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Author Topic: "Bitcoins are not good for anything besides trading."  (Read 5369 times)
NghtRppr
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May 04, 2011, 06:26:46 PM
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To understand why you are wrong, you need to understand the genesis behind the idea of Bitcoin.
 
Interestingly enough, it started with the goal of stopping bulk spam. The reason why there aren't dump trucks backing up to your mailbox each morning to unload massive amounts of spam is because there is a larger cost associated with sending postal mail versus email. There's the cost of the ink, paper, envelope and stamp. This means that any spam that can't recoup those costs simply doesn't get sent. Contrast that with email which is orders of magnitudes cheaper, the price being whatever it costs to send a few bytes over an Internet connection.
 
So, the idea was to attach a higher cost to emails in much the same way that postal mail has a higher cost. There are several schemes. One of these is run by a company called "GoodMail". They convinced a bunch of email providers to give certain emails a special icon in your inbox. These icons only display if you pay an extra fee to send the email. This prevents spammers from having such a huge economic incentive for sending spam, if they want the special icon. The service still exists but it really hasn't caught on.
 
However, a precursor to this idea was called "HashCash". Instead of charging money outright, it is based on a proof-of-work system. Under this system, you run a program and it starts generating tokens by using CPU resources. You attach a token to each email you send and the recipient can verify your token for relatively no cost. This makes it easy for the typical user to send and receive emails while making bulk spam prohibitively expensive.
 
After this system was proposed, someone came to the natural conclusion that there would be individuals that wouldn’t want to run the program but instead would rather buy the tokens outright. This gave rise to the idea of an entire market based on buying and selling tokens. Fast forward over a decade later and the creator of Bitcoin says, “Hey, who cares about email? Let’s use this stuff for money!” The rest is history.
 
So, what's my point? My point is that Bitcoin is a proof-of-work system which has value as a good because people, even if not used as money, would still want to use Bitcoins to prevent bulk spam. I imagine that if/when Bitcoin becomes widespread, we will see an actual implementation of this where sending an email costs a tiny fraction of a BTC.
 
I really hope this will put to rest the myth that Bitcoin has no possible use aside from being a medium of exchange.
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May 04, 2011, 06:33:25 PM
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I bought diapers for my kids in the recent spike.

End of story.

Story part deux:

This new action by paypal is going to be the Streisand trigger that ends the manipulation of money by banks.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
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May 04, 2011, 06:56:06 PM
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To understand why you are wrong, you need to understand the genesis behind the idea of Bitcoin.
 
Interestingly enough, it started with the goal of stopping bulk spam. The reason why there aren't dump trucks backing up to your mailbox each morning to unload massive amounts of spam is because there is a larger cost associated with sending postal mail versus email. There's the cost of the ink, paper, envelope and stamp. This means that any spam that can't recoup those costs simply doesn't get sent. Contrast that with email which is orders of magnitudes cheaper, the price being whatever it costs to send a few bytes over an Internet connection.
 
So, the idea was to attach a higher cost to emails in much the same way that postal mail has a higher cost. There are several schemes. One of these is run by a company called "GoodMail". They convinced a bunch of email providers to give certain emails a special icon in your inbox. These icons only display if you pay an extra fee to send the email. This prevents spammers from having such a huge economic incentive for sending spam, if they want the special icon. The service still exists but it really hasn't caught on.
 
However, a precursor to this idea was called "HashCash". Instead of charging money outright, it is based on a proof-of-work system. Under this system, you run a program and it starts generating tokens by using CPU resources. You attach a token to each email you send and the recipient can verify your token for relatively no cost. This makes it easy for the typical user to send and receive emails while making bulk spam prohibitively expensive.
 
After this system was proposed, someone came to the natural conclusion that there would be individuals that wouldn’t want to run the program but instead would rather buy the tokens outright. This gave rise to the idea of an entire market based on buying and selling tokens. Fast forward over a decade later and the creator of Bitcoin says, “Hey, who cares about email? Let’s use this stuff for money!” The rest is history.
 
So, what's my point? My point is that Bitcoin is a proof-of-work system which has value as a good because people, even if not used as money, would still want to use Bitcoins to prevent bulk spam. I imagine that if/when Bitcoin becomes widespread, we will see an actual implementation of this where sending an email costs a tiny fraction of a BTC.
 
I really hope this will put to rest the myth that Bitcoin has no possible use aside from being a medium of exchange.

I think that's the crux.  Possible uses vs. current uses.  People who say they aren't that useful RIGHT NOW are correct.  There may be an occasional coincidence of wants, where someone wants Bitcoins and someone else wants Alpaca socks, and both parties have what the other wants.  If you don't have what the other guy wants (he will only trade Alpaca socks for BTC), you'll have to go get some, which takes time, overhead, transaction costs, etc...  Basically all the downsides of barter economies.  So a lot of people are only capable of looking at the present.  "Why would I want to use it RIGHT NOW?"  And the answer is mostly novelty and a few goods you can only purchase with BTC.  And while current use is an important factor in the value, it's not the only one.

Right now people are gambling on possible uses.  That's not a bad thing.  It encourages investment in BTC.  If people are showing they think it will be used for something, then it makes sense to build the infrastructure to actually support getting paid in BTC.  Someone comes up with a business model that's based on them being valuable, and that's good.
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May 04, 2011, 08:55:52 PM
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Can you imagine the price of BTC when it is actually in day to day for more people buying regular goods!?

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tomcollins
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May 04, 2011, 08:57:23 PM
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Can you imagine the price of BTC when it is actually in day to day for more people buying regular goods!?

Depends if its higher or lower than cash.
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May 06, 2011, 01:47:11 PM
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It doesn't matter if bitcoins can be used to prevent spam.  It doesn't matter if bitcoins can be used to buy spam.  So now we can buy frozen pizzas, alpaca socks, porno and sex toys with bitcoins.  What difference does it make?

Except for relatively small niche markets (e.g. the silk road market), people are not buying bitcoins in order to spend them.  People are buying bitcoins to hoard them and trade them.  Hoarding and trading is exactly what buoys the bitcoin economy.  Buying little trinkets with them does not.

Does anyone think that unless mom & pop merchants, or even better amazon.com, start accepting gold and silver as payment methods, that the gold and silver economy is doomed?  No.  What gives gold and silver value is that people want to buy it.  There's no worry that you can't spend it.  The only thing that matters is that you can convert (sell) it.

So why do some think that the measure of the bitcoin economy is the variety of methods in which you can spend it?  The measure which matters is if you can sell it.  If by next year the majority of trinket merchants stop accepting bitcoins, and the only goods we can spend them on are alpaca socks, it will make little difference.  As long as they still convertible (sellable) bitcoins will be as good as gold, if not better.

Perhaps the reason people think this is a problem ("not good for anything besides trading"), is because they think contrary to silver and gold, bitcoins don't have any intrinsic value.

The intrinsic value of bitcoin is that it is an extraordinary Value Storage and Transfer System.  Its better than gold for storage because there's no hassle of physically storing and protecting it (very cheap to store).  And it is better for transferring because it can be done electronically (with no centralized intermediary).  

That bitcoin has no industrial use doesn't matter.  That it isn't good for anything besides trading is exactly right.  Bitcoins one and only purpose is trading, and it EXCELS at its purpose.  And the market is assigning bitcoin a lot of value because, to its market and for its purpose, it is proving itself to be better than any competitors.




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NghtRppr
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May 06, 2011, 05:00:27 PM
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What difference does it make?

It matters to certain economists and their followers. If you don't care, that's fine. Don't worry about it. I'm trying to remove doubts from other people that do care and do worry about it. They aren't impressed that you can buy pizza & drugs with BTC because they can do the same thing with USD and have the same issues with it, aside from inflation.
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May 06, 2011, 05:44:09 PM
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Bitcoins obviously have uses.  But, unlike gold or aluminum, those uses are dependent upon collective action.  And currently, with such a small economy, that collective action must be global in scope.  Or, at the very least, international.  So there is risk in assuming that global, collective usage of Bitcoins will continue unabated.

Regardless, someone should ask Yahoo what they spend to maintain their Bayesian spam filters and whether Bitcoins would be a viable substitute.  Somehow I suspect the answer would be "no".

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May 06, 2011, 06:42:36 PM
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What difference does it make?

It matters to certain economists and their followers. If you don't care, that's fine. Don't worry about it. I'm trying to remove doubts from other people that do care and do worry about it. They aren't impressed that you can buy pizza & drugs with BTC because they can do the same thing with USD and have the same issues with it, aside from inflation.

Better to tell those certain economists and their followers that their worries are misplaced.  As you said, being able to buy pizza & drugs, or anything else for that matter, is not impressive.  So why not just drop already the standard disclaimer, "once more merchants start accepting bitcoin, you'll actually be able to use them!"  Its self-deprecating and ignores the true value and purpose of bitcoin.


Bitcoins obviously have uses.  But, unlike gold or aluminum, those uses are dependent upon collective action.  And currently, with such a small economy, that collective action must be global in scope.  Or, at the very least, international.  So there is risk in assuming that global, collective usage of Bitcoins will continue unabated.

Gold and aluminum are also dependent upon collective action.  Both depend on the existence of a collective market of buyers to be useful investments, just like bitcoin.

Yes, the bitcoin economy is small.  Its still a very thin market with much risk and volatility.  That's a good thing, as there's as much risk to the upside (reward) as the down.

The important thing is to focus on how fast the bitcoin economy is growing.  This growth is demonstrated by the record volumes and prices at which they are traded.  The argument that a lack of merchants accepting bitcoin is a sign of weakness of the economy completely misses the point.  Bitcoin is a value storage system, not a value spending system!

Spending bitcoins directly is a waste of their potential (potential to increase in value), so merchants are already at a distinct disadvantage by requesting bitcoin.  Don't get me wrong, new merchants accepting bitcoin are a good thing.  However, a lack of such merchants is not a sign of weakness, but we would expect of a precious and convertible currency.  The ability to sell them is their primary indicator of health, so that's what should be in focus.

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May 06, 2011, 07:02:57 PM
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Spending bitcoins directly is a waste of their potential (potential to increase in value), so merchants are already at a distinct disadvantage by requesting bitcoin.  Don't get me wrong, new merchants accepting bitcoin are a good thing.  However, a lack of such merchants is not a sign of weakness, but we would expect of a precious and convertible currency.  The ability to sell them is their primary indicator of health, so that's what should be in focus.

When modern economics is a culture of thievery and bloodshed, the initial trading usage is an opportunity the awakened will not pass up.

I spend bitcoin with those who accept it and I sell bitcoin when I need other things.

I got diapers because of the upswing. End of story.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
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May 08, 2011, 06:44:59 PM
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Hey, i'm new to bitcoin, but i'm fairly sure you've answered my only question.

I was under the impression that the bitcoins we generated were actually useful to someone, somewhere, not as a trading currency but actually because they can be used as a tool in cryptography or similar profession.

I understand now that i'm wrong in this assumption? - Bit coins are only useful for trading because they're easily provable to have been generated in the same network and using the same program as everyone else's bitcoins? How disappointing. While i understand that such a proof-of-work (Or, should i say, 'Proof of having done some pointless work in standardized form') is very suitable as a  'Currency' in that it is difficult to counterfeit, and easily transported, it is nethertheless worthless as a $100USD bill in actually creating something useful to humans, as opposed to trading for something that *IS* useful.

Please correct me if i'm wrong.
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May 08, 2011, 09:51:28 PM
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Besides papercraft, what can you make that is useful to humans with a 100 USD bill?

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May 08, 2011, 11:29:04 PM
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Besides papercraft, what can you make that is useful to humans with a 100 USD bill?



Prophecy, apparently.   Tongue  http://youtu.be/HpskvfE06yw
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May 09, 2011, 03:18:07 AM
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Besides papercraft, what can you make that is useful to humans with a 100 USD bill?



Exactly my point.
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May 09, 2011, 03:21:19 AM
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You can't roll up a bitcoin and do a line...

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May 09, 2011, 11:11:30 PM
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Besides papercraft, what can you make that is useful to humans with a 100 USD bill?



Exactly my point.

I bought diapers.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
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May 10, 2011, 05:44:33 AM
 #17

Yesterday i applied for vpn service & i got it instantly with out loosing charges to some monopoly suckers.
It seems the creator of this thread so far didn't understand fully how human mind works.

Human are ready to adopt to any new system, if the new system runs parallel with old system.
Yes, bitcoins is some what tougher to use now. But it can be used efficiently & also with out has to pay some 1-40% as commission to transfer money.

If anyone want to buy goods with bitcoin, its very simple.
Every one at least know 2 languages. One is mother tongue & another language.
Bitcoin is another new language & it is fluctuating very high.
So, if want to sell, a seller can mention the price in his mother language, thats currency he knows & uses, here USD
He also says bitcoin accepted.
When some one wants to buy on bitcoin, seller can convert the usd price to btc on that particular date according to fluctuation.
Thats it, very simple.

Yesterday i bought vpn service for 1.64 btc/month & today price is 1.53 btc.
It just conversion which seller has to mention or buyer has to calculate.
my seller converted for his customers.

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May 10, 2011, 01:08:24 PM
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I bought diapers.

Congratulations...

If BTC really does as well as some people think, you could have financed your kid's studies if you had kept these few BTC.

If it doesn't, then you were really better off with diapers - only time will tell.

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May 10, 2011, 02:05:34 PM
 #19

What do you say of the 10K BTC pizzas?
That guy has 100K USD now and it is just starting. D:

Dunno if he hold it however the buyer, a mod here, has now bought the most expensive pizzas. Hope they were the best in the world.

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May 10, 2011, 04:23:39 PM
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I bought diapers.

Congratulations...

If BTC really does as well as some people think, you could have financed your kid's studies if you had kept these few BTC.

If it doesn't, then you were really better off with diapers - only time will tell.

You misunderstand.

It already did well.

I bought diapers.

I kept the rest.

The only way to get to the college education is to trade with bitcoin more.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
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