The real bitcoin value

[tomcollins]

I have thought about this a lot over the past week or two, while preparing bitmunchies for launch.  Honestly, I think you're all over analyzing this.  Even at the total present market value of $18-20m, this is still in hobby land.  Sure, there are probably some unrealized millionaires somewhere around here.  With as many people as are using bitcoin, it spreads out pretty damn thin.

I think bitcoins are a fascinating commodity.  I'd like to accumulate a few, and play with them.  I don't mean that in a callow sense.  I love economics and programming, so I wrote the code to open a shop that will trade in a unique market.  For the business to work, I need to be able to be able to convert most of my revenue into USD within a week.  I've carefully researched the available demand, and I think it is safe to risk a week's revenue at the prices I've set.  That would be the worst case scenario, and it isn't too hard to compensate for the risk.  Hopefully, I'll slowly make back the relatively modest investment I've made in bitmunchies.  I intend to split the profits between USD and BTC.

That being said, I intend to hold half the profits in BTC.  I don't expect that I'll sell them any time soon.

Carrots being the first item wasn't a coincidence, was it?

[uck]

Did you catch the price on those carrots? 45BTC for a bunch?

[BioMike]

Looking a bit at how the thread is going, my comments:

I never said that I wanted to fix the price (I know that is not wise to do), only stabilize it a bit to get the fluctuations out (the merchants decide what the price is, not what the speculators think it should be. I don't think that the immediate selling is an option, if you sell at a high and the price drops directly after that, you get a loss. Looking at market depth and moving averages might help, but if you did that with the drop on Sunday, you will still make a loss.

With a few merchants here. Let me ask the question:

Lets say that the current calculated price would be 2.8USD for the whole month (guaranteed sell at that price, only available for merchants). Would you change your prices for goods to reflect that rate (and adjust them every month to the new price)? No requirement to sell them to the party offering at that price if the BTC markets offer more.

[markm]

Easiest for merchants would be for the payment processing provider to do any conversions needed.

A widget where the merchant specifies the type and amount of currency the merchant wants.

All details of what the customer gives to the processing-provider is between the customer and the processing provider.

For the merchant the only effect a customer's choice of payment method/currency has is the customer's perception of the price. The higher the overhead or customer-perception of overhead the processing-provider places on the conversion of the customer's chosen currency / payment-method into the merchant's chosen currency the worse the prices are likely to appear to the customer.

On the other hand the more obscure the currency or method the customer wants to use the less likely it probably is that other merchants can be bought from via such a method or currency.

From a merchant perspective the best payment method to use is probably the one that gives the customer the largest range of options, so the merchant doesn't have to implement many different interfaces.

Presumably in the competition among payment-processing providers how wide a range of options they can offer to customers and to merchants and how little overhead their service imposes on prices as seen by customers are two of their major selling points?

This approach lets the currency trading and speculating be done by the payment processing service.

It also frees merchants from worry about the price of coins or rupees or whatever the customer chooses to pay with changing during the transaction. The payment processor will pay the merchant the price the merchant set in the currency the merchant set. Whether they accept sexual favours or icecream cones or lottery tickets or dollars or bitcoins or whatever from the customer isn't' really the merchant's problem worry or concern except insofar as it might influence the customer's perception of the price as being high or low or good or competitive or uncompetitive.

-MarkM-

[BioMike]

Yes, I was thinking in the same lines this morning (that it would go best through a payment processor).

Did just a quick calculation based on products that are offered on various sites.
On basis of 11 products I get the following:

1 BTC = 1.42EUR or 2.10USD

For some things it is linked to the MtGox market price, for some things I had to guess the price in USD or EUR. But I think this should give an indication.

[JohnDoe]

What's with the retarded thread title BioMike?

[BioMike]

What's with the retarded thread title BioMike?

I guess it is not appreciated. Restored to original.

[BeeCee1]

I have thought about this a lot over the past week or two, while preparing bitmunchies for launch.  Honestly, I think you're all over analyzing this.  Even at the total present market value of $18-20m, this is still in hobby land.  Sure, there are probably some unrealized millionaires somewhere around here.  With as many people as are using bitcoin, it spreads out pretty damn thin.

That being said, I intend to hold half the profits in BTC.  I don't expect that I'll sell them any time soon.

Bitmunchies is an awesome idea, however, I'd really like to be able to find out the shipping costs without creating an account.

Please let us know how this experiment goes.

[bearbones]

Bitmunchies is an awesome idea, however, I'd really like to be able to find out the shipping costs without creating an account.

Please let us know how this experiment goes.

Shipping starts at 3.66BTC.  I am working on a guest checkout process.  In the meanwhile, if you would like to order without creating an account, I'd be glad to put a parcel together for you.  I've already had one customer order via email. 

[Steve]

With the markets being volatile as hell, it is a nightmare for people actually selling goods.

I came up with the following idea, but would like to know how other people think of this.

Some merchants already provide goods against a fixed price, some adjust against the markets quickly.
My focus is on the ones that provide against the fixed price. One could value their goods in USD and see
how many bitcoins they want for that. From that you can calculate a price per bitcoin. If you would average
all these rates (from the different merchants) out, you would IMHO get a more realistic price of how much
a bitcoin would be worth.

If more and more merchants would stick to that calculated price it would reduce its volatility even more and the
exchange markets might move towards that same value.

Every month the price would be recalculated depending on the trades that took place during that last month.

Is this doable and would this work?

I posted an idea similar to this a few times...rather than use the dollar or any inflated fiat currency, make up a new unit of account that is indexed to some basket of basic goods (I suggested indexing basic foods you'd find at a grocery store that one would need to survive for a day).  1 or 10 of these could roughly equate to what the average person would need to feed themselves for a day.  You could base your pricing on this unit but use bitcoins or anything else for actual payment.  This unit would also have utility for contracts (loans could be made in terms of this unit (but settled with bitcoins) to avoid the risks that bitcoin volatility poses to such contracts).