficient yet. They're rather non-uniform, and often the process can require multiple stages, with fees taken at each stage. Basically, there is a lot of friction moving USD into BTC and back. And USD-BTC is the most popular pair trading! The situation is worse in the minority of other trading pairs. In this era of super easy and streamlined bank-card transactions, where they are almost universally accepted online or in-store same as cash, this is a HUGE barrier.

Use the model of an average Joe on the street. First he has to be made aware of bitcoin, convinced of its suitability, and persuaded to buy some. He must have a minimum tech-saavy, because this will require some internet skill, and a little bit of PC skill. There's a tiny speed bump.

Now, he might be fully on-board with the idea. But, faced with the panoply of various sites and OTC markets, PayPal or LR interfaces, the possibility of needing to create at least one or more new online accounts, comparing fees which are likely charged, it's not easy for him to know that he's getting a good value. He hasn't even bought anything yet, and already it's making his head swim.

Now with a supply of BTC, he can delve into the marketplace and begin buying goods and services. Well, it's still early days, and still not a lot of merchants exist who are willing or promoting trade denominated in BTC. These merchants generally must transact back out of BTC to acquire inventory, or pay overhead expenses and taxes and such just to operate. To average Joe, this comparative lack of easily available and diverse products and services makes BTC less attractive compared to the amazing universe of stuff on offer in his traditional fiat currency.

So while this more-important aspect of the bitcoin economy slowly starts to take shape, there is not yet much one can do with their bitcoin. It is no small wonder the easiest option was one of the first developed, and the one with the current greatest state of sophistication: FX speculation!

I think that many of the new bitcoin users were at least in part attracted to the system by the prospect of speculation, especially in the current quarter, where we witness that very symbolic pop above dollar parity. There isn't all that much one can do yet with his BTC, so why not slosh about in the FX market?

To me, I think all this stuff is great. I love markets and free exchange. Their may not be much more to do with BTC than FX right now, but interest can attract the entrepreneurs who will start to offer the things that other BTC users would like to exchange BTC for. Development will attract more development, once we achieve a critical mass (which I still don't think has happened yet, and which new competition of the sort I mentioned up-top is increasing the required mass).

As that develops, it makes no sense to me to see BTC above or significantly close to USD parity (again, barring a major dollar devaluation). Why? It's expensive (in time, knowledge, and fees) to buy BTC with USD, and it's less marketable for goods and services. Parity starts to make sense when the size of the non-FX bitcoin economy matches the amount of currency in circulation. With 5.7M BTC in circulation, do you figure there is 5.7M USD worth of products and services available in the BTC economy right now?

Merchants just want to sell their merchandise, so they'll tend to offer their goods/services in whatever their customers present which is also highly-marketable for them, so they can cover their costs of doing business. With government legal-tender laws distorting the market, the most marketable money tends to be the fiat stuff offered and blessed by the government.

Given the friction of moving into or out of BTC, if there is simultaneous pricing on the part of the merchant, the money which has the least friction will be the one selected by the consumer to buy the product. Merchants who hope to do much more than curiosity-level business in BTC must, therefore, offer their wares at a discount in BTC.

(Thinking on the page here) For businesses to do as well transacting in BTC as they do in government fiat cash, I think it might require them to go off-book, as their taxes are due and payable in government fiat. Even if they could settle all of their overheads in BTC, there would still be a need to buy fiat for settling up with the government. It might be possible to make this work, but then, if it were easy to avoid the fiat problem, we'd all still be using gold and silver commodity money (or these days, modern electronic/plastic substitutes backed by same). Gresham's law: bad money drives out good, is true whenever the government is involved. That might mean such businesses might have to be comfortable with the prospect of being illegal. Bigger business won't do this (gov't may be unable to touch the money, but they'll certainly touch the owners, the employees, the suppliers, and even the customers).

I cannot be sure, but I would argue that a vast majority (maybe >90%) of the daily transactions in BTC are FX right now. (And most of the rest might be gambling.) Basically, there is an awful lot of churn. Bitcoin is more like an oxbow lake on the river of traditional fiat exchanges. A good amount of money is coming in and going out, but it's mostly FX and not sticking around to facilitate much exchange of real goods and services.

We're back-sliding in hash-rates because a lot of the new users who were attracted by speculative interest and mere curiosity, have come inside the BTC economy, looked around a bit, and got bored and left. Perhaps they did some real business in BTC, but I think most of them found their traditional fiat currencies were more valuable to them for everyday use. They're still more marketable. This is what wins.

How does it get better? It's the everyday use that builds the economy. Advancements on the software end will help. As discussed here and elsewhere, new clients tailored to use case:

o  bandwidth efficient and mobile clients which don't try to verify the whole block chain

o  generator/miner clients which do verify the whole chain or more of it than consumer client while communicating efficiently (transfers of the chain are very slow right now)

o  merchant clients or APIs where transaction process is integrated into point-of-sale and accounting software

o  Entrepreneurial business which seeks to streamline the ease of getting into and out of BTC, so that if you see a merchant offering in BTC, buying in bitcoin is no harder than buying in foreign currencies abroad with plastic today. As a US citizen traveling in Europe, for example, with your VISA credit or debit card, if you see something you want priced in euros, you just plunk down your very same VISA card. The financial institutions behind the card buy the euros required to complete the transaction behind the scenes, charging a markup or FX fee you decided you were willing to accept, and your experience of the transaction was absolutely no different that swiping that same card at a Wal-Mart back home! Nearly frictionless (except for the fee, but certainly so in time and knowledge).

o  A fiat money meltdown.

Given all the foregoing, I'm kind of surprised to see that at the moment bitcoin is still trading for $0.76 USD per BTC. When I joined the network, the price was nearer $0.25 USD/BTC. Of course the "right" price is whatever the market says it is at any given moment. But I do wonder how much more the real economy in bitcoin has grown over the past four months or so. Does the move in BTC match the real growth of the BTC denominated economy? Arbitrageurs in the bitcoin FX markets will slowly take out the value waged by the speculators on that question.

Unless and until we get advancements on these fronts, expect periodic wild swings in the value of bitcoin on the FX markets as future rounds of media attention attract waves of new bitcoin explorers who pile in, take a look around, and maybe get bored and pile back out again.

The key for the future of bitcoin will be to try give some real tangible reasons for the largest possible fraction of each wave to stick around as the media tide again ebbs. What fraction can we expect? I don't have a clue, but the smaller that fraction turns out to be, the longer bitcoin will have to persist as a curiosity. Any positive fraction, however, is good.

We have to accept, too, that the real progress will be made by bitcoin entrepreneurs (which includes not just businesspeople but those who contribute their skill toward developing the software). Most of us are consumers. Our function will be supplying the gas to make the engine go, but first we have to have an engine in which our fuel runs "better" in some way. Else, we'll just tend to stick with the engine we have.
kiba
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March 20, 2011, 07:48:32 PM
 #24

Hey everybody! I have 0.02631579 BTC to contribute. It's probably only worth that!
Wow! This could go in my upcoming magazine.

andrew.skretvedt
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April 21, 2011, 05:18:34 AM
 #25

Somehow I got onto this blog story about Bitcoin (probably via a linktrain originating via a @bitcoinmedia tweet). http://timothyblee.com/2011/04/18/the-bitcoin-bubble/

I love crypto, and bitcoin stands at a neat crossroads of applied crypto and economics. I consider myself a student of the Austrian School, so I've been following bitcoin's fate with interest. I'd like it to "win" somehow, and perhaps it can. I must say I'm also a skeptic (as much as I love its technology). Here was a bit from the above blog I couldn't resist resharing:

Quote
Dollars underpin the American economy in essentially the same way that the TCP/IP protocol underpins the Internet. The original choice of a medium of exchange was arbitrary, but people needed to pick something and once the dollar was chosen it acquired tremendous momentum. Convincing Americans to switch to a currency other than the dollar is roughly as futile as convincing the Internet to switch to a protocol other than TCP/IP, and for the same reasons.

I remain interested to see how bitcoin can deal with this. Since my post above, we've seen bitcoin compute power and value in USD terms trail off, then lurch back to a point now modestly above parity again. Wild ride.

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NghtRppr
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April 21, 2011, 05:34:50 AM
 #26

Quote
Dollars underpin the American economy in essentially the same way that the TCP/IP protocol underpins the Internet. The original choice of a medium of exchange was arbitrary, but people needed to pick something and once the dollar was chosen it acquired tremendous momentum. Convincing Americans to switch to a currency other than the dollar is roughly as futile as convincing the Internet to switch to a protocol other than TCP/IP, and for the same reasons.

That's funny since we will be/are switching protocols, from TCP/IPv4 to TCP/IPv6.  Cool

Unfortunately, USD has the nasty habit of losing its purchasing power whenever politicians get the urge to "stimulate" the economy by printing more monopoly money. It's bound to be replaced by something superior, just like IPv4 will/has.

Assuming, by TCP/IP, we are referring to the actual protocols and not the protocol suite, which is a moving target and would render the analogy nonsensical anyways.
gigabytecoin
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April 21, 2011, 07:08:49 AM
 #27

Much of the hype around Bitcoin has been the rapid rise in exchange rates vs. USD. This rise has leveled off for a while now, and it seems some of the enthusiasm has faded with it. No surprise, really. The kind of extraordinary growth we saw recently can't sustain itself indefinitely. Want Bitcoin to succeed? Hype it less, offer more goods and services.

+1

+2
gigabytecoin
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April 21, 2011, 07:10:12 AM
 #28

We barely got started with the exponential growth.

Let me modify my suggestion. If you want to see more Bitcoin mentions in different media, you can buy more and push the price up, or you can offer new goods or services people want. In the absence of either a new price hike or new uses for Bitcoins, there is little to talk about.

Just think about what $5 million dollars invested in BTC would do in terms of free advertising???

If you could bring the value of BTC up to $5 or $10 for even a short while, you might be able to sustain it with the amount of media attention you receive.
gigabytecoin
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April 21, 2011, 07:47:06 AM
 #29

You can't exactly force "Fast News" though...

I have noticed a lot of posts to hackers news recently, and a lot of them getting hammered in the comments by people who are sick of it's constant re-submissions.

People do read those comments you know. And it does hurt.
bitdragon
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April 21, 2011, 10:12:23 AM
 #30

Bitcoin Appears in Techdirt today:
http://www.techdirt.com/articles/20110420/02412713972/can-bitcoin-really-succeed-long-term.shtml

A rather short neutral article, I'll be looking out at the comments section see what pops up.

bonker
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July 16, 2011, 12:15:40 PM
 #31

We need some sort of wrapper for the everyday moron. You know, something to hid concepts like cryptography, and all the stuff that the mindless masses give up on.
Ideally everything about bitcoin and how it works should be wrapped up behind a symbol or a button that could be used with the swipe of a finger. Something that
a drunk burger flipper could do at 3 am.

BTC: 1FU1EX4xCEt26rezoNaEZ1rhbqA4VVP8pq
LTC: Li8UYJprncRwmNzvRs53UG714Lcps2Yy8R
BitcoinPorn
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July 16, 2011, 12:28:07 PM
 #32

We need some sort of wrapper for the everyday moron. You know, something to hid concepts like cryptography, and all the stuff that the mindless masses give up on.
Ideally everything about bitcoin and how it works should be wrapped up behind a symbol or a button that could be used with the swipe of a finger. Something that
a drunk burger flipper could do at 3 am.
Bitcoin itself needs to be slightly more secure before it can be taken by the public as something that can be used with the swipe of a finger, because that is not something that should be advertised to the public at this point without the stress of security.

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