Online-Only Currency BitCoin Reaches Dollar Parity

IamTheRealMike writes "The BitCoin peer to peer currency briefly reached exchange parity with the US dollar today after a spike in demand for the coins pushed prices slightly above 1 USD:1 BTC. BitCoin was launched in early 2009, so in only two years this open source currency has gone from having no value at all to one with not only an open market of competing exchanges, but the ability to buy real goods and services like web hosting, gadgets, organic beauty products and even alpaca socks."

Comments

I was thinking of calling it a con

[makubesu]

until I realized starting up a system like this isn't really any different than what banks do with fractional reserve banking.

Re:I was thinking of calling it a con

[JesseMcDonald]

... this isn't really any different than what banks do with fractional reserve banking.

Aside, of course, from the complete lack of anything resembling deposits, loans, or reserves (fractional or otherwise). In other words, no real similarity at all. It's not a con or scam either, of course—merely a protocol for indirect exchange in which certain hard-to-find patterns of bits take the place of scarce physical commodities. As a virtual currency it has many of the attributes which make precious metals so eminently suitable as physical currencies: scarcity, durability, divisibility, and fungibility, to name a few. The protocol may not be perfect, but it is the best I've seen thus far. The limitations mainly relate to scalability and maintaining a consistent state between many decentralized peers—technical issues, not economic ones.

Re:In other words

[Anonymous Coward]

From the site,

The total eventual circulation will be 21 million bitcoins. There will never be more coins than that. The coins are entering circulation gradually, at a steady pace over many years, to nodes supporting the network in proportion to the CPU time they contribute. With the current total CPU power on the network, most CPUs will usually take months between successfully generating 50 BTC.

So basically, this is like "collector items", not currency. A very scare "resource", if you can call it that. You get 50 BTC after few months, meaning that basically you've just spent $50 in electricity to get your "free" money.

Anyway, this virtual "currency" is bad for so many reasons, it's not even funny. Fist, the purpose of currency is not to hoard it - it is to spend it for goods/services. Currency is IOU notes that devalue over time. It is not a hard asset, like coal or copper or shares of MegaAssInc. FIAT currency tends to be *backed* by something, like an economy, like USA or European Union or even China. What is this backed by?

Anyway, another fad "currency". Might as well collect "ISK in eveonline" or "gold nuggets in WoW" - same thing.

Strength of dollar != competition

[RingDev]

The dollar is weaker compared to other currencies than it has been in the past. It sounds like this is a bad thing, but really, it's not such a clear cut issue.

For instance, I have a bunch of Canadian and European friends who are coming to the US this year to vacation. The weaker US dollar means their Canadian dollars and Euros will go much farther. And Tourism is awesome because it brings money from outside of the economy in.

We are also seeing a slight uptick in exported goods as our prices are effectively lowered by the weak dollar. It creates a lower labor cost (relatively speaking) and allows us to create more jobs for exported goods manufacturing and services.

And it also means that our debts, while still significant, are effectively smaller.

There's a fair bit of not so go that goes a long with a weakening dollar as well, but it's not a wholly good/bad situation. There is some good, some bad, and some ehhh that accompanies any change in value of the US dollar.

-Rick

Re:In other words

[SETIGuy]

Scarce yet widely spread resources work best (gold, for example).

Supply is too scarce and industrial demand for gold are too variable for it to be a good currency any more. Even in the 1700s and 1800s inflation and deflation often hit 20% or more, which killed a lot of economic growth. Yes, that's inflation and deflation of a currency consisting primarily of gold coins. And the government wasn't capable of stopping it. You won't hear that from anyone claiming all of our economic woes are because we went off the gold standard. Inflation has generally been lower and more stable than it was on the gold standard, and deflation has been rare. That doesn't mean it's not a good store of value (i.e. the price of gold won't drop to zero. It could drop 80%, though) or a hedge against high inflation. It just means that it isn't a good currency.