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BitCoin Gets a Futures Market
fireballrus writes "There is one more way to use your BitCoins rather than buying weed or socks. Recently, a Bitcoin Exchange called ICBIT quietly introduced a futures market, obviously using Bitcoins as its main currency. Gold futures trade roughly at 137 BTC/tr.oz and Sweet Crude Oil at 7.3 BTC/bbl. This may play a positive role in the Bitcoin economy which needs more ways to actually use coins instead of mining them." While this sounds intriguing, I'd like to hear a good case for why BitCoin makes sense in this context.
Even MORE ways to scam people and steal their money! *CHA_CHING!!!*
While you're throwing your money away on stupid ideas, go invest in some Second Life real-estate.
So you use this, and you either lose or gain bitcoins. That seems like a circular system where bitcons beget bitcoins. That is NOT a "use" for bitcoins, not when the end result is ideally more bitcoins.
"Have you ever thought about just turning off the TV, sitting down with your kids, and hitting them?"
Awesome! Hat off to you, sir!
BitCoin futures at 0 BTC/BTC!
I love bitcoin, but so far every exchange or market turns out to be a way to lose your coins to poor security or straight fraud. Add in gold and oil futures and it sounds like another great fraud opportunity.
You mean that theres no "use" in using USD to gain more USD?
At least 24,000.
if it all goes to BitCoin, its use is tied with objects, phone/mice and the medium of which its delivered through visual input is a phone screen or a computer monitor.
a potential mark of the beast with this?
Because I have a whole sack of them here that I'm willing to trade for BitCoins. No, wait, the other thing - Leprechaun gold.
SRSly, Slashdot, it's a joke currency used by a few fantasists and dreamers. WOW Gold is "worth" more. It's not news, never has been, never will be.
If you were blocking sigs, you wouldn't have to read this.
Much like the term "Fetch" in the Lindsay Lohan classic film "Mean Girls," BitCoin is never going to happen.
Well, futures markets in general are quite useful because they help provide economic stability if you have an economic interest in the underlying commodity.
For example if you are an airline you can buy futures in oil. If the price of oil goes up you make a profit in the oil futures that helps offset the cost of your fuel.
If you are a farmer you buy futures in the crop you produce. So if your crop fails due to weather you will likely make a profit in your futures because the price of your crop futures has gone up.
So if I were a producer or buyer of bitcoins, a solid futures market would be of great interest.
I've never understood the vitriol heaped on BitCoins in this forum. None of the stated reasons for "It'll never work" seem to hold under examination.
1) It's not based on anything
Well, neither are any of the major currencies, especially the dollar. The Euro is teetering on the brink of disaster, the Fed has been spraying money with a firehose, numerous South American currencies have gone bust - I just don't see any difference. ...except, that bitcoins are immune to *some* of the problems typically found in national currencies.
2) No one is using them
There was a time when no one used the internet, either, and look how big that got.
I'm not sure there is a point here - lots of things didn't get big and no one uses them (pets.com, anyone?), and lots of things got big and *everyone uses* them (google.com).
If you're saying that not enough people will *ever* use them, so that the idea won't take off, then that's an opinion. A lot of people are predicting success, so why are they wrong and you right?
3) It's a scam
All of the scams reported so far have been, effectively, companies trying to be a bank without banking regulation.
It's not a problem for BitCoin if someone convinces you to deposit your coins in their bank and then loses them, any more than it's a problem for US currency if someone convinces you to give them your money and loses it. People get scammed all the time, but it's not the fault of the currency.
Again, I don't see the difference. BitCoins are like money, and can be stolen like money. Why is having money any different?
==================
BitCoins doesn't solve all the problems of money, but it does solve a fair number of them. Logic and reason would seem to indicate that this is a better way to do currency.
I must be missing something.
Can one of the economists explain why it won't work?
I mean, explain it without appealing to emotion and irrational fear. Like, by using logic and evidence.
Is there a way to filter out any bitcoin related infotisements scams on slashdot?
Thank you in advance.
What the bitcoin economy needs is not another financial market but more people accepting it as a payement for real goods and services.
I still offer a 5% discount for bitcoin users, but until now, no clients have been interested. However I do not despair as I am getting clients from all around the world and a lot complain about the difficulty to make international payement.
So, if you have bitcoins and need computer vision development, contact me : IV-devs
The Wise adapts himself to the world. The Fool adapts the world to himself. Therefore, all progress depends on the Fool.
I'm curious as to what BTC is actually good for.
It's not an untraceable currency. The BTC currency exchanges seem to be getting hacked all the time, and I constantly see their markets being rolled back. All the geeks are busy off drooling over expensive ASIC hardware to "mine" bitcoins, while none of them seem to understand that the cost of such equipment will never actually pay for itself- because the more ASIC miners you add, the higher the difficulty becomes, and the less everyone gets paid in the end.
Some websites accept it, apparently it's great for getting things on the black market. Beyond that, I dunno. It seems largely like a giant hobby hack that is doomed to eventually fail.
While this sounds intriguing, I'd like to hear a good case for why BitCoin makes sense in this context.
I'll give you a positive and a negative.
Positive - This make sense because "futures" relate back to the (expected) scarcity and surplus of real-world material goods, the availability of which has no connection to the value of the Euro vs the Yuan. It would make more sense to hedge crude in terms of soybeans than in dollars, yet we only really have the option of doing it in dollars.
Negative - Bitcoin lacks even the connection to reality that Dollars have by virtue of the latter's use in trade for otherwise-real-world products and services.
Now, you could take that in two ways - Connecting Bitcoin to commodities may make it more "meaningful" than most government-issued currencies, because it can float against the rest of the world's currencies to maintain an accurate reflection of the reality underlying production, rather than some random economic policy put in place by a central bank. On the flip side of that, you currently can't actually take delivery of 50 tons of pork denominated in Bitcoins, so this looks like a "futures" market in the worst speculative sense, without the faintest connection to the underlying commodities.
Nobody else has done this because it's totally without question illegal.
I hope they enjoy going to jail.
Game currencies cannot be compared to BitCoin, Game currencies are created at extremely high rate (how much D3 Money created per minute?) and are centralized (by the company server). BitCoin are mathematically restricted and decentralized... that's huge difference. I'm not a bitcoin user [yet] but I think this currency will succeed against all the international trading regulations, fees and delays.
This is a BIG deal! It gives the currency liquidity; it can now readily be transferred back into other currency forms by washing it through gold or oil in the two examples provided. That also increases how desirable it is to intercept and steal people's bitcoins though. I hope the servers hosting the coins are as secure as they need to be.
Actually, I only emitted the idea as a joke. Not only that, but what they're really talking about is not a futures market for bitcoins as the summary tries to imply, but a futures market for oil and gold in which the transactions are done in bitcoins.
That's hardly the same idea, so I'm not sure if I should be offended that they took my half-baked idiotic idea and tried to implement it, or that I should be offended that they took my half-baked idiotic idea and tried to copy it badly.
Either way, I'd recommend against investing in this market, and as the inventor -- I should really be the one to know.
I find myself wondering how the producer of the socks makes any financial gain. According to the check out page the socks cost -2.00 USD. I'm heavily thinking of investing in some sock storage because at 2.00 for every sock I adopt I could make a fortune. I'm sure the initial investment will more then pay for the shipping and afterwords I can resale them for additional capitol.
Momento Mori
Can you leave your editorial comments to the comments section please?
It is pitch black. You are likely to be eaten by a grue.
Why obscure the links behind a link abbreviation service, so we can't see where they're leading? This isn't Twitter, and it's not like the submission itself is particularly long.
That right there stopped me from clicking on them. Which is sad, because I haven't had a chance to mock a BitCoin story in several days now.
#DeleteChrome
There is zero value in bit coins and I wish Max Keiser from Russia Today needs to make a stance with Stacy Herbert on this http://rt.com/programs/keiser-report I know Max Keiser is still a sceptic for obvious reasons.
Bit Coins are being sold to us in a unique way, whereby funds can be transferred. There is nothing tangible with bit coins and it is a con on the back end of the financial crisis to try and replace currency. Please read https://en.wikipedia.org/wiki/Asset
If I can give you an example...... If buy gold or silver bullion I want that bullion in a physically tangible asset to which I can own and hold in my own hand.
I do not want to part with my cash with some stock trader on Wall Street or a Corrupt Banker who are quite willing to take millions off you if they can and give you a piece of paper to say you bought $1,000,000.00 in Silver Bullion. That is all you have my friends a piece of "toilet paper". Bitcoin is the same if you ask me and it is a get rich quick scheme on the back end of world financial meltdown; but the ideas of it are sold really well to you.
Just take my advice and be very shrewd with your money and only buy things you physically have an not some piece of paper ;)
Do not get conned!
Love NSN
All cows eat grass!
Yes, there's a lot of people who are in Bitcoin because of become-a-billionaire-overnight fantasies. But you remove all that and you're left with a really fascinating system that should appeal to everyone on Slashdot. It's a mix of cryptography, freedom of speech, computing, networking, finance, economics, and even politics -- most of us here dig that stuff.
Get over the hype and take Bitcoin for what it really is: a fascinating experiment that has, so far, withstood the amazing barrage of publicity, hacking attempts, legal uncertainties, and remains valuable for reasons completely contrary to everyone that says it's worthless. It may become worthless one day, but consider the possibility that Bitcoin is disproving all your wildly oversimplified assumptions about what makes something valuable. It is completely different, and there's plenty of reasons to believe that it could succeed as much as it could fail.
Why does gold have value? Nothing is backing gold. Yet it has value, mainly because of its properties: scarcity, fungibility, density, beauty, etc. Bitcoin is really quite similar but some different properties. Ease of transfer over the internet, fungibility, scarcity, storage efficiency, near-anonymity and built-in escrow.
I don't think it's any more ludicrous for Bitcoin to have value than it is for gold to have value. And in the end, when I want to sell WoW weapons, buy webserver space, or play a few games of poker online, why would I use gold, credit card or paypal, which all require me to remember log-in creditials, give away information and/or pay a bunch of third party fees. There's plenty of value in being able to pay people across the world, instantaneously, without sacrificing your privacy, and without paying any fees. Why is that not valuable? Seriously... quit focusing on the get-rich-quick kids, and start appreciating Bitcoin for it's unique properties and philosophy.
I run a gold mine and want to hedge so I sell futures contracts for December delivery.
By sheer coincidence, I do business with someone who prefers bitcoins over dollars.
So, do I sell a future contract for dollars then buy bit-coins on the spot market, or do I sell a futures contract for bit-coins and hopefully save paying the money trader?
OK, I know, everyone's saying "yeah, right, like that's going to happen," and you are right, it's very, very unlikely. But it could happen, and if it did, it's a legitimate use of a bitcoin futures market.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
Money is a measure of work done. The value may be hard to pin down but at some point it is linked to somebody doing something of use.Ponzis, bitcoins or other pyramid schemes like to confuse their marks by making noise about all currency being fiat currency but that's not really how it works. Pretending that currency is imaginary is just sophilistic bullshit that is equivalent to saying that just about everything agreed to in a society is imaginary. Belief also creates laws and the selection of leaders.
there are many examples of utopianists. people who were fed up with society, and wanted to start a new one from scratch. usually these were religious in nature. heck, mormonism is a surviving example of this utopianist era
http://en.wikipedia.org/wiki/Utopia
they run the range from this:
http://en.wikipedia.org/wiki/Harmony_Society
to this:
http://en.wikipedia.org/wiki/Peoples_Temple
with thousands of other examples, some harmless, some malignant
but nowadays, there is no more new world. so the pioneer utopianists are doing it in cyberspace (forgive the outdated term)
but the thing with utopianists, today and from yesteryear, is there is a lot of faith in grand schemes that don't really mean much when coupled with basic human nature. they mostly fail
so the scorn is from people who see those with great passion for something like bitcoin, and the curious identification of someone who is so bothered by something that, yes, is a bother (contemporary currencies), but not something so horrible that going all utopian idealist on the issue actually results in any improvement
but hey, who knows, maybe bitcoin will be like mormonism: someday mainstream. 99% of utopian projects fail, but 1% do change history
but i wouldn't bet on bitcoin. it's more like second life to me: high minded but destined for the dustbin of history, populated with a lot of eager highminded idealists for a moment in time, riding the wave of fervent passion but destined to crumble, a curiosity show for the rest of us to mock. which may seem cruel, but anyone who is a fervent idealist better get used to mockery. if your idealism is among the 1% of utopian projects that work, you will change the world, so take heart and shoulder the mockery with fortitude. but please note: 99% fail, so don't be too disappointed if your efforts fail
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
I know next to nothing about bitcoins, but what happens if someone decides to do a "scientific experiment" on BitCoins that has access to one of the worlds most powerful supercomputers? Say if in the name of science, social experiments, or unregulated currency and the effects of mass input of them (or simply to make a few bitcoin bucks themselves) and dedicates the full power of one, or more, of those to the crunching of numbers for a little while. What happens then?
Have gnu, will travel.
And how many BTC will it cost me to get /. to add a -1 Dumbass moderation option?
"I'd like to hear a good case for why BitCoin makes sense in this context."
It's anonymous.
The finest quality Alpaca socks and beef jerky that digital currency can deliver! You can almost taste the pure, encrypted 1's and 0's!
Raspberry Pi a scam? only on /.
in any case, it's either a 32-bit scam, or a 200-bit scam.
At the moment, 1 BTC is about 100 bits' worth of scam.
Your calculations were orders of magnitude off: I'd be posting AC too.
Still working on the Libraries-of-Congress conversion.
Those who advocate genocide deserve every protection afforded by law, and none afforded by common human decency.
if you want to protect against future increases, you can buy futures now. If the price of crude goes up, you earn profit on your futures contracts which offsets the increase in the pirce when you go to the pump. Corporations do this, airlines do this, governments do this, wealthy investors do this.
Who doesn't do this? Joe 6-pack. Any why not? Well, it used to be because to invest in options you needed a huge balance in you brokerage account and the account enabled for margin trading. Now you can buy an Oil ETF like a normal stock but you still need a brokerage account.
With ICBit, the threshold is lower. After setting up an account on ICBit, you get a bitcoin address for deposits. You then punch that in to BitInstant and enter that you want to buy $100 worth of bitcoins. Head to 7-11 with cash and boom, you have a funded account on ICBit, ready to be used for buying OIL futures to hedge against future price increases. (BitInstant is one of the most convenient methods for buying bitcoins, but a trader will probably want to use Dwolla or cash deposit at a bank where there are no fees.)
Now ICBit also offers leveraged trading, where with that $100 you can speculate on up to 10X that amount. So if oil goes from $90 to $110, you don't just earn the $20 difference, you get 10X that, or $200 -- from speculating with only $100. Now leveraged trading is risky, and going 10X your are more likely to lose it all due to forced margin trading, but that's just an example of what is possible.
I haven't found a single post that doesn't miss the point.
Being able to buy/sell futures of commodities such as oil ties the bit coin to the real world in a way we haven't seen before. A potential user of bitcoins may be put off by the volatile nature of the value of the bitcoin itself, but if he can pin it down to the value of oil or gold by trading those futures, it makes holding bitcoins a much more sensible, or at least much less financially treacherous prospect.
Imagine... I could sell 1000 USD and buy 100 bitcoins (no idea how this compares to the real exchange rate, bear with me...)
I could then, with my 100 bitcoins, buy gold futures. Even if the value of a bitcoin plummetted meanwhile, I'd be making all that money back as the price of gold (expressed in bitcoins) skyrocketed. I'd be essentially immune to the fickle price of a bitcoin and merely invested in gold. I could further stabilise my finances by SELLING gold futures in USD. If I did this right away, for a small cost, I would essentially have pegged the value of my bitcoins at 1 per every 10 USD.
The creators of bitcoin have been very smart to introduce this market. It enables the use of bitcoins without the fear of volatile price moves. Surely the biggest barrier to entry for most potential users.
j'ai découvert une démonstration vraiment admirable (de ce théorème général) que cette si
Must be the first time you've seen it - Yes it's funny to those who know of the Time Cube site - Once. But it's getting stale.
Who is John Cabal?
I'm glad you brought that up. As it happens, I'm a math major and I can be easily convinced by arguments that are based on math.
Let's start with the basics: What is the "best" value for single-digit inflation? I assume that 1% is too low and 9% is too high - what's the optimum value to use? Is 7% too much?
While we're on the subject, what's the math formula for calculating the optimal value? If the answer is "it depends", then what does it depend on? Is the function relatively flat (any value within a range is good) or peaked (one specific value is best, and near values are bad)?
Actually, how does one even calculate the current inflation rate? Are gas prices included? Luxuries? How do I tell which purchases contribute to inflation and which don't? Is there a rule I can look up?
Don't appeal to math unless you know what math is. Economics is not math.
OK, let's take a look at one of their derivative contracts. Read, especially, Margin Call. The example given is buying a derivative contract, but the real issue is selling one. (There must be an equal volume bought and sold; this is a zero sum game.) Buying a contract costs you a known amount up front,which you may lose. Selling a derivative contract implies that, at some specified future time, you must deliver what you sold, even if you take an arbitrarily high loss doing so.
This is implemented by draining the account of the seller as necessary to pay off the loss. That would be OK if it was a cash account, with no margin. But this exchange permits selling derivative contracts on margin, where the seller is effectively borrowing from the exchange. They currently require 75% margin. Does the exchange take the risk of a counterparty defaulting? No. They write "your profit is always limited by ability to pay of counterparties to your contract." Actually, that's incorrect - it's limited by the cash counterparties have on deposit with the exchange, not their total assets. (That's probably just as well.) However, as a contract buyer, you don't know, and aren't allowed to find out, who the counterparty is or how much money they have on deposit.
The way this is set up, a seller of a derivative contract can escape part of a loss by draining their account. If the value of a derivative is increasing, the seller can cut their losses by draining their account up to the margin limit. This will force the exchange to drain out the rest of their account and close out the derivative contract. The derivative contracts can't change price by more than 10% per day, so there's a maximum loss when selling a derivative contract. This makes derivative contracts less valuable than they would otherwise be.
Then there's the issue of allocating losses when a counterparty defaults. Everything is anonymous, so you have no idea if the exchange is screwing you. On top of that, of course, you're relying on a pseudo-business with no identifying information to pay you money at a future date.
If you don't understand everything above, you should not be in this market.
Except that you can trade these BTC back into "real money" at the same place you probably got them anyways
BitCoin comment
i like you share for a positive and a negative.Very interesting to read this article.I would like to thank you
Best Regards
Tai Bigone
1) The assumption that there can and should be a finite amount of money on the market is plainly wrong. It's not even true when applied by gold standard fanboys. They assume that total of Earth's gold is finite - which is true - but what matters is how much of this gold is on the market and this variable increases constanly. And even when we will mine all of Earth's gold - we will be eventually able to mine it from space bodies.
Now, BTC being virtual currency, the total limit is hardcoded from the start. So designers decided that at some time in the future, 1 BTC should amount to exactly 1/21,000,000th of world's total wealth. Which is a dumb decision - wealth is not constant as well. For once, gold makes a part of wealth and it's amount isn't constant nor finite, but also factors like technological progress increase the total amount of wealth - ideas and discoveries may not be "original" as they are based on laws of nature, but they have their value nontheless. So, this system will very fast lead into deflation, which is just as bad as inflation - only to the other extreme and Ron Paul's fanclub want you to believe nothing can be worse from inflation. The only thing that keeps BTC scheme sustainable as a currency now is that there is still a constant influx of new money.
2) Money has to represent a value. In a gold standard system, money's value is based on a fraction of gold in possession of government. Bretton Woods currency has a value, too - whenever government issues new money on the market, it does it by means of buying something and thus the money represents a fraction of gross national income. BTCs are issued in return for adopter's PC doing some calculation. But there is no point in calculating for the sake of calculation. I haven't found any information about what the BTC algorithm actually does, and if it's useless - it doesn't have a value.
Except that there's not such thing as 'too big to fail' in bitcoin land, so any futures you're buying have to consider the risk that the issuer cannot pay.
In US$ land, that's not true, the issuers are the Goldmans, Lehmans etc. of this world, and when they fail, their bad bets are bought by the Fed at face value. Which is just another way of saying they are bought by you and me, by diluting the dollars in our accounts.
So bitcoin is any but a pyramid scheme.
Or get your BTC stolen by using said services.
Change is certain; progress is not obligatory.
Since currency is no longer backed by anything, and hasn't been for some time, its value is based on people's trust in the currency as a fair method of exchange for goods and services. Currencies, such as the US Dollar, are failing due to diminishing trust for a variety of reasons, including the Federal Reserve's ability to print at will. Bitcoin's success may be surprising at first, but given that its basis is on a controlled method of extracting new coins, if the system is trusted it has value. Obviously that is happening.
An excellent book that contains the explanation for why this is working so well, even though it doesn't specifically reference bitcoin, is "The Price of Everything".
Is it even possible to make money mining them? Why on earth would people do it? It can't really be feasible unless they already had a crunch box or something.
Buying gold futures, by contrast, does not have any use, except to then sell those futures, hopefully at a profit.
You mean except for the actual purpose of a gold future which is to take delivery of a defined amount of gold at a specified price on a specified date?
Methinks you are confusing speculation on a financial instrument with the actual purpose of the instrument. The purpose of a gold future contract is to lock in a price on a delivery of a defined amount gold. The primary purpose of futures contracts is to hedge against future price fluctuations in commodities like gold or corn or frozen concentrated orange juice. [/movie reference] If you are a farmer and you are growing corn, you are carrying a lot of risk if you wait until the end of the growing season. Not only do you not know how much corn you'll have but you don't know what the price will be. So you sell a contract to deliver X bushels of corn on Y date for Z price. Your price is locked in and if there is a drought you can simply sell the contract on the futures market instead of delivering the corn.
Anyone who buys a futures contract using bitcoin is an idiot or a scam artist. No one who is actually hedging risk is going to use bitcoin to do it so all that is left is speculators. Speculating in futures contracts is highly risky even without adding an additional level of exchange rate risk in using bitcoins. Furthermore, I'm rather doubtful that if you purchased a futures contract through this "market" that you could actually take delivery of the products that underlie the contract.
I have no idea why there is this obsession with bitcoin by a few people here on slashdot. Bitcoin is an incredibly stupid idea used mostly by people doing illegal things. Anyone who uses bitcoin either has no concept of exchange rate risk or is doing something illegal that carries an even higher risk like jail time. At best bitcoin is an ill-conceived and fatally flawed virtual currency. At worst it is a pyramid scheme and/or a money laundering scheme. Either way it is something to stay away from.
Be a helluva lot better in the long run to get the government OUT of picayune regulation, let the crooked banks actually FAIL, and toss the crooks in jail.
So tell me shit for brains, if there is no regulation, on what charges would you throw the crooks in jail? Without regulation, there ain't no crooks.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
Pro-tip for life, instead of just saying someone is wrong, tell them why you think they are wrong, and maybe even how you think they can fix it.
Since you asked so nicely.... Bitcoin is a stupid thing to use because it introduces a lot of unnecessary risk and there is a very strong chance that it is either a pyramid scheme or an outright scam. Bitcoin is thinly traded, difficult to exchange, accepted almost nowhere and fluctuates wildly in value. It is used primarily for illegal activities including purchasing of controlled substances and money laundering. It has a dubious and complicated method of currency creation which is fairly incomprehensible to anyone who isn't a crypto-geek. It replicates most of the problems of a gold standard based economy plus rampant inflation/deflation cycles and extremely poor liquidity. Bitcoin is a pet project conceived and executed by a few geeks who think they know more about economics than they actually do. I have difficulty conceiving of a more perfect vehicle for losing a lot of money than bitcoin.
How to fix it? Stop using bitcoin and stop wasting everyone's time with pointless articles about it on slashdot.
All currencies are ethereal, the difference is belief that it has value.
That's completely true for any asset - currency or otherwise. However there are proven mechanics regarding how to administer a currency such that it is actually useful to a society. While confidence in the value of a currency is a necessary condition it is not a sufficient one. Bitcoin is terribly flawed in a variety of ways that go well beyond whether people actually believe it has value - which they largely do not.
In general, as stocks decline, gold goes up as people shift money from one market to another. So if you buy both, when one goes down, the other will go up faster, helping limit losses.
Gold and real estate may tend to have a negative correlation with stock prices but there is little actual relationship between the two assets in most cases. Gold can just as easily go up at the same time as stock prices go up and that often happens. Our current financial crises was caused by real estate dropping in value (for complicated reasons) and taking other assets (including stocks) along for the ride. A futures contract creates a perfect hedge for a defined amount of the underlying commodity. A perfect hedge is not always possible so sometimes we use proxy commodities (oil for gasoline for instance) but "hedging" stocks with gold or real estate is merely diversification with negatively correlated assets. Might work but it is a rather poor hedge if that is the actual goal.
to make money off of idiots
Futures are a tool for moving risk between financial operations. They can be used to assume risk from others (i.e. gambling) and to remove risk from your business (e.g. the farmer). Futures are just a tool. It is fine to pour scorn on the people who abuse such tools, but don't go making sensationalist stuff up.
That isn't a parody of Time-cube, it is an effort to counter-troll a prolific poster named APK, who seems like a troll himself, although is way too easy to troll into wasting massive amounts of time on BS not far from the exaggerations above: http://science.slashdot.org/story/12/08/03/1328212/it-at-the-lhc-managing-a-petabyte-of-data-per-second ( "44 of 248 comments loaded"... almost 200 comments of off-topic trolling...). Just be thankful APK hasn't replied to these in a while...
BitCoins doesn't solve all the problems of money, but it does solve a fair number of them.
Bitcoin doesn't even solve the problems it was created to solve. It carries enormous risks, not the least of which is huge exchange rate risk. It's not a particularly effective medium of exchange (complicated, requires a computer, thinly traded, not accepted anywhere) nor is it a particularly good store of value.
Logic and reason would seem to indicate that this is a better way to do currency.
Do you seriously think that Bitcoin is trying anything that has never been tried before? Limiting the amount of currency available by tying it to some arbitrary limiting function? Tried that with the gold standard - didn't work very well.
Can one of the economists explain why it won't work?
While I'm not an economist, I am a certified accountant. I see numerous problems with bitcoin.
First, governments are an integral part of EVERY economy and usually account for a substantial portion of GDP (20-50% is pretty common). We can fairly argue about how much of a role governments should play but the fact is that they do play a substantial role even in the most restricted forms. I cannot conceive of a circumstance whereby a government would abdicate its ability to control and influence monetary policy. Even if they were willing to do it however, it would remain a bad idea because...
Second, there is no escape hatch. The biggest flaw in the gold standard was that it was difficult to impossible to depreciate currencies if a country were to run chronic deficits. The Euro is experiencing this problem right now in Greece - exchange rates are effectively fixed within the Euro zone and there are limited ways for Greece to devalue its currency - basically the only option is austerity measures. (The US doesn't experience this because labor and capital mobility is easier within a political union) Bitcoin would share the same fatal flaw as the gold standard. In certain inevitable circumstances it would be extremely difficult to influence the money supply in helpful ways. Effectively bitcoin would severely limit options in the event of a fiscal crisis by replicating the single worst feature of the gold standard.
Third, I find it deeply unlikely that most people will ever trust bitcoin and trust is fundamental to any currency. People (sort of) get that the dollar can be created by the Fed and taxed by the government and used pretty much anywhere. It's complicated but fundamentally run by people. People feel they can wrap their head around that even if they get some of the details wrong. Asking them to trust the bitcoin creation and storage process which uses untested (for this purpose) and highly technical cryptography that sounds scary and incomprehensible to most people is going to be asking a lot. I cannot imagine successfully explaining how bitcoin works or why she should use it to my grandmother. Furthermore, bitcoin presently is apparently being used by most accounts primarily to launder money and facility transactions of dubious legality. If you want to be able to trust a currency, having the perception (right or wrong) of potential criminals as counterparties isn't a good start.
Fourth, exchange rate risk. Given that it isn't going to be supported by a government, bitcoin is almost certainly going to remain a niche currency. This means that it probably is going to remain thinly traded and subject to wild fluctuations in exchange rates. Inflation/deflation will be severe problems. You can facilitate transactions in bitcoin but eventually you will have to turn those bitcoins into dollars or euros or some kind of good. Without the support of governments it will be virtually impossible to achieve the kind of scale needed to provide enough liquidity to mitigate the exchange rate risks. As such it will effectively be more expensive to exchange goods in bitcoin once you fully account for the risks
Sometimes, you just have to trust that things will work out well and take a chance because if nobody does, nothing will happen.
Fine, you go ahead and take a chance with your money. If it works out well for you maybe the rest of us will consider it. Maybe you'll even find some great opportunities. Or maybe you'll be eaten by proverbial sharks. I'm quite comfortable not using bitcoin and see lots of risk to it with little potential upside. Always possible I could be wrong - but I doubt it.
Dollars are also not generated by doing useful work. They are generated by a printing press, which is not doing anything inherently useful. I don't really see why rewarding early adopters is a bad thing.
Dollars are created by the Federal Reserve loaning money to banks. Those loans are then turned into additional loans which are used to buy things that do useful work. Governments don't actually fire up a printing press to "print money" and haven't for a very long time.
I still offer a 5% discount for bitcoin users, but until now, no clients have been interested.
Why? That's financially stupid unless your transaction fees are greater than 5% which is a pretty easy hurdle to beat. Furthermore bitcoin introduces a whole mess of additional risks that need to be paid for and that I'm pretty sure you haven't adequately considered. Clients aren't interested because it is actually rather expensive in terms of time and financial risk to use bitcoin.
However I do not despair as I am getting clients from all around the world and a lot complain about the difficulty to make international payement.
Making payments internationally is absurdly easy. It's not free but it isn't hard at all. If someone complains these days that it is difficult to send money internationally they are either stupid or unbelievably lazy. In a previous life I owned an auction company and we sold things worldwide. Transmitting payment was never even remotely difficult.
Find me a service that delivers money into my account in less than 30 minutes, without fees, from Japan to France or Australia to France. I am more than interested.
Without fees or without cost? HUGE difference. Bitcoin might be without fees but it carries significant costs in terms of time and more importantly risk. You have to set up and administer the account which is an additional account beyond your regular bank account. You have to take the risk of putting your money into an illiquid currency and then have exchange rate risk when you try to exchange it for regular currency like dollars. I'm pretty sure you aren't even close to accounting for the actual expected cost of the transaction. I haven't even gotten into counterparty risk, market risk, and the rest. Sure it will often work out fine - but if you are actually accounting for the risk you are taking and time you are spending, the cost is no where near zero even if the fees are.
Being able to buy/sell futures of commodities such as oil ties the bit coin to the real world in a way we haven't seen before.
No one who is hedging in those commodities for real is going to have anything to do with bitcoins. So the only people who are going to do anything combining futures contracts and bitcoins are speculators - and stupid speculators at that. It's super difficult to make money speculating on futures contracts even without adding in all the exchange rate and other risk associated with bitcoin.
it makes holding bitcoins a much more sensible, or at least much less financially treacherous prospect.
No it doesn't. Introducing derivatives contracts for speculation ADDS risk to the equation. There is no causal relationship between the value of any commodity traded as a futures contract and the value of bitcoins with relationship to other currencies. The only thing bitcoins add to the equation is additional exchange rate risk.
A potential user of bitcoins may be put off by the volatile nature of the value of the bitcoin itself, but if he can pin it down to the value of oil or gold by trading those futures, it makes holding bitcoins a much more sensible, or at least much less financially treacherous prospect.
So your idea is to (somehow) reduce your exposure to the volatility of bitcoins exchange rates by buying a differently volatile commodity which bears no relationship to the value of bitcoins whatsoever? Why not just avoid the bitcoins altogether and buy the futures contract directly using dollars? It would cost less and have no exchange rate risk.
I could then, with my 100 bitcoins, buy gold futures. Even if the value of a bitcoin plummetted meanwhile, I'd be making all that money back as the price of gold (expressed in bitcoins) skyrocke
Gold and bitcoins bear no causal relationship regarding their value. Gold can just as easily go down while bitcoins are going down. Gold is of dubious value as a hedge against fluctuations in the value of bitcoins.
I'd be essentially immune to the fickle price of a bitcoin and merely invested in gold. I could further stabilise my finances by SELLING gold futures in USD. If I did this right away, for a small cost, I would essentially have pegged the value of my bitcoins at 1 per every 10 USD.
If you are going to peg to the dollar, why not just own dollars? You have just taken a lot of risk and spent a bunch of money on a hedging strategy that you could replicate without spending anything and just holding on to your dollars.
Yeah, we know, he did, used some, and destroyed the rest. Just ask the Kurds.
Please get a native English speaker to explain it to you. If you are a native English speaker then you should be ashamed of yourself for deliberately making it more difficult to communicate.
To all those who post on this based on opinion and not on how money moves and how markets work, your ignorance it the reason that so many terrible things happen in the economy. Unscrupulous bankers and investors get away their actions because the general public has not taken a little bit of time to learn how money works. Before the internet, this was at least excusable. Anyone who uses money should know the basics of how our systems work, why they are setup that way and what needs to be improved. Here is a great site to educate yourselves www.investopedia.com and www.fool.com. Hell just watch some videos on youtube on the subject if reading about it is to hard. It is 2012, we have an internet full of information and you have no excuse to not know how to teach yourself on a subject before you make statements.
Although futures markets can help stabilize a currencies fluctuations, I think it is way to early for them to be doing this. Bitcoin has serious security issues, not with the bitcoins themselves but with the institutions that manage the coins. If you are in the US (not sure about other countries and their currencies) your money is FDIC insured up to $250,000. You do not have this protection in bitcoin. You are at the whims of institutions that can say they are transparent but do not have any regulatory bodies to enforce a fair and honest system. You do not know who owns these "banks" or who they are loyal to. Relative to all current currencies, the risk of theft alone is outrageous. Can you tell me who is going to truly investigate and punish those who steal these bitcoins? Most governments can barely keep a handle on their own banks. How will they deal with cyber theft of a non native currency stored in a "bank",most likely located in a foreign country.
So whats the solution to this mess? Forget improve security standards! Lets add a futures market where people are mostly speculating because they have little reason to hedge their investments and see what happens. Hell why not go and get a large number of long puts then start an anti-bitcoin smear campaign or, better yet, pay some hackers to steal a large number of coins again and make a killing in the market. It's just to much to soon, it sounds like a bandaid fix for frightened investors.
With a 30-day Volume of 11,112,488.64 USD bitcoin has potential and it has had impressive growth. I think it may have a future but not if they don't start to address the real world problems they couldn't predict when they created it. This would make more sense to me in 2-3 years given all their manageable external risks were dealt with.
And you can't get robbed or scammed when using cash.. right?
Someone please mod the AC above up. They've put it far better than I did. And AC, please get an account so we don't just lose you in the noise.
Not with coins and paperbills, no. However, I can at least get the transaction reversed where bank transfers, cheques, credit/debit/cash cards are concerned and additionally protected by various financial laws. Can't do that with BTC.
Change is certain; progress is not obligatory.