Bitcoin Exchange Value Halves After Chinese Ban

An anonymous reader writes with news of the latest major fluctuation in the price people are willing to pay for Bitcoins. From the article: "China's ban on its financial institutions handling bitcoin causes world's largest exchange to cease trading, halving the value of the currency from $1,000 to less than $500 in a matter of days. The country's central bank took a hard line on Bitcoin in early December when it banned financial institutions from handling the decentralized crypto-currency, and as a result BTC China, the world's largest bitcoin exchange, has stopped accepting deposits from its users." Just watch that line trend downward.

Comments

history, itself, repeat, etc.

[Anonymous Coward]

A week ago, there was a Chinese ban on Bitcoin as a currency (not as a tradable asset) and BTC had its value halved from $1k to $500. Now, you're telling me there's a ban on Bitcoin in China and it has caused BTC's value to be halved from $1k to $500? Now that's what I call news!

Re:history, itself, repeat, etc.

[beelsebob]

More like (nearly) thirded, it's gone from $1215 down to $425.

Re:history, itself, repeat, etc.

[Anonymous Coward]

Really??? I'll give you $425 for all the bitcoins you can supply. Don't lie.

Re:history, itself, repeat, etc.

[Anonymous Coward]

I'll gladly transfer you all (none) of my bitcoins for $425.

I think I win on that deal.

Re:history, itself, repeat, etc.

[Richy_T]

Every sale is also a buy. Derp.

Re:history, itself, repeat, etc.

[Anonymous Coward]

Or you can look at how it's gone up from early October $130 to $606 at the moment. Or maybe from being $11 for most of 2012 up to $606 now...

Perspective.

Re:history, itself, repeat, etc.

[idioto]

If you're a bitcoin investor, which you may be, you might have trouble reading the news. Two separate things. The first was a warning, which hinted at the action. People who actually can listen to stuff outside of the bitcoin bubble reacted to the warning. And then the action took place. So now there's a reaction to that. And then there's people who, evidently, can not read the news, buying "cheap" bitcoins and slowing the fall.

Anyhow, if you need to get rid of your bitcoins, I will trade you some baseball cards. They're awesome, and they're not making any more of them, so they can only go up!

Re:history, itself, repeat, etc.

[anagama]

These price fluctuations are not the mark of money -- bitcoin seems more likely a wildly volatile commodity.

Re:history, itself, repeat, etc.

[Joce640k]

A week ago, there was a Chinese ban on Bitcoin as a currency (not as a tradable asset) and BTC had its value halved from $1k to $500. Now, you're telling me there's a ban on Bitcoin in China and it has caused BTC's value to be halved from $1k to $500? Now that's what I call news!

It went back up again a bit after last week's dip (to about 975). That was all the idiots thinking they were going to make money after the Chinese thing caused a crash...

Now the cold hard truth has set in and it's gone down for a second time - and, yes, it's for the same reason.

Re:history, itself, repeat, etc.

[LF11]

I am buying. Christmas 60% off sale. Happy Holidays to me, thank you very much.

Re:history, itself, repeat, etc.

[shaitand]

It's the size of the market. Warren Buffet could single handedly raise the price of bitcoin back to $1235 in a day. The market skyrocketed when the congressional hearing indicated bitcoin was golden and shiny and everybody should have one or ten (I suspect because the FBI is sitting on millions in bitcoin seized from Silk Road).

With that green light there was a ton of investment as everyone and their dog in the financial world added some to their portfolio.

Re: history, itself, repeat, etc.

[Anonymous Coward]

Sure, I'll buy 0.0247 of your baseball card, please send it to me in Netherlands, here is the address: JfytvchjHdg46gjgbjf

Re:history, itself, repeat, etc.

[RockDoctor]

It went back up again a bit after last week's dip (to about 975). That was all the idiots thinking they were going to make money after the Chinese thing caused a crash...

Isn't that what the white-collar thieves and scoundrels call a "dead cat bounce".

And this

[FooAtWFU]

And this is why we're still decades away from having mortgages denominated in bitcoin. :P

Re:And this

[cheater512]

I dunno....seems slightly more reliable than getting a mortgage from a US bank.

Re:And this

[BitZtream]

... considering you would be dealing with the same bank ... in bit coin ... how exactly is it different?

Re:And this

[i kan reed]

Fixed rate home mortgages in the U.S. are backed by the federal government, who provides insurance in order to "incentivize" ownership. For reasons unrelated to the present discussion, I think this is a bad idea, but that doesn't influence the main point that mortgages in the U.S. tend to have lower interest rates than in most other countries.

Re:And this

[gl4ss]

doesn't matter who it is backed by if they can just issue foreclosures on it at will and the court agrees for some weird reason("bank wouldnt lie, would they?")

Re:And this

[Anonymous Coward]

While that has happened, it's extremely rare, to the point of not even being a statistic.

Re:And this

[cheater512]

Does your statement make sense to yourself?

The only way the probability of an event can not have a statistic is if it is not measured.
And if fraudulent behaviour by banks isn't measured then the US really is stuffed.

Re:And this

[Richy_T]

Low interest rates because the govt is printing money (via the Federal Reserve) to lend to banks to lend to buyers.

If you actually had to borrow that money from people who are investing to, y'know, save for their retirement or rainy days & such, interest rates would be higher. Instead, they have to watch while their savings dwindle in true value due to inflation (the aforementioned printing).

Hence Bitcoin.

Yeah, the price dropped. Discovery is an interesting process. It's still up on April's ATH and more European bail-ins will make things interesting in 2014.

Re:And this

[i kan reed]

You actually want to pay back a mortgage in a deflationary environment. You're nuts. Think about what that would actually mean.

Re:And this

[beatle42]

Banks (well, most at least) don't have a monopoly on dollars. If you can find some random guy on the net to give you the dollars to buy a house you wouldn't need to deal with a bank either.

Re:And this

[Brigadier]

who says this is destined to be a mainstream currency ? maybe the whole point of this is it will be the underworld currency which never exists in tangible form where it can be converted to standard currency, but where it only functions to trade goods. Thats sorta the problem with our current currency, in that it is volatile. Currency itself should never be traded, it should only function as a conduit for exchanging services, and goods. The value should only be in the commodity.

If bitcoins cannot be cashed out, but only serve as a value exchange for commodities then it will be a stable market. at least in my head it seems that way.

Re:And this

[Richy_T]

No. It can all be factored in.

Re:And this

[larry bagina]

Oh it would be stable, much the same way the "suck my asshole" economy is stable, in that no one is participating.

Re:And this

[Copid]

And inflation can't?

This is what I don't get about the hard money types. They talk as though consistent inflation is some sort of magical evil that businesses and consumers couldn't possibly hedge against or factor into contracted interest rates, but jarring bouts of deflation out of nowhere can easily be smoothly absorbed by the market. WTF?

Re:And this

[AK Marc]

"Bank errors" aren't measured. One guy's fraud is another man's error. There are a handful of cases out there (handful as in 5-10) where address errors were made. But I didn't find any where, when faced with proof of a bank error, the foreclosure proceeded. It looks like it was never fraud, but simple errors. Your house is worth more than everything else you own, combined, but is a rounding error to one day's transactions to the bank. Stealing homes wouldn't gain them anything. They just get careless sometimes, from the stories I read, usually when contractors get involved.

Re:And this

[debrain]

Just an FYI, sellers of houses have offered to accept Bitcoin on at least a couple newsworthy occasions:

- http://au.finance.yahoo.com/news/developer-sell-house-bitcoin-020107308.html
- http://www.cbc.ca/newsblogs/yourcommunity/2013/03/alberta-man-accepting-bitcoins-in-exchange-for-home.html

A far cry from denominating mortgages, but still, it's something.

Re:And this

[jeffmeden]

Does your statement make sense to yourself?

The only way the probability of an event can not have a statistic is if it is not measured.
And if fraudulent behaviour by banks isn't measured then the US really is stuffed.

Yep, pretty sure it's most recent measure was $100B (in penalties/settlements) and a lot more than $100B in actual fraud (depending on how you mark the value of a subprime mortgage backed security and the loan itself): http://www.bloomberg.com/news/2013-08-28/u-s-bank-legal-bills-exceed-100-billion.html

Re:And this

[JesseMcDonald]

The difference between a bank and a "random guy on the net" is that the bank can loan out money at no cost to themselves, apart from the low reserve requirements, while the guy on the net has to actually earn every single dollar he loans out.

Banks may not have a monopoly on dollars, but they do have a monopoly on cheap dollars that effectively prevents anyone else from competing in their domain.

Re:And this

[Richy_T]

Inflation can and is. The main problem with inflation is that it take value from savings and transfers it to the already rich.

Re:And this

[JesseMcDonald]

You've been listening to the wrong "hard money types". Jarring, unexpected changes in the money supply are a problem regardless of whether they amount to inflation or deflation. However, deflation doesn't have to be like that any more than inflation does. Proponents of hard currency tend to prefer a fixed money supply without much in the way of fractional-reserve banking. Such policies avoid both unpredictable inflation due to a central bank's monetary policy and sudden, jarring deflation due to credit contractions when banks are proven insolvent (like in America's Great Depression).

As you say, people can always factor in a consistent level of inflation or deflation in their planning. That's easy. Of course, the fact that you know you're going to lose a few percent to inflation only means that you need a correspondingly higher return from your investments; it doesn't imply that you'll actually be able to find such investments. As an investor, inflation hurts your bargaining position: when you're the one holding the perishable goods, you can't afford to wait around for a better offer.

The other problem, of course, is that inflation and deflation aren't consistent—and aren't supposed to be. In the absence of manipulation they reflect the state of the economy. Inflation means we need more capital investment to improve our ability to produce, while deflation means that we've invested enough and its time to consume. Whether manipulation makes them change when they shouldn't, or keeps them at a fixed level when they should change, the result is false signals and malinvestment.

Re:And this

[lgw]

The difference between a bank and a "random guy on the net" is that the bank can loan out money at no cost to themselves, apart from the low reserve requirements, while the guy on the net has to actually earn every single dollar he loans out.

There are no reserve requirements any more, except on "demand" (checking) accounts. But that bank earns its money as much as the "guy on the net" does. As a software developer, I'm going to insist that work of the mind is just as much "earning" as work of the body.

Banks may not have a monopoly on dollars, but they do have a monopoly on cheap dollars that effectively prevents anyone else from competing in their domain.

No, they convince people to lend them money. At the rates most banks pay for savings, I'm amazed and impressed they convince anyone to do that. But there's also peer-to-peer lending, charitable micro-loans, and other models for lending. Most people go to a bank because banks are traditionally pretty good at being retail storefronts. But the value of brick-and-mortar storefronts keeps falling in all businesses, and banks don't have a lock-in this century.

Re:And this

[AK Marc]

When interest exceeds the rate of deflation, then yes, you would want to pay back a mortgage in a deflationary environment. Holding $100 cash gives you $101 in a year, or putting that on your mortgage and having $105 in a year. It makes perfect sense to pay back a mortgage in a deflationary environment.

Re: And this

[Richy_T]

"Seriously?" right back at you.

There are different types of rich people of course. Most have investments, not savings. Those investments are in a bit of a bubble right now because there is so much money sloshing around the markets from the huge amount of printing going on. Hence the cash value of their investments have *risen*. Then there's the other kind of rich people who take the money handed over to them by the government and lend it out to others, receiving interest on those loans for doing effectively *nothing*.

Those who put a little money in a savings account, CD or other instrument that makes sense for those who need liquidity are losing value daily.

Re:And this

[alexander_686]

You have that backwards.

Inflation (and increase of) reduce the value of money and thus reduces the value of those who hold (net) cash and financial assets – a.k.a. the wealthy. Inflation also reduces the value of money that need to repay loans and thus help those who owe (net) cash and financial assets.

Re:And this

[timeOday]

Ohh, the evil Fed, printing money and causing the dollar to lose 1.2% of its value over the course of a year. Never mind that bitcoin just lost 50% of its value in a week.

Re:And this

[alexander_686]

But it rarely is because it is difficult and expensive. Inflationary protection bonds have their principle tied to the inflation and these are the only loans that factor in deflation. And that assumes the bonds allow the principal to fall – many don’t. The only bonds of this type that I know of are issued by governments.

Here is a simple thought experiment. Assume you lend out $100, the real interest rate is 3%, and deflation is at 5%. At the end of the year, for the risk you have taken, you $98 ($100 + $3 -$5). Or you could have just buried the cash the back yard and have $100 with no risk at all so that loan will not happen.

The numbers are large to illustrate a point; borrowing money faces headwinds under deflation. If you don’t like theory I have historical and empirical examples that I could bring forward

Re:And this

[i kan reed]

Wow, I'm so glad you're not in charge, dude. $100 being worth $250 1990 dollars doesn't mean that it counts for $250 principal on your loan, and if you had that much cash on hand to sit on, you wouldn't need the loan.

ugh

Re: And this

[Copid]

Then there's the other kind of rich people who take the money handed over to them by the government and lend it out to others, receiving interest on those loans for doing effectively *nothing*.

You mean banks, who lend out a mixture of money they borrow from the government and money they borrow from savers. They lend it out to borrowers and receive payments back, and those payments decline in value with inflation. If they hold on to those loans as assets, they're in the "hurt by inflation" set.

Those who put a little money in a savings account, CD or other instrument that makes sense for those who need liquidity are losing value daily.

Those people are also very likely to be net debtors. Inflation reduces the real burden of fixed nominal debt. The set of people for whom cash holdings and fixed return nominal debt are substantially larger than their debt and who don't reasonably have the option to use something other than savings accounts is pretty darned small. If you have enough fixed return assets to be concerned with inflation, you have enough assets that you have options other than savings accounts. "Waah, I have a $250K fixed rate mortgage but the $800 I have in cash savings lost $20 in value last year due to inflation!" is pretty weak tea.

Re:And this

[Copid]

Inflation means we need more capital investment to improve our ability to produce, while deflation means that we've invested enough and its time to consume.

I'm generally with you (modulo the fractional reserve thing) until here. It would be nice if this was true, but I don't think there's really a good reason (either theoretical or empirical) to believe that it is. On the theoretical side, inflation or deflation could simply be a temporary reflection of consumer sentiment and desire to hold cash--one that would return to normal if it weren't for the self-fulfilling nature of those types of actions. On the empirical side, I'd expect our needs for capital investment to be at least somewhat continuous over time and move at a relatively low frequency. We don't need "lots of 20 year investments" one day and then "a lot less 20 year investments" the following week. That doesn't appear to be the case with the demand for base money, so it seems difficult for instantaneous demand for base money to send useful signals about our long term capital structure.

Of course, if that function was heavily smoothed, it probably would be a very good long-run indicator, and you'd get the nice side effect of reducing the heartburn that comes from rapid changes in the price level. But that's roughly what a central bank does.

Re: And this

[Richy_T]

interest > inflation, profit
interest < inflation, loss

The banks are in the former category, the "little people" in the latter.

And yes, if you steal peoples wealth by inflation, of course they will turn from saving to borrowing. And all that entails.

Re:And this

[JesseMcDonald]

There are no reserve requirements any more, except on "demand" (checking) accounts. But that bank earns its money as much as the "guy on the net" does. As a software developer, I'm going to insist that work of the mind is just as much "earning" as work of the body.

As I said, low reserve requirements.

I have no problem with "work of the mind"—I'm a software developer too, BTW. But when you can take $1 in reserves (just enough to meet the daily demand for physical currency) and turn it into a $1000 loan, and get paid real interest on the full $1000, there's something undeniably fishy going on. If you or I tried that we'd be charged with fraud in a heartbeat. Though I suppose running a successful scam can be considered "work of the mind" if you stretch it far enough, I wouldn't consider the proceeds "earned".

No, they convince people to lend them money.

They do convince people to lend them money. However, if I convince someone to lend me a dollar, I can't turn around and convert that into a $1000 loan to someone else. If I want to collect interest on a $1000 loan, I have to actually have $1000 to lend out or be considered a fraud. The bank has a monopoly on cheap money because when they want to collect $10 in interest on a $1000 loan they only need to convince people to lend them $1, not $1000.

Re:And this

[Richy_T]

OTOH, if savings actually made sense and could produce a return commensurate with the value of the use of the money and not diluted by government running the presses, perhaps people would be less inclined to turn to debt. Of course, the overbearing tax burden doesn't help much either.

We already have a demographic nightmare rounding the corner with a tidal wave of "oldies" about to enter the scene. They also have no savings, huge amounts of debt, the currency is being inflated at a rate that could trigger hyperinflation at the drop of the hat and the stock market is hugely bubbled.

Good luck, everyone.

Re:And this

[Richy_T]

Theory is fine. You are just missing other effects and assuming that things are static other than what you happen to have your microscope on.

Re:And this

[alexander_686]

As you say, people can always factor in a consistent level of inflation or deflation in their planning. That's easy.

For deflation it is not as easy as you think. You point out unpredictable deflation leads to things like the Great Depression. The problem is that predictable deflation also leads to recessions as well. Inflation destroys wealth, which is the value of past investments. Deflation destroys the value of future investments, destroying the value of current investments.

Nominal Interest Rates = Real Interest Rates + Inflation/(Deflation). The higher the deflation the lower the real interest rates are. The value of investing in real asset fall so investments in future production fall. The value of investing in financial assets increase, shifting more money to those already wealth and less inclined to invest in tomorrow.

Take a look at what happened to Great Britton during the interwar years when Winston Churchill deflated the money supply to bring the pound back to the hard money standard – a 10 year deliberate, predictable, and well announced plan. Investment sank, productivity gains declined, and a general recessions was had. I would also point to America between 1870 to 1910 and Japan for the past 20 years. While less predictable, times of steady deflation, lower investment, and recsion.

BTW, in a relativity steady inflationary environment you don’t need to find investments that beat inflation. You need to do that for fixed financial assets, like cash or bonds. Real assets (factories, homes, college degrees, stocks, patents, etc.) value tends to increase at the same rate as inflation.

Re:And this

[Richy_T]

1.2% of its value compared to what? Certainly not Bitcoin.

Re:And this

[Richy_T]

Oh lose. For some reason I thought you were going to say gain.

Still, same point, Bitcoin has gained value over the course of the year. Volatile? Sure, the market cap is tiny. It's not staying that way though and the fluctuations are decreasing (as many of us expected) as it grows and it becomes harder to control large amounts of available capital.

Re:And this

[AK Marc]

I never said anything about $250 or 1990 dollars. You are assuming stupid stuff, then arguing against that strawman.

I have $100 in my pocket. A mortgage of 5%(APR), and there's deflation of ~1%. What will have the greatest change in my net worth 1 year from now, holding the $100 or paying it against my mortgage? (assuming it's an extra payment beyond the regular P&I, so it goes against principle only)

It's best to pay down your mortgage. Your ignorance doesn't change fact.

Re:And this

[anagama]

When I first learned about this, I was totally shocked. It's really kind of sickening.

This video, "The History of Money" is pretty interesting without being yet another return to gold standard video. There some interesting ideas for modernizing money creation at the end (in part 4).

http://www.youtube.com/watch?v=D0IJCGuNtqk

Re:And this

[alexander_686]

o.k., I present a theory, you dislike the theory, and throw a non-argument in my way. Really? What do you want then?

I can pull data from the bond market for the past 50 years? To short? Try Milton Friedman ‘s A Monetary History of the United States, 1867-1960. Too narrow? Try Irving Fisher. His monetary theories have held up remarkable well for the past 50 years globally.

Re:And this

[alexander_686]

Fractional reserves are not the boogie man. There is a difference between currency and money. Currency is something hard and fixed. Money is a bit more nebulas. Do savings account? Money Market – maybe. Yes? Does your unused HELOC loan count? Pre housing crisis it was probably near money, today not so much. Money is something you think you can turn into currency. It is one of the reasons why the “real bill” theory of money died 100 years ago.

On to the point – inflation does not explicitly say any of this. Inflation is the change in the aggregate demand of money verse the aggregate supply of money.

          You can have demand side shocks – this falls into the scarce human or investment capital.

          You can have supply side shocks – think oil crisis and crop failures.

          You can have changes in the supply of money. Government turning on the printing press or (in the gold standard days) a gold strike.

          You can have a change in the demand for money. War – yep – that increases demand. Financial crisis? Banks needed 4% in cash before the crisis, now they need 8%.

Inflation tells you less than you think in these matters – you need to drill down another level. And realize that multiple pieces are moving and things work on a 6 month to 3 year lag.

Re:And this

[Copid]

Fractional reserves are not the boogie man.

I try to tell people this. Even without fractional reserve banking, there will always be entities that borrow short and lend long. When long term and short term expectations shift, some of those entities will go bust. You can't "fix" that problem by doing away with fractional reserve banking.

Inflation is the change in the aggregate demand of money verse the aggregate supply of money.

Exactly this. Bitcoin is a perfect example of what happens when the rate of change of the money supply is basically unrelated to the demand for money. Surely the massive Bitcoin price swings are not "telling" us anything about the Bitcoin economy's "need" for more or less investment. It just tells us that demand for Bitcon fluctuates and the supply of Bitcoin is pretty much on a smooth trajectory and will be until the final Bitcoin is mined. Again, I can't figure out why "possible" hyperinflation that comes from having a central bank is somehow worse than *actual* bouts of hyperinflation and hyperdeflation that we are observing *right now* with this nifty new currency.

Re:And this

[lgw]

have no problem with "work of the mind"â"I'm a software developer too, BTW. But when you can take $1 in reserves (just enough to meet the daily demand for physical currency) and turn it into a $1000 loan, and get paid real interest on the full $1000, there's something undeniably fishy going on.

You may be misunderstanding how this works. A given bank can't lend out the same money twice, or 1000 times. In order to lend out $1000 someone has to deposit $1000 with the bank (after which that money is presumably spent and if another bank must convince the new owner of that $1000 to deposit it, only then is it loaned out again). And the bank needs to do something people find valuable in order for people to make those deposits, and accept a lower interest rate than the bank can make. in return.

Historically, being a retail storefront at all was a big part of how banks added value, and being able to process small transitions with good liquidity was the rest. But all of those things are becoming available to the individual small investor now with no need for a bank. Banks are basically coasting now on the financial sophistication of the average guy catching up with technological advancement (which usually take a generation or so).

Re:And this

[timeOday]

"The latest annual inflation rate for the United States is 1.2%, as reported by the Bureau of Labor Statistics (BLS) on December 17, 2013."

Re:And this

[JesseMcDonald]

You point out unpredictable deflation leads to things like the Great Depression. The problem is that predictable deflation also leads to recessions as well.

Not "unpredictable deflation", just significant decreases in the supply of money—planned or otherwise. Price deflation is not correlated with recessions in general, just in cases like the Great Depression where the supply of money underwent a significant contraction. You point out that a deliberate policy of destroying currency to manipulate its price relative to other currencies led to recessions. Well, naturally; that's what happens when you play with the currency supply, regardless of whether you're creating inflation or deflation: you send false signals, which leads to malinvestment, which destroys wealth, which leads to a recession.

BTW, in a relativity steady inflationary environment you donâ(TM)t need to find investments that beat inflation.... Real assets ... value tends to increase at the same rate as inflation.

If the value is only increasing at the rate of inflation then it's not an investment, it's just savings. So I buy a house, and in ten years (ignoring taxes and maintenance costs) I still have the same house, and it's worth about the same relative to other goods as it was when I bought it. Where's the expected return? To be an investment there needs to be an expectation of a net return, not just in nominal dollars but in actual value, and for that the nominal return has to outpace inflation.

Re:And this

[LF11]

Mortgages will probably never be denominated in bitcoins, unless they reduce in value over time. Debt is a terible thing to hold in a deflationary economy.

Re:And this

[ravnous]

Look up fractional reserve banking and be as shocked as the rest of us when we first heard of it.

Re:And this

[lgw]

No, you're just not getting how it works. The same bank does not get to lend out the same money twice. The "same money" gets loaned out multiple times (and thus the money supply is quite a bit larger than the physical currency pool) by different banks in sequence. The Fed is very firm about this: it's the only bank that gets to actually print money, all the other banks must get a deposit before they loan the money out.

Re: And this

[shaitand]

"You mean banks, who lend out a mixture of money they borrow from the government and money they borrow from savers. They lend it out to borrowers and receive payments back, and those payments decline in value with inflation. If they hold on to those loans as assets, they're in the "hurt by inflation" set."

Generally they don't loan out money from savers they use it as collatoral to borrow from government and loan that money out. Which makes sense since the interest rates from the Fed are so low as to be non-existent and they are allow to borrow a double digit multiplier of the money they are holding.

Re:And this

[alexander_686]

Not "unpredictable deflation", just significant decreases in the supply of money—planned or otherwise. Price deflation is not correlated with recessions in general, just in cases like the Great Depression where the supply of money underwent a significant contraction. You point out that a deliberate policy of destroying currency to manipulate its price relative to other currencies led to recessions. Well, naturally; that's what happens when you play with the currency supply, regardless of whether you're creating inflation or deflation: you send false signals, which leads to malinvestment, which destroys wealth, which leads to a recession.

mmmthat was not what Churchill was trying to do. And what false signal was he trying to send? To put this in context, England was on the gold standard prior to WWI, but had debased their currency to help fund the war. Churchill’s goal was to return the pound to its prewar value over 5 years. What type of malinvestment do you think occurred? I am not saying that malinvestment did not happen – it did. Investors overinvested in cash and loans and underinvested in real assets – which was my point.

And why do you say that deflation is not correlated to rescissions? I would be interested in where you are getting this data. I will point to 19th and the early 20th century where there was deflation due to a money supply growing slower than the real economy. Between 1870 and 1910 the US had a fairly constant and modest deflation of .3% and it was constantly being punctuated by recessions, financial bubbles, etc. There are plenty of other examples. I have a hard time pinpoint a example in the last 150 years where there was a prolonged period of deflation without a recessions.

If the value is only increasing at the rate of inflation then it's not an investment, it's just savings. So I buy a house, and in ten years (ignoring taxes and maintenance costs) I still have the same house, and it's worth about the same relative to other goods as it was when I bought it. Where's the expected return?

That one is easy – rent. Historically, property values and rent have a very high correlations with inflations – and there are good causal reasons. This is true even if you buy the house for your own personal use due to “opportunity costs”. That is, if you had not bought a house for yourself you would have had to rent a house and it’s rent would have gone up with inflation.

And this is true of most economic assets. If you build 1 factory that produces 1 widget a year, you’re your yield is 1 widget. Widgets, on average, increase in value at the same rate as inflation – by definition. Or a law degree where your yield is clients seen. Or stocks. Etc. Now if we are not talking about economic assets – such as cash, loans, or other fixed income investments – whole different story.

Re:And this

[shaitand]

Just because the price vs fiat has changed doesn't mean the currency has inflated or deflated I wish people would stop repeating that. Deflation or Inflation are changes in valuation related to supply of the currency the price changing due to market speculation is neither deflation nor inflation.

Re:And this

[Copid]

You're using a definition that most of the rest of the field doesn't use. The fact that they use it that way on misses.org doesn't mean that's how the rest of the world operates. Insisting on your own boutique definition doesn't help anything.

Re:And this

[alexander_686]

Well, no. You are making the assumption that idea cash will cause the economy to grow. If you burry your cash or gold in your backyard it doesn’t grow the economy much.

Let’s go back to the math and see if it holds up to reality.

Nominal Interest Rates = Real Interest Rates + Inflation.

Does higher real interest rates lead to higher investments? Broadly yes. We have got 150 years of global data to back that up. Inflation only has a modest impact – mainly because high inflation (above 20%) is normally unpredictable inflation, which increases inflation risk.

So let’s say real interest rates are 3% and deflation is 1%, so nominal interest rates are 2%. So if you risk your money you get 2% - not 3% - risks stays the same but rewards go down. Theory implies that investment goes down.

And we have got 150 years’ worth of data showing that it does. It is not as robust as the real interest rate data – I will give you that. It tends to be from before the 60s because after that almost everybody dumped the gold standard and Bretton Woods, and the older data is not as good. But we do have the America (1870-1910), Great Briton (1920s), and Japan (1990-)

Re:And this

[shaitand]

I prefer to look at the successful global use of deflationary money for a few thousand years before that. Next to that anything the past 50 years can merit hypothesis status at best especially in a world with 20yr mortgages. The only problem with the deflationary currency used was that as population increased there weren't enough units of currency to go around. There are 21,000,000 Bitcoins to be mined and 100,000,000 units of currency within each "Bitcoin" and that can be increased by network consensus (enough people install clients that support it) without inflating or deflating the currency. Inflationary currency on the other hand caused a global economic meltdown in less than one century.

The volume on MT Gox (the actual largest bitcoin exchange in the world, BTC China passed it for only a couple days) is 109225 BTC * the weighted average price of $569.03 that is $62,151,732 extrapolated that is $22,704,027,962.62 a year. If we divide that by the total of Bitcoins that will ever be mined 21 million, we see that Bitcoin should actually be valued at $1081 if no other exchanges existed in the world... including BTC China. Thanks to the FBI we know that at least 10% of that is the Bitcoin based internet drug trade alone and not mere speculative trading. The merchant catalog utilizing Bitpay, Amazon pay gateways, etc indicate a substantial white market trade as well.

So obviously it wasn't the people who bought at $700 before on the first word of the China thing that were morons, it's the people who sold on the news and caused the drop. The market will eventually correct Bitcoin to $1081+

Re:And this

[shaitand]

Why? If I loan you $25 and you pay me back $30 is the $30 not going to be worth just as much when I get it back as it would have been if I'd sat on it? It's not like you'd reduce the amount owed due to deflation.

Re:And this

[JesseMcDonald]

The effect is the same whether it's one bank acting alone or many banks acting in concert. One dollar deposited at one bank leads to a series of loans and further deposits which eventually permit 1000 banks to make 1000 $1 loans and, all together, collect $10 worth of interest. Provided, of course, that no two individuals ever ask to withdraw "their" dollars at the same time and thus bring the whole house of cards crashing down.

Out of curiosity, do the banks really need to be different, or does money deposited by a bank's loan customer count toward that bank's deposits? It was my impression that all deposits counted and there was no need for the money to pass through many distinct banks.

I'm not really as fanatical about fractional-reserve banking as some. I consider it shady and unsound but not inherently fraudulent so long as the bank's practices are public knowledge; caveat emptor. I would prefer a clear dividing line between demand accounts, which the bank must be prepared to pay out in full at any time (full reserves), and time accounts, which should be clearly described as investments, loans to the bank which, like any loan, may not be available for withdrawal on demand and could end in default, costing you some or all of your principle. Current practice is to mix the two types in varying proportions, from interest-bearing checking accounts to CDs guaranteed against default.

Re: And this

[LF11]

Because income diminishes over time. Say you loan me 25 bc. Let us assume I earn 1 bitcoins per week, and that amount will buy 5 MacBook Pros. At the end of six months, that amount will buy 10 MacBook Pros, and I am earning only 0.5 btc per week.

Debt in a deflationary currency becomes harder to pay off over time.

Re:And this

[lgw]

The effect is the same whether it's one bank acting alone or many banks acting in concert. One dollar deposited at one bank leads to a series of loans and further deposits which eventually permit 1000 banks to make 1000 $1 loans and, all together, collect $10 worth of interest. Provided, of course, that no two individuals ever ask to withdraw "their" dollars at the same time and thus bring the whole house of cards crashing down.

Out of curiosity, do the banks really need to be different, or does money deposited by a bank's loan customer count toward that bank's deposits? It was my impression that all deposits counted and there was no need for the money to pass through many distinct banks.

Well, there's not much fear of a run on the banks since the FDIC was created and backed with the money-printing power of the Fed just to prevent that - I can't think of a reason I would ever withdraw my saving as physical cash. I might spend all my savings to buy gold or land or guns, but I've never heard of even the "preppers" hoarding cash.

No, it doesn't strictly have to be a different back, it's just quite likely to be. My only point was you can only loan out the total of your deposits so it's not "free money": you have to work to convince people to deposit that money in the first place, and you won't do that without offering something of value.

would prefer a clear dividing line between demand accounts, which the bank must be prepared to pay out in full at any time (full reserves), and time accounts, which should be clearly described as investments, loans to the bank which, like any loan, may not be available for withdrawal on demand and could end in default, costing you some or all of your principle. Current practice is to mix the two types in varying proportions, from interest-bearing checking accounts to CDs guaranteed against default.

The is a clear dividing line, it's just not the one you want. A "demand account" is for all consumer purchases the same as a "checking account" - allowing banks to pay interest on those started around 2000, but the interest has no bearing on it. (And the reserve requirements are pretty low for demand accounts too, their just not 0 like savings and CDs).

It's worth noting that in the current system, there's not really a risk that you can't get your money back because of fractional reserve banking, because a bank can meet withdrawal needs short-term by just borrowing the money from the Fed, which is willing to create infinite money to meet such demand. There's not enough physical currency to go around, but again I'm not sure that's relevant any more.

Re:And this

[m.dillon]

Turns out that wasn't true. The Bitcoin had to be converted to cold hard cash first. Nor was the article about the Tesla being sold for bitcoin.

-Matt

Re:And this

[xvan]

Inflation transfers value from the people (both, poor an rich) to the government.

It has a bigger impact on poor people because they have a lot less of invenstment options to keep their money value, and banks won't lend them money to take advantage of the "help to those who owe".
Guess which segment is the one that owes more money?

Inflation hits everyone equally... That means that the proportional damage to the poor is greater.

Re:And this

[alexander_686]

I will disagree with you a little. First, how do you figure that inflation transfers value to the government? By what mechanism? I am going to guess you mean that they can turn on the printing press and mint free money, but most OECD countries (rich countries like the US) systems are set up to prevent that.

You are correct that the poor have fewer options and thus inflation hits them more directly. But if that is so, then the sophisticated (who tend to be rich) can structure their investments to blunt their impact. Which is why most people say “unexpected increase in inflation”.

But you have to remember there is a difference between the poor (low income, few assets), the middle class (moderate income, relatively high debt), the rich (high income, but also relatively high debt) and the wealthy (less income then you think, but owns more debt then you might think). Where am I going with this? Take a look 100 years ago. Farmers were begging for higher inflation because deflation was transferring wealth from those with high debts to the wealthy. See William Jennings Bryan's
Cross of Gold speech

No, the way governments transfer money from the rich and poor is though financial repression. i.e. when inflation is greater the nominal interest rates. Yes, this can happen when inflation increases, but most of the action by governments over the past 60 years have been to drop the nominal interest rates. That is what is happening in the US today (via the Fed's easy money policy) or China (where the government has placed caps on the interest rate). Or dozens of other cases.

Re: And this

[shaitand]

That's a reason it sucks to OWE debt with a deflationary currency not a reason you don't want to be OWED debt. But it comes out in the wash.

In the current world, currency inflating by 1.2% (someone quoted this from bureau of labor and statistics but it might as well be X for this example). Banks have to increase the interest rates they attach to loans by this amount so that they aren't losing money. For example, $100 loaned for 1 year would only have the buying power of $98.80 so I'd have to charge 1.2% interest just to break even and get paid back $101.20 + markup interest.

In another world, currency deflates by 1.2%. In this world banks simply charge markup interest because the money they are paid back will be worth more than the money they loaned. So, the same $100 loaned for 1 year would have the buying power of $101.20 + markup interest when paid back.

Either way the person taking loan has to come up with 101.2% of the borrowed amount of purchasing power plus markup interest. The only real difference is that in the deflationary world the lender doesn't have to try to measure, predict, and include the rate of deflate/inflate in to the interest.

"Say you loan me 25 bc. Let us assume I earn 1 bitcoins per week, and that amount will buy 5 MacBook Pros. At the end of six months, that amount will buy 10 MacBook Pros, and I am earning only 0.5 btc per week."

That's some pretty extreme deflation let's go with a more realistic and still high rate say 10%. Let's make it a year. So I loan you 25BTC for 10% interest so you have to pay back 27.5 BTC. Let's say you selling MacBook Pros and currently sell 5 MacBook Pros a week (0.50 BTC cost and 0.20 BTC profit each, so .70 BTC to consumer) and earn 1 BTC a week. By the end of the year (I'm going to ignore amortization because it doesn't change the concept and I don't want to bother calculating it). At the end of the year your MacBook Pros would be sold for .63 BTC, cost .45 BTC and net .18 BTC profit each. So yes, you'd need to increase your sales to pay back the loan but your potential customers salaries would be worth 10% more year on year so they could afford to buy 10% more of your product. The result of this is that deflation means 10% more goods/services would need to be produced to cover deflation. Just like 10% inflation would mean 10% more goods and services would mean the same.

Unless you are talking about a salary of say 1 BTC a week. It isn't like an employer would be able to cut salaries for deflation, they also wouldn't need to increase salaries to offset inflation like they do now, merely for merit. So you'd still make at least 1 BTC a week, it would just buy 10% more goods and services. That works out because your company and everyone elses increased production by at least 10% to cover salaries and pay back debts. That was easy for them to do because their goods and services are flying off the shelf 10% faster because their clients have 10% more to spend on their goods/services and their costs dropped by 10%.

Re:And this

[shaitand]

It helps keep a distinction between market speculation and the rate at which supply of currency increases/decreases which is pretty important if you don't want to confuse the effects of the two things together (being that they are distinct) in a discussion.

Re: And this

[LF11]

Your points are all good. I think bitcoins is too volatile, however, to denominated any long-term contracts. The deflation rate is high because velocity is low. Bitcoins gain in value hundreds of percent per year, and can lose 50% or more in moments.

I feel that something needs to be built on top of bitcoin. Perhaps a futures market, and we perform all transactions in futures contracts instead of the currency itself?

What do you think?

Re:And this

[alexander_686]

The problem with that approach is that there is no way to measure it, which takes to conversation away from facts and theory to dogma, which I don't find very useful in a economic context.

Re:And this

[alexander_686]

What history are you pointing to? Economic history is a hobby of mine but I don't know what era you are talking about.

I can't recall off the top of my head any deflationary period prior to 200 years ago. Heck, most of the inflation issues that I can think of is from governments debasing their debts after times of war or local gold strikes which expanded the supply of money.

Of course, during the past 5,000 years growth, and thus increasing demand for money, was something like 1% a generation. And it was not until 1850 when the majority of the economy was monetized or local economies tightly integrated. If you are trading cows for ploughs a .025% deflation is not going to same affect on you as a 1% deflation rate is going to affect your salary and mortgage today.

By the way, can you explain to me why it matters that BitCoins can only be dived by 100,000,000? Why is this limitation important? If I have 1 BitCoin, and there is deflation, I can now convert my BitCoin to 1.0 coins. Or maybe 1.0000 coins? How does adding extra digits to the precision of the value affect the effects of deflation on value. Why does this matter? Governments can take their current currency at subdivide infinitely. Reintroduce the ½ penny. Mint the 1/100 cent – or cent cent. Redecriminalize the currency as many times as needed.

Re:And this

[Copid]

If you do not spend your money and hold it, you are deferring your claim on resources and allowing those resources to grow the economy instead of being consumed by yourself.

You're drawing a distinction between "using resources" and "not using resources" and thinking it's a distinction between consumption and investment. That's not accurate.

Re:And this

[shaitand]

Prior to a couple hundred years ago all money was based on precious metals, gems, and other physical goods of innate value which are by definition deflationary.

"By the way, can you explain to me why it matters that BitCoins can only be dived by 100,000,000? Why is this limitation important? If I have 1 BitCoin, and there is deflation, I can now convert my BitCoin to 1.0 coins. Or maybe 1.0000 coins? How does adding extra digits to the precision of the value affect the effects of deflation on value."

Because the most critical purpose of inflating or deflating a currency is provide more units of it so that there are enough units of currency to readily facilitate trade. If there is not enough supply of currency the price goes up, by creating more units you drop the price back down. That is creating units by shifting the decimal to the left. You theoretically you can shift the decimal point an unlimited number of times so there is no limit to the amount you can inflate the currency.

People are used to this because that is how inflationary currency always worked. Deflationary currency has the same effect except that it creates units by shifting the decimal to the right. This also theoretically allows the supply to grow to unlimited quantity but in practice deflationary currencies have always been based on physically limited goods that ultimately could not be subdivided.

People are very used to thinking about money in whole units. Those people are looking at the price of Bitcoin and thinking about the price of 1.0 BTC. They refer to 2.0 as Bitcoins instead of 2 Bitcoin. If valuing against dollars 1.0 BTC was relevant at dollar parity. .1 BTC became the relevant unit of trade when it hit dollar parity. .01 BTC when it hit dollar parity, and .001 BTC when it hit dollar parity, etc. I'd call this the bit dollar. With every shift further back from the decimal point the bitdollar goes the more stable a unit it becomes because it requires an exponentially more significant change of dollar value relative to 1.0 BTC to change it.

We can shift this around and show that by applying the purely logical concept of the bit dollar we can magically turn bitcoin's deflation into inflation and thus prove that mathematically they are equivalent with the only mathematically significant factor being the rate. So if I had 1.0 BTC at parity I had one Bitdollar. When .1 hit dollar parity I would have had 10 bit dollars. When .01 hit parity I would have 100 bit dollars. When .001 hit parity I would have had 1000 bit dollars. So if I'm logically paying attention to the BTC it's deflating. If I'm logically paying attention to the effective unit of trade, the bit dollar or BTD suddenly I have an inflationary currency. This is economically sound because any currency is given value relative to another. These first shifts were fast because the economy is small, it is still relatively small. In order to shift the bit dollar again BTC would have to grow 10 fold. If you are familiar with the FOREX the same thing occurs by on the opposite side of the decimal. Because the currency is inflationary they trade massive quantities of it on sub penny changes.

But does it reflect the real market? Somewhere else I calculated out that the BTC volume of mt gox (the largest BTC exchange) * the average price * days in a year divided by the number Bitcoins that will ever be mined works out to $1081 and we know at least 10% of that amount flows through black market trade alone thanks to the FBI. Thanks to Bitpay and miners we know substantially more is solidly backed with white market trade. Bitcoin is currently floating between $600-$1200 per BTC. The Bitdollar is shifting between $0.60 - $1.20 over the course of a week. The same $600 shifts in BTC price if the bit dollar were to shift would be $0.96 to $1.04, if it were to shift another decimal the prices would be sub penny. And if it were to shift 4 more times from there fluctuations of $600 in the price of 1.0 BTC on the Bitdollar could not be expressed in something as unstable as the dollar even on the FOREX.

Re:And this

[shaitand]

P.S. "And if it were to shift 4 more times from there fluctuations of $600 in the price of 1.0 BTC on the Bitdollar could not be expressed in something as unstable as the dollar even on the FOREX." There are only 3 more shifts to make... leaving something that could just be expressed with the fifth decimal on the FOREX and I'd have inflated my original bit dollar to 100,000,000 BTD's that are more stable than any currency in the world.

Re: And this

[shaitand]

Agreed. I answered another post and talked about how using idea of a floating reference called the "bitdollar" (all rights reserved) which equates to the decimal place of the bitcoin unit that has reached dollar parity we can actually turn it in to an inflationary currency and that as the BTC decimal that corresponds with the Bitdollar shifts it becomes more stable. For instance now the bitdollar is the bitmil or .001 BTC and when the market shifts by $100 it shifts $0.10 fluctuations of the bitdollar. If BTC were valued at $10,000 that $100 shift would represent $0.01 change in the bitdollar relative to the dollar, and so on with a factor of 10 reduction in variation with each shift.

It's much like a stock split really. I wish the clients and exchanges would express BTC this way because there is a psychological barrier that makes it easy to accept small price variations in something like a Bitdollar and difficult to embrace ever higher values of a single BTC.

Of course the market has to reflect the higher values for a whole BTC. I guesstimate based on how many dollars are moving around the exchange that BTC should be at least $1081 (see my other post to see where I got that number) to cover the amount of money flowing through MT GOX in a day extrapolated over a year. So it is currently under valued but the current 'bitdollar' would still correctly equate to .001 BTC. If people speculated and traded on bitdollars we'd see a couple slower than now but relatively fast splits and then the bitdollar would stabilize to something much more reasonable.

Theoretically, this can work as far as 1 BTC being a lot of $100,000,000 BTD and something likely traded by national banks and not individuals and the BTD would be the most stable unit of currency we've ever known. It would be solidly backed by BTC with zero chance anyone has miscalculated the global supply of this limited resource and no chance of counterfeiting. It survives the rise and fall of nations, corporations, deaths, etc and can't be manipulated by any of them as long as there are others to keep them in check.

Re:And this

[lgw]

Again, that's just wrong. A bank with $1,000 in deposits via a CD can loan out precisely $1,000. There are no reserve requirements on CDs. There is also no borrowing of additional funds from the Fed (in the normal course of business for a healthy bank, although the "overnight window" is there for panics).

In fact, the Fed money loaning is the opposite of what you've stated. Banks voluntarily deposit money with the Fed in excess of reserves to get a decent interest rate, and currently there are $1.7 T in excess reserves - an insane amount, and no one really knows what effect it's having on the economy.

The ratio you talk about is not a bank with $1,000 somehow able to loan out $10,000. It's the net effect of the fractional reserve banking system on the money supply.

Comparison: Bitcoin is like 'Abortion' in the US..

[Anonymous Coward]

Totally legal but...

States do everything to prevent access to it... shutting down clinics left and right..

And if you do find a clinic you to face a picket line

Given the responses from all these governments you can tell that Bitcoin is something big... that is.. maybe not the actual coins, but the intellectual underpinnings:

- Decentralized
- Limit in coins
- No one governs/owns

It is really what the world has been waiting for.. something that can not be corrupted by any government, is safe and fast. The internet needs this

trending downward?

[Anonymous Coward]

If anything, it looks like it bounced off the bottom and is recovering upward.

Don't bet on trendlines though.

Price not value.

[trout007]

Both parties in a trade value what they are getting more than what they give. The person selling the item values the cash higher than the item. The person buying values the item higher than the cash. The price is where the exchange takes place where both parties value what they get more.

Re:Price not value.

[Trepidity]

Both parties in a trade value what they are getting more than what they give.

For a certain definition of value, yes, but not necessarily for the common one. In an idealized market, you do hope this is true for the common definition also: people have independently assessed how much they value some commodity, and offer a price accordingly. The price then converges on some aggregation of values.

But in real markets, this is often recursive: someone is offering $x for a commodity not because they themselves consider it to have a certain value, but because they think they will be able to resell it for $(x+y), due to market fluctuations. They may themselves consider it a worthless pile of trash valued at $0; day-traders, unlike value investors, don't make trade decisions based on their own assessments of the underlying value of the commodities or equities they're buying and selling. Instead they base their decisions on statistical estimates of market dynamics, independent of whatever the underlying item is and whether it may or may not have any value at all (models often don't even consider the underlying item in the equation).

Re:Price not value.

[sunsurfandsand]

Both parties in a trade value what they are getting more than what they give.

The party that values cash more than bitcoins, though, probably will suffer less buyer's remorse.

Re:Price not value.

[trout007]

Speculators still value the prospect of future gains over the cash they give in the trade.

Re:Price not value.

[dj245]

Both parties in a trade value what they are getting more than what they give. The person selling the item values the cash higher than the item. The person buying values the item higher than the cash. The price is where the exchange takes place where both parties value what they get more.

This is a key part of the economic argument (The "Scrooge" argument) on why giving non-cash gifts is a colossal waste of time and money. It is difficult to know how much another person values something unless they tell you.

Re:Price not value.

[Trepidity]

Sure, but that's a market-internal "value" that doesn't lead to the kind of idealized market that actually makes any sense.

You can see this fairly clearly if you study dynamical systems. Some of them are "well-behaved", in which inputs/ouputs relate as you might expect. But many have internal pathologies that they can fall into if they reach certain states: feedback loops and chaotic behavior and such that's driven by system-internal (aka market-internal) dynamics and disconnected from anything else (such as any market-external notion of value).

Re:Price not value.

[trout007]

All value is subjective anyway which is why often it doesn't make sense. I don't understand why people get tattooed. You would have to pay me quite a bit of money to get one.
And yet some people spend fortunes on them.
To me it makes no sense.

Re:Price not value.

[myowntrueself]

Both parties in a trade value what they are getting more than what they give. The person selling the item values the cash higher than the item. The person buying values the item higher than the cash. The price is where the exchange takes place where both parties value what they get more.

This is a key part of the economic argument (The "Scrooge" argument) on why giving non-cash gifts is a colossal waste of time and money. It is difficult to know how much another person values something unless they tell you.

Thats part of the fun of gift giving.

Re:Price not value.

[fatphil]

Approaching it from a bit of a DSP engineer's perspective. I've always thought that day traders (or HFT) actaully value the first derivative of the value more than the value itself. Which means that calculations based on the moments of the value distribution, or even relying on the existence thereof, may no longer apply.

Re:Price not value.

[trout007]

Not a bad way to look at it but the volume most HFT deal with will affect the price. The HFT (when it works) should tend to filter out spikes.

Re:Price not value.

[Copid]

And like Bitcoin, a lot of people get tattoed thinking that it will provide a certain level of utility for them and then come away realizing that they had miscalculated.

Re:Price not value.

[trout007]

Of course. But we are talking about at the time of the exchange.

Re:Price not value.

[Copid]

Right, but the time of exchange isn't the only interesting time, especially when you're trying to decide if something is just a speculative bubble. In fact, I'd say that a good definition of a bubble is a case when most people are buying a financial asset because they belive something about the future price that is unlikely to be true. I think Bitcoin fits that description better than just about anything else these days.

Re:Price not value.

[LF11]

Speculators trade safety for cash. They value safety less than the cash (or, vice versa, they are valuing safety more than cash).

Re:Price not value.

[trout007]

The offering price at the time of the trade is the only objective measruement. Someone can say they value their grandmothers antique more than anything because of it's sentimental value. But you don't know that for sure until someone actually offeres them cash for it.

Re:Price not value.

[justthinkit]

Not if everyone shops at Dollar Tree!

Litecoins

[click2005]

I guess this why Litecoins halved from $30 to $15 each too.

Re:Litecoins

[Anonymous Coward]

Cosbycoin is way up, though!

I'm not the boss of my house. I don't know how I lost it, I don't know when I lost it, I don't really think I ever had it. But I've seen the bosses job...and I don't want it!

Re:Litecoins

[SuricouRaven]

Not just yet, please. I'm just about to mine some myself. Not because I think I've a snowball's hope in hell of making a profit off it - I'll be lucky to pay for the power. I'm just interested to see how the maths works, and a good way to find out what this technology can do is to play with it.

Re:Litecoins

[compro01]

Not just yet, please

If you're just starting mining, the difficulty dropping would be an excellent thing for you. It would mean you would have a larger share of the network hash rate and thus get more coin out of the same equipment.

Though a difficulty cut doesn't seem all that likely at the moment unless the current trend suddenly reverses itself. Even with the price drop, the network hash rate is flirting with 10 petahashes (up from about 6 at the start of the month) and it looks like the difficulty is going to break 1 billion next adjustment, which looks like it will be either on christmas or boxing day.

Re:Litecoins

[SuricouRaven]

Not that I've got much hardware. I'm not going to throw money into this.

Re:Litecoins

[DanielRavenNest]

Since it's winter in the northern hemisphere, just think of the energy going into your mining hardware as partly heating your house. So basically it offsets the other heating system you have, and thus is free (minus wear and tear on the hardware).

Re:Litecoins

[shutdown -p now]

I'm just about to mine some myself. Not because I think I've a snowball's hope in hell of making a profit off it - I'll be lucky to pay for the power.

Even at the current reduced rates for both LTC/BTC and BTC/USD, you will still make way more than power (assuming you have a relatively recent, power-efficient GPU). If they keep dropping at the same speed, though, that won't last long.

Darn!

[Anonymous Coward]

Darn! Just when I finally got the BFL miner I ordered over a year ago - and silly me thought my 5GH miner was going to make me stupid rich...

Re:Darn!

[sunsurfandsand]

silly me thought my 5GH miner was going to make me stupid rich...

One out of two ain't bad.

Seems like a good time to buy

[Anonymous Coward]

If only one could trust any of the fly-by-night exchanges.

"Proof against tyranny"

[i kan reed]

Kind of a sideline approach here...

This is the clearest evidence yet that the pro-bitcoin libertarian segment misunderstand how government control works. The argument goes "government prints the money, and tracks the money therefor can tax me." The presumption of bitcoins is if the currency doesn't come from the government, they don't have any means to control it.

Good ol' actually tyrannical China comes along, and does the thing any government is capable of doing. Saying "if we catch you dodging our system, our system will throw your stupid self in jail." Poof.

If having a wallet.dat is a crime, the fact that the coins inside of it are encrypted won't protect you.

Re:"Proof against tyranny"

[operagost]

Because there totally isn't crime or a black market in places like China.

Re:"Proof against tyranny"

[i kan reed]

Did I say no one breaks the damn law? That's so radically different what I said that I must question your basic verbal processing capability.

Re:"Proof against tyranny"

[IamTheRealMike]

I think only the most naive anarchists argued that (and I've called them on it many times before in various Bitcoin forums). The gamble being made there is effectively that given a choice, a government would choose not to become totalitarian and oppressive, and would prefer to give up some control over the financial system.

Well, only an idiot would believe China would do that. They are already totalitarian and oppressive, no surprise they'd be willing to jail anyone who uses Bitcoin.

In contrast, many European countries are sorting out how they're going to handle it. See the recent announcement from Denmark saying that Bitcoin is fully legal, and people who want to run exchanges don't even have to be regulated as financial institutions at all! It seems very unlikely that the governments of Norway or Denmark are going to start jailing anyone who sells sandwiches for coins.

America is somewhere in the middle. It's not as free or liberal as most of the smaller European states, but it's not as oppressive as China. Hence the confused approach there where the US government is saying one day Bitcoin is cool and it's all OK, and then next day threatening Bitcoin businesses with jail time. They can't quite decide which direction to go in, it seems.

Re:"Proof against tyranny"

[ADRA]

No, but they don't seem to have qualms executing corrupt politicians / business people who have done great harm:
http://www.businessinsider.com/chinese-white-collar-criminals-death-sentence-2013-7
http://www.bbc.co.uk/news/world-asia-pacific-14197485
http://www.nytimes.com/2007/07/11/business/worldbusiness/11execute.html?pagewanted=all&_r=0

Re:"Proof against tyranny"

[i kan reed]

And, that seems like a perfectly reasonable belief. But bitcoin suffers from an excess of "true believers".

Re:"Proof against tyranny"

[crypticedge]

It is china, where they execute people for bankrupting a company. I doubt they'd just throw them in jail because of that.

Re:"Proof against tyranny"

[i kan reed]

Part of having inappropriate punishments for crimes is that they aren't necessarily going to correspond to any metric in particular, but the whim of the leadership. That includes light sentences sometimes.

Re:"Proof against tyranny"

[crypticedge]

Oh I know, I'm just expecting a news report that china executes someone for BTC use within the next year or so. After all, it is china.

Re:"Proof against tyranny"

[i kan reed]

Remember that the overarching goal of government in China is "glorious harmony." They want a monoculture, and they're more inclined to use work-camps with no trial involved than bring people up on summary charges and execute them. You basically have to be an image problem to get executed in China(they kill fewer people than the U.S., for example).

Re:"Proof against tyranny"

[crypticedge]

And that means a very vocal and visible dissident, or a high profile business refusing to comply. It's not like china hasn't had many of those cases.

Re:"Proof against tyranny"

[DerekLyons]

Hence the confused approach there where the US government is saying one day Bitcoin is cool and it's all OK, and then next day threatening Bitcoin businesses with jail time. They can't quite decide which direction to go in, it seems.

Huh? There's no confusion at all. The US Government is 'totally cool' with Bitcoins so long as you comply with existing financial regulations. The Bitcoin business (the physical coin dealer) wasn't threatened with jail because he dealt in Bitcoins - but because he didn't so comply. The difference isn't semantic and is about as subtle as thermonuclear weapon. I suspect he won't be the last, I bet there's a lot of people out there trading and speculating in Bitcoin that otherwise wouldn't be speculating and trading in currencies and financial instruments - and because they're operating outside traditional and existing channels they don't realize they're playing with fire.

Re:"Proof against tyranny"

[i kan reed]

How totally astute of you. I hadn't considered what I said through the lens of the petulantly literal person who has never broached the idea of there being something after the "1." entry in a dictionary definition.

Thanks for the tip!

Re:"Proof against tyranny"

[Stormy Dragon]

What governments can't do is change a few numbers on a spreadsheet and *POOF* billions of bitcoins suddenly exist that didn't a second ago. Bitcoins biggest feature is that it protects against the currency being devaulued by excessively expanding the money supply.

Re:"Proof against tyranny"

[IamTheRealMike]

If you investigate what it takes to be compliant with US state money transmitter laws you will see there's no possible way for Caldwell to ever comply. Most estimates I see say it takes several years and between 3-10 million dollars to come into compliance with these regulations. He'd have to have his fingerprints be taken 47 times. Effectively, being labelled this way (it's a vague set of rules) is a death sentence for any small company. So no the difference is no "as subtle as a nuclear weapon". Given a set of laws so absurdly hard to comply with that basically only one new company in living memory has succeeded (PayPal), and that is the subject of a book called "The PayPal Wars", there's practically little difference between that and being explicitly banned.

Re:"Proof against tyranny"

[DerekLyons]

Most estimates I see say it takes several years and between 3-10 million dollars to come into compliance with these regulations.

You need to get your estimates and information from somewhere other than wingnuts.

Re:and yet dogecoin trends upwards!

[grasshoppa]

That's cute.

What did you think the stock market was?

This is just a clever trick by China . . .

[PolygamousRanchKid]

Now that they have driven the price of bitcoins down, they will now buy up all of them at low prices . . . and then . . . announce that the will accept them as currency . . .

Profit!

Re:This is just a clever trick by China . . .

[Anonymous Coward]

I am :)

Re:This is just a clever trick by China . . .

[Anonymous Coward]

Okay, great, so why don't you buy some now and profit too?

Buying bitcoins seems a lit like buying drugs or hookers. I may want to, but if I haven't done it before, I don't have the slightest idea how to go about it without getting screwed. Or not, in the case of the hookers.

Re:This is just a clever trick by China . . .

[LF11]

Localbitcoins.com is a reasonable way to get started.

Re:This is just a clever trick by China . . .

[DanielRavenNest]

If you are in the US, you can sign up with https://coinbase.com/ They just got $25 million of venture funding: http://www.bloomberg.com/news/2013-12-12/bitcoin-startup-gets-25-million-in-andreessen-led-funding-round.html so they are not a fly by night outfit.

You have a choice to keep your bitcoins on their system, which is OK for small amounts, or transfer it to a personal "wallet" on your own computer. All bitcoin balances actually live on a distributed database called the "block chain", which every full copy of the client software audits independently. A wallet contains the private cryptographic keys that allow you to *move* a balance from your address to another one in the database. Thus wallet files are pretty lightweight, and can be backed up onto pretty much anything, including paper. Bitcoin wallets should be treated like house keys - have backup copies, but don't lose them, because then someone else can steal your stuff/bitcoins.

The distributed database is why bitcoin transactions are so cheap. A transaction is basically a message that says "Move X bitcoins from address A to address B", which is signed by your private key. The block chain database includes every past transaction, so everyone can audit your current balance simply by adding up all the past transactions for that address. If your balance is too low to cover the new transaction, it gets rejected. If it meets all the audit tests, it gets passed along to everyone else on the network. Since everyone now knows you spent your balance, you can't spend it again.

Bitcoin balances are tracked to 8 decimal places, so you don't have to deal in whole bitcoins. These days people are transitioning to reporting in millibitcoins (mBTC) since those are closer to dollars and other fiat currencies than a full bitcoin is these days.

me too...

[globaljustin]

after I picked myself up off the floor and composed myself a bit, I still laughed to myself at how fast the BTC bubble burst

that said, I learned alot by studying & discussing how BTC worked & what it's benefits/drawbacks were...I wish I had found my BTC wallet info!

i bought exactly 1 BTC back in late 2009 IIRC but I was so busy with grad school it got lost in the shuffle

any idea that BTC could replace currency or be an investment vehicle were/are silly but its still noteworthy as a sort of 'prank' that got taken very seriously!

Re:me too...

[SuricouRaven]

There may still be a niche in informal transfers: Party A buys coin, sends to party B, B sells coin. Potentially handy for those who are unable to deal with conventional payment processors (Criminals, activist groups under government oppression, those affected by international sanctions, people in obscure countries where Paypal does no operate) or who are just unwilling (Anti-corporate idealists, paranoid activists, people worried about the many paypal stories of those who struggled to get their money out).

As a medium of long-term storage, or even something you could price goods in, it's just too volatile.

Re: me too...

[AvitarX]

That's funny, the first time I read that the value burst, it fell 50 percent to around 100 or so.

Every time I see it loose 50 rapidly, it bounces back and further, see the various scandles, see when silk road closed. It's super volitile, but it has been fairly resilient too.

Re:me too...

[AlphaWolf_HK]

Then again, every time bitcoin bubbles and pops, it rises to unexpected levels later.

People like you were saying exactly this when it dropped from a high of $200 to a low of $50, and said the same thing in the bubble prior to that. My only regret at the time was that I believed it. Not long after, it began trading at $1300.

Anyways, I've actually profited rather well off of bitcoin; in fact the whole thing could collapse tomorrow and I'd still have made a profit. The silly thing is that while you've been rolling on the floor laughing at me, I've been rolling in cash.

Re:me too...

[crypticedge]

The bitcoin bubble gets inflated and bursts monthly. When silkroad closed the same thing happened.

The concept is neat, but the chance of it ever becoming more has always been nil.

Re:me too...

[Copid]

The silly thing is that while you've been rolling on the floor laughing at me, I've been rolling in cash.

That's not really how currencies are supposed to work, though.

Re:me too...

[Richy_T]

Burst all the way to 3-4 times what it was a couple of months ago...

Re:me too...

[Richy_T]

Tell that to George Soros.

Re:me too...

[Richy_T]

The silkroad fallout was a barely noticeable blip.

Now, when they auction off the confiscated BTC, things could get interesting.

Re:me too...

[Copid]

Pretty sure George Soros wasn't saying that the ERM was all that great an idea either.

Re:me too...

[Richy_T]

Sure it was. For him.

Watch anything that comes from that guy's mouth. You either know it's supposed to benefit him or evoke a reaction that does.

Re:me too...

[jeffmeden]

There may still be a niche in informal transfers: Party A buys coin, sends to party B, B sells coin. Potentially handy for those who are unable to deal with conventional payment processors (Criminals, activist groups under government oppression, those affected by international sanctions, people in obscure countries where Paypal does no operate) or who are just unwilling (Anti-corporate idealists, paranoid activists, people worried about the many paypal stories of those who struggled to get their money out).

As a medium of long-term storage, or even something you could price goods in, it's just too volatile.

That would only work if the state-backed currency was immediately converted to BTC, then back again. And if thats the case there will quickly become markets for arbitrage as the value would float around wildly (imagine only holding BTC for .1s and the price dropping by 10%, it happens). No, people will still just use the normal, state-backed currency methods for all those things you mentioned. If TOR isnt effective at masking oneself against the oppressive regimes you listed, no BTC transaction house will be invulnerable so the money going in/out will not be insulated in any way just because it existed as BTC for a brief moment. Paypal aside, most of them work pretty well (even if they are pricey in comparison).

Re:me too...

[J Story]

after I picked myself up off the floor and composed myself a bit, I still laughed to myself at how fast the BTC bubble burst

"Burst" does not really describe the phenomenon. Before the run-up in value, some weeks ago, 1 BTC was trading at around $100. Now that the value has "collapsed", it is trading at around $600.

Re:me too...

[nschubach]

I am curious how they intend on dealing with all the "lost" bitcoin if they only ever intend on "making" 21 million btc. If the feds just decided to up and delete the drive, how will anyone know?

Re:me too...

[darkwing_bmf]

There is arbitrage and the price does fluctuate but it's still probably the easiest way to send "money" halfway around the globe.

Re:me too...

[Richy_T]

Why would anyone care?

Bitcoins are currently divisible to 8 decimal places and could be divided further if needed. Lost bitcoins are not an issue, they just cease to participate in the economy.

Re:me too...

[shaitand]

They don't have to auction it that's for goods. It's digital currency in the US. Why do you think the FBI and DOJ were so crazy in favor of it before congress?

Crypto COMMODITY

[brunes69]

I wish people would stop calling these "crypto-currencies", because it is a total misrepresentation of what these things are. They are crypto-commodities. BTC is just like gold right now - it is not used to transact, it is used as a value store - except it is much worse as a value store because it is orders of magnitude more volatile. No one can use BTC as a currency because its value fluxuates so wildly. Everyone who is SUPPOSEDLY using it as a currency just has it pegged to the US dollar with a live update.

Re:Crypto COMMODITY

[DaveV1.0]

Perhaps you should tell that to the inventors of Bitcoin.

Bitcoin is an innovative payment network and a new kind of money.

How about reading their their FAQ where it specifically says Bitcoin is a cryptocurrency? You might learn something.

Re:Crypto COMMODITY

[Anonymous Coward]

They can call it what the want, but it's not traded like a currency.

Re:Crypto COMMODITY

[brunes69]

It does not matter what people intended something for, it matters what it is USED for in actual practice. Until people start actually using BTC as a real currency, it is not a currency.

I can write a bunch of numbers on post-it notes and claim it is a currency as well - it does not make it one.

Re:Crypto COMMODITY

[tlhIngan]

Everyone who is SUPPOSEDLY using it as a currency just has it pegged to the US dollar with a live update.

I doubt it's everyone doing it with live updates - I'm fairly certain there are places that merely adjust the prices far less frequently. They may initially peg it at the current exchange rate, but adjusting it depends on how much they'd make or lose - if the value of BTC rises, they may adjust downwards a little bit, but not by much - preferring to profit form those who decide to do the "cool" thing and pay the sucker rate.

Re:Crypto COMMODITY

[egcagrac0]

Sure it is...

Re:Crypto COMMODITY

[rubycodez]

gold is used to transact. I sometimes go to countries that do so. and governments transact in gold

gold is real money, with value that fluctuates just as any other money

Re:Crypto COMMODITY

[Richy_T]

I've bought several things with it. It is typically stable enough over the short term to allow for close-enough approximations.

The £ dropped against the $ about 20% virtually overnight a few years ago so it's not like regular currencies are immune.

Re:Crypto COMMODITY

[fatphil]

I put some numbers on a beermat - wanna swap?

I'm also looking for numbers on the back of old receipts, if you know anyone who has any.

Re:Crypto COMMODITY

[Richy_T]

Seems extremely similar to me.

Re:Crypto COMMODITY

[roman_mir]

There is a world of difference between gold and Bitcoins. Gold was always valuable in itself, before anybody used it as money, people wanted it just because the metal was fairly rare and easy to make jewellery from. It's not like gold was found and immediately people said: that's money. No, gold was a metal that was desired for thousands of years, then eventually it was used as money also for thousands of years. Gold was storing value for people before people started commonly using it as money, the metal proved itself to be capable of withstanding the test of time in business of storing value.

Bitcoins were intended to be money from the beginning, their entire existence is for one purpose: to be money. In that sense Bitcoins are a currency, and since they are not backed by anything (no gold behind Bitcoins), they are a FIAT currency. The difference is that they are not printed by government, but the scarcity argument is moot, every bit of Bitcoin is about as 'valuable' as any other bit. One Bitcoin is essentially 10Million coins, each one can take an arbitrary value. More importantly, competing electronic fiat currencies exist and there will be more and more of them as more people want to participate in this new electronic currency market.

To say that Bitcoins store value is premature AT BEST, I don't think Bitcoins will become less volatile with time, I think they will be more volatile with time, I don't think they store value, I think they are an interesting vehicle for speculation and many disciplined day traders can make a killing trading these, but there is no value outside of its direct purpose: be currency.

Some say that the protocol and the network are the value, but again, those are replicated across many other currencies and there will be more of them, there is nothing special about Bitcoin except for it being first, but being first also has disadvantages. With Bitcoin prices going up, every time the price goes up, the risk that one takes buying them is bigger than the day before. There was very little risk buying 1000 Bitcoins at a few dollars a few years back. Today to buy 1000 Bitcoins you need half a million or more dollars and given the speculative nature and volatility, very few people will buy 1000 Bitcoins, but they will buy a few or maybe fractions - coins of smaller denomination. Or maybe they'll buy other coins, that are perceived to be cheaper.

Basically declaring that Bitcoin is a store of value is extremely premature but also is most likely completely false.

Re:Crypto COMMODITY

[stanjo74]

Absolutely right. Bitcon in NOT a currency, until a country starts receiving tax payments in it. The definition of currency is "a system of money in general use in a particular country". Gold used to be a currency when countries would take it to settle obligations - now it's a commodity. Same with Bitcoin - it's a commodity and a store of value, and you still need to sell it for a currency to settle your capital-gains tax obligation on it.

Re:Crypto COMMODITY

[stanjo74]

Which country takes gold for tax payments ?

Re:Crypto COMMODITY

[bloodhawk]

I can call what comes out of a horses arse Currency too, it doesn't make it so.

Re:Crypto COMMODITY

[bloodhawk]

you have to go back a few years to find such a huge drop in currency value. 20-50% drops and rises in BTC are a DAILY occurance. It is closer to a stock or a commodity than it is a currency.

Re:Crypto COMMODITY

[DanielRavenNest]

Does $100 million in merchant transactions make it real enough?

http://www.coindesk.com/merchants-love-bitcoin-bitpay-100-million-reasons-prove/

Between BitPay and Coinbase (the two large merchant processors), they have 32,000 merchants accepting bitcoin. That's nowhere near the acceptance of bank cards, but it's growing fast. And these are not just mom and pop retailers, through http://www.gyft.com/bitcoin/ you can use them a 150 major national brands,

Re:Crypto COMMODITY

[david_thornley]

If the exchanges are actually liquid in some reasonable sense, and they don't maintain price agreement, they're going to get really screwed as soon as somebody uses arbitrage (e.g., buys Bitcoins in quantity at $500 in Chicago, and sells at $510 in Tokyo at the same time). If they're not particularly liquid, then they're lousy exchanges in the first place.

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[account_deleted]

Comment removed based on user account deletion

Re:and yet dogecoin trends upwards!

[dugancent]

Not the members of 4chan. Arguably the most worthless site on the internet.

A very happy bureaucrat.

[MarkvW]

Somewhere in China a group of Bitcoin-speculating bureaucrats are very happy right now.

Must make the Bitcoiners really happy to know that their financial world can be so readily disrupted . . ..

Re:i got some bitcoins

[paskie]

Yes, just use Electrum or equivalent if running the full-blockchain is too bothersome (it is for most, now). Avoid putting your bitcoins on *any* online account, that is way too dangerous. With Electrum, you don't have to download a blockchain, but only you still have the wallet.

No surprise in the collapse

[timholman]

When a couple of my friends started posting "now is a great time to buy into BitCoin" messages on my Facebook feed a couple of weeks ago, I had a feeling the BTC price was about to take a strong downward turn. It is never a good sign when the "true believers" begin actively recruiting new buyers into a price bubble.

The collapse of BitCoin as a speculative investment is inevitable, and its own success will be its downfall. The speculative frenzy over BTC is based strictly on artificial scarcity. The problem is that there are an infinite possible number of cryptographically signed digital currencies. If only X amount of gold exists in the world, there is no replacement for it, assuming you desire the exact physical qualities of gold. But if only Y digital coins exist, it is trivial to create another digital coinage with a slightly different protocol that behaves exactly the same way as far as a user is concerned.

The boom in BTC has led to several new competitors, with similar frenzies growing around some of them. And given the low barrier to entry, you can expect more and more competing digital currencies to appear. It is only a matter of time before people realize that they're fighting over a particular set of tulip bulbs while standing in an infinitely large field of tulips. Once that happens, the speculative bubble will pop for good for all digital currencies. In the long run, this is a good thing, because once the speculators are gone, some digital currencies may actually prove useful as a real medium of exchange, with values that don't fluctuate wildly from one day to the next.

Re:No surprise in the collapse

[kencurry]

Your point that digital currency value is based upon scarcity, yet nothing prevents a new one popping up anytime is a good one. A sober reality check and one I hadn't though of.

Re:No surprise in the collapse

[Anonymous Coward]

to your first paragraph: it's said that Joseph Kennedy sold most/all of his shares weeks before the 1929 crash because "he knew it was time to get out of the market when he received stock tips from a shoe-shine boy." http://en.wikipedia.org/wiki/Joseph_P._Kennedy,_Sr.#1929_Wall_Street_Crash

Personally I knew the "new market" bubble would burst months before it did - because everyone and their dog bought shares and told me to do so, too.

Re:No surprise in the collapse

[ADRA]

"it is trivial to create another digital coinage with a slightly different protocol that behaves exactly the same way as far as a user is concerned."

The sad thing is, this will almost single handedly end the bitcoin craze. With hundreds/thousands of competing crypto-systems of exchange who in the world is going to maintain and trust in these systems? Do you see valuation agencies looking at these things and go, uh yeah this is a good valuation? They will laugh at it and say there is no valuation to judge on it. That alone will prevent most institutional investors from even toughing them, meaning realistically, the only people touching crypto-currencies are cowboy investors or people who actually want it to make exchanges. But in a system with 100's of competing products, who wants to run their business by having hundreds or thousands of highly volatile currencies as a exchange?

Re:No surprise in the collapse

[F. Lynx Pardinus]

The problem is that there are an infinite possible number of cryptographically signed digital currencies.

I'm not a BitCoin fan, but I'm not sure I buy this argument, because it seems too close to saying "gold can have no value because lots of other metals exist." How do you differentiate those two arguments?

Re:No surprise in the collapse

[myowntrueself]

If only X amount of gold exists in the world, there is no replacement for it, assuming you desire the exact physical qualities of gold.

The interesting thing with gold will be when asteroid miners start bringing it back.

IIRC the first asteroid ever examined for it turned out to be very likely to have more precious metals in it than have ever been mined out of the Earth. And that was a random one.

Re:No surprise in the collapse

[Richy_T]

The same is true of Facebook, Amazon, Ebay etc.

Re:No surprise in the collapse

[Jeremi]

But in a system with 100's of competing products, who wants to run their business by having hundreds or thousands of highly volatile currencies as a exchange?

Nobody, of course. But that only means that most of the competing currencies will die a quick death from lack of support. In the end there will probably be one or two currencies that retain enough mindshare to survive; BitCoin may or may not be one of them, but it does have first-mover status, which is a significant advantage.

Re:No surprise in the collapse

[UnderCoverPenguin]

The problem is that there are an infinite possible number of cryptographically signed digital currencies.

I'm not a BitCoin fan, but I'm not sure I buy this argument, because it seems too close to saying "gold can have no value because lots of other metals exist." How do you differentiate those two arguments?

Each metal has a set of properties that differentiate it from other metals that affect its desirability for various uses. The combination of gold's properties and its relative scarcity give it its value. Scarcity can vary over time, thus changing the value. An interesting example is aluminum. Before the techniques and technologies required for large (or even medium) scale smelting of bauxite, aluminum was almost as valuable as silver.

The difference with digital currency is simply that it is easier to assemble the required algorithms and protocols to create new currencies with whatever set of desired properties/features. The main obstacle to its competitors is achieving sufficient level of adoption by users. Part of achieving that will involve addressing Bitcoin's problems without compromising its benefits. - and then adequately demonstrating its superiority,

Re:No surprise in the collapse

[wertigon]

Ah, but you are missing one important detail about BTC/LTC etc.

While we can move to an alternate currency, that currency in and of itself will need some valuation at some point. How are you going to evaluate this new currency?

Everyone might move to WTFCoin, FooCoin or WhateverCoin tomorrow. But moving to these currencies would be equally useful as, say, monopoly money.

A currency is not valued in some arbitrary number but rather the (perceived) value of that currencys financial backbone. The US Dollar is based on the oil, the Yuan is based on China's economy, and the Euro is based on the European economy (or rather, the countries involved in the EMU union). What is WhateverCoin based upon?

So far it seems that BTC is a "digital gold standard" while LTC is "The silver to BitCoins gold" and therefore directly dependent on BTC. See?

Re:No surprise in the collapse

[ancientt]

The problem is that there are an infinite possible number of cryptographically signed digital currencies.

The problem is that there are an infinite possible number of ways to print something and call it a "dollar bill."

Is there any other cryptographically signed digital currency with a cumulative value near $6 billion dollars? If there isn't, then the infinite possible number of cryptographically signed digital currencies don't matter. Just like there are an infinite number of potential ways to print a new kind of dollar bill, they don't count unless a lot of other people are willing to accept it. If anything, bitcoins are much more difficult to fake.

Bitcoin has value because people use it to hold and exchange value, exactly like any other currency. Of course there are differences and I expect you are right about the future of speculation dying off, but precisely because I expect bitcoin to stabilize in ten years or so.

Oh, and read up on the tulip bulb thing. I thought the same thing you apparently think now until I got an education by somebody who actually knew the history.

Re:No surprise in the collapse

[ancientt]

IPv5, IPv6, IPv7, IPv8 and IPv9 are making IPv4 pointless just like all the possible other digital currencies are making bitcoin pointless. I guess that's technically unfair since IPv4 does have to be replaced and look how quickly people are doing that.

The first widely adopted protocol is very, very, very hard to replace. Take IPv4, SMTP, FTP and Telnet as examples. All of them need replaced but they are still used and relied on all over the world.

Re:No surprise in the collapse

[ancientt]

The difference with bitcoin is simply that it has already been widely adopted and protocols that are widely adopted are very, very, very hard to replace. IPv4, POP, FTP, Telnet and SMTP all have better replacements and yet they're still used practically everywhere. Being the first protocol to be widely adopted isn't just important, it is by far the single most important factor.

Re:No surprise in the collapse

[complete loony]

I've thought that a fork of the bitcoin protocol could be useful as a gift card system. Keep the same transaction process and cryptographic ownership, shift the block chain creation onto central servers, allow a "bank" entity to create new coins of arbitrary value, put the value of outstanding coins on their financial balance sheet and audit the company to ensure they have the capital to back them. Allow anyone to download the block chain and verify it.

Say that Amazon switches to a system like this, where they can sell digital gift coins to consumers, denominated in USD. And will accept them as payment for items, again denominated in USD. This would give you an actual digital currency, as the gift card digital coins can always be spent at the issuing store, backed by their balance sheet and reputation. Which gives you a way to measure their value and convert them to traditional currencies without being impacted by rampant speculation.

Re:No surprise in the collapse

[DanielRavenNest]

You are neglecting the "Network Effect", the reason there is only one big auction market or social network at any given time.

Bitcoin had about a three year head start on other cryptocurrencies, therefore the client software is better developed, more merchants accept it, more users have wallet apps on their smartphones, etc. Your statement about "nothing prevents a new one popping up" is true, and has already happened: http://coinmarketcap.com/

They list 53 coins so far, but the top two, bitcoin and litecoin, represent 98% of the total market value. It's definitely possible for another coin to be a better product, and eventually overtake bitcoin, but it won't happen next week. I expect it to take years to overcome the leader's head start.

Re:No surprise in the collapse

[ancientt]

The country Georgia uses the Georgian Lari as it's currency and there is about $4 billion worth in total. (Around 2/3 the total value of bitcoin.) I wouldn't consider Georgia as a major economic power, but I wouldn't dismiss the legitimacy of its currency based on the total number transactions done in Lari. The Lari is a big fish in its own pond. I find that comparison interesting even if it doesn't directly prove anything about the strength of bitcoin as a currency. I'd certainly say the Lari has critical mass.

I would agree that "Bitcoin isn't just a protocol, it's the block chain." You have to accept the Nakamoto block chain as the single legitimate chain in order to work with bitcoin in any of the common systems, otherwise you're working with a system which excludes the most common use opportunities. So what? The same can be said for IPv4 because ICANN is accepted as the authoritative system. Plenty of people start networks that don't use it as the authority and even large groups have toyed with creating their own authorities, and IPv4 doesn't mean ICANN. If you want the most common use opportunities then you accept the Nakamoto block chain and ICANN authority. Seeing a major change in either one is possible and extremely unlikely to happen anytime soon.

That's also the answer to "why would people like me who weren't early adopters of the original block chain want to grant early adopters huge fractions of the world's wealth for doing nothing of economic value?" If you want to use bitcoin or IPv4 (or IPv6 for that matter) then you have the widest range of opportunities by following the largest crowd.

That's not to say either system couldn't be changed if there was enough momentum behind a change. IPv6 is poised to replace IPv4 but if countries decided that they were going to each implement their own ICANN like authorities and provide a method for conversion/communication between countries, then IPv4 could be saved and some might argue that it should be. If a couple countries were to start their own new bitcoin chains with methods of conversion between national bitcoin chains, then they could make it work. In fact, I think that's probably the largest threat to the Nakamoto based system; nations setting up competing chains. Take Gerogia, they could start the Lari chain and set up to own the majority of their own chain then set up an exchange rate with the value of the traditional Lari decreasing in value each year for official transactions and in as little as a decade, we could see Georgia having a solid bitcoin based on the Lari change with the additional benefit of having better control of their own currency than they have now.

I'm not actually betting on the Nakamoto bitcoin system being the long term successor to traditional currency. I'm actually only investing in the idea that the dollar has at least 50 years of being a reliable currency. As a thought experiment, consider this scenario: You get one of two vouchers. Each is worth the equivalent $1 million in today's money in either "Lari" or "some future bitcoin like currency." The catch is that you only get paid if the ability to spend the one you choose is easier to spend in South Africa in January 2064. If I had that choice, I'd choose "some future bitcoin like currency" but if it was specifically "bitcoin based on the Nakamoto chain" then I don't know which I'd choose.

Re:No surprise in the collapse

[goose-incarnated]

IPv5, IPv6, IPv7, IPv8 and IPv9 are making IPv4 pointless just like all the possible other digital currencies are making bitcoin pointless. I guess that's technically unfair since IPv4 does have to be replaced and look how quickly people are doing that.

The first widely adopted protocol is very, very, very hard to replace. Take IPv4, SMTP, FTP and Telnet as examples. All of them need replaced but they are still used and relied on all over the world.

Which is why bitcoin is finding it so hard to make inroads; people already have what they consider to be "digital currency". I buy stuff from all over the world (and hopefully will sell to all over the world as well) without using cash, just sending bits of information over a computer network. For the man on the street the difference between doing a money transfer and sending bitcoins is that bitcoins are untrustworthy, he can't use them without a currency exchange and the price fluctuates. Back to your analogy: EFT is the IPv4, bitcoin is the IPv9, and there is no need to move to IPv9 if IPv4 works. If it turns out *really* borked, we'll move to IPv6 instead.

Re:No surprise in the collapse

[goose-incarnated]

Bitcoin has value because people use it to hold and exchange value, exactly like any other currency.

Nope. Sorry, try again. Bitcoin gets traded for currency because speculators hope to make profit out of it. When the people who buy a "currency" (and I use that term very lightly when it comes to bitcoins) to make a profit outnumber the people who trade items for it by a couple of orders of magnitude, then that "currency" isn't a currency. It's a vehicle for speculators exercising the greater fool theory.

Re:No surprise in the collapse

[goose-incarnated]

It's bitcoin that is the newcomer (IPv9) and the current currencies that are IPv4.

Re:No surprise in the collapse

[ancientt]

Calling current currencies IPv4 is a potentially agreeable analogy to me as well. There are a variety of limitations and problems people have with it. It's expensive to move, heavily tracked and tied to specific governments. IPv6 is an attempt to overcome those limitations and problems, and there have been some flaws found and resolved with IPv6. Bitcoin mirrors that pretty well too. Calling it IPv9 is a little bit of a jump since people are actually using bitcoin and the protocol is widely established. Name another peer-to-peer currency with more support if you want to make the argument that IPv9 is a better analogy.

Re:No surprise in the collapse

[ancientt]

What is IPv6 in your analogy then? EFT/Traditional currencies have the problems of government interference, heavy tracking and are expensive to move. The expense is really the big issue because we're used to the other problems, but they're not insignificant. If you want to call EFT with traditional currencies IPv4, that's fine, particularly since IPv6 is a working standard that fixes most of the problems with IPv4. Bitcoin is analogous to IPv6 quite accurately. Name any other peer-to-peer currency with a tenth the value of Bitcoin, or even any other method of electronically exchanging value that overcomes those issues and you can compare bitcoin to IPv9.

Re:Bitcoiners on reddit are completely delusional

[Anonymous Coward]

Try and relax and have a little fun with them. Reddit coiners are possibly the most fun group to troll I have ever encountered. They eat the bait like sharks in bloody water. I hope this never ends. Comparing Bitcoin to Enron is always fun over there.

Re:and yet dogecoin trends upwards!

[Anonymous Coward]

It very well could be members of 4chan, shitposting doesn't really have a barrier to entry.

Re:i got some bitcoins

[SuricouRaven]

It's only going to get bigger. Bit of a flaw in the system, that.

Re:Not too worried

[TheloniousToady]

It lacks one central feature of a true fiat currency: potentially unlimited supply.

Re:can I just say

[chfriley]

We've been hearing this on Slashdot for 3.5 years now and during the time bitcoin has gone from well below dollar parity, to here.

No surprise in this trend...

[geogob]

Looking at the data provided in the summary's link, the value got from under 200 to over 1000 within a month. How is a drop of 50% within a few days any surprising? I would expect any currency that volatile and - above all - unregulated (in the sense of regulation through central banks), to do about anything.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[Captain_Chaos]

"No one governing" the Euro is what almost caused the collapse of the EU over one small state having credit difficulties.

Wow. It's been a long time since I've seen such a high concentration of ill informed bullshit in one sentence...

1. The Euro is not "not governed". It is governed by a very strong and independent central bank, namely the European Central Bank
2. The EU did not "almost collapse". A few countries have received some large loans, all of which still look like they will be paid back in full. At no point was the "EU" in danger, nor even the Eurozone (despite wild speculation in the media), which is what you probably meant
3. The Euro was not "dramatically volatile" at any point. It's been trading for about $1.20 to $1.40 consistently for the last ten years

Re:Bitcoiners on reddit are completely delusional

[DogDude]

Why are you talking about reddit, exactly? What does that have to do with this article?

Re:Comparison: Bitcoin is like 'Abortion' in the U

[u38cg]

Yep, except it's total bullshit.

Not China's Fault

[medv4380]

It was a standard parabolic bubble. It's happened three times with bitcoins now, and they always have a 40 to 60 percent drop when they pop followed by a random walk as they deflate. The 3rd one just happened to occur just as the second finished its random walk, and China just had to be the last to say anything about bitcoin before it poped. These will just keep getting close, and closer until the fun begins. My bet is the next one in 3 months, then a month, followed by ... fun. Who would have thought that one of these with the modern era of communication, and education would still be possible. But I guess without a modern example with that perfect bitcoin transaction log to watch it all go down it was probably inevitable to happen at least one more time.

Re:Not China's Fault

[SuricouRaven]

Bubbles sometimes need a nudge to burst. Just a small one. This story could be that nudge.

If it hadn't been this, it'd be something else eventually.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[u38cg]

Yep, except it's total bullshit.

Apologies, forgot to actually hyperlink...

Re:Bitcoiners on reddit are completely delusional

[operagost]

Hmm... I can't chargeback cash, either.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[IamTheRealMike]

"No one governing" the Euro is what almost caused the collapse of the EU over one small state having credit difficulties.

Er, no. What people were worried about was that heavily indebted countries would voluntarily choose to exit the Euro so they could inflate away their debts by printing money as fast as possible, and bulk exits of countries from the Euro would cause problems. The "solution", if you want to call it that, was that after resisting for a long time the ECB (actually Mario Draghi) gave into immense political and personal pressure to start open-ended Euro printing in order to essentially reallocate money from savers in Germany and other northern states to heavily indebted, often highly corrupt governments in the south. In order to preserve the fiction that Europe is one big happy family all sharing the same wonderful currency, the ECB agreed to a global tax on all Euro savings everywhere and made lots of people who managed their finances appropriately very very unhappy!

This is not actually solving any problems - it just sends a powerful message from governments that only suckers try to save money because governments will inevitably confiscate it from you in order to pay for (e.g.) absurdly generous pensions in Greece or elsewhere.

Bitcoin does not allow governments to do this. If Europe had been running on Bitcoin at the time, then those governments would have had to go through an actual default and inflict the pain on the people who lent them the money - but on the other hand, if Europe was run on Bitcoin, it's very unlikely the southern countries could have got into so much debt in the first place. Who was lending such vast sums to countries that had such basic, fundamental fiscal problems? Banks, of course, banks who knew they would be bailed out (with yet more money printing) if something went truly tits up. They gambled that politicians cared more about keeping the Euro than protecting savers, and they were right. If Europe used Bitcoin for everything, the "moral hazard" of banking would not exist as they would know that nobody could bail them out, and they'd have far fewer deposits to play with anyway (or maybe none). As a result, far less money would have been invested into places like Greece and the economic distortions such huge borrowing allowed would have never happened.

profit

[globaljustin]

I've actually profited rather well off of bitcoin

right, I'm assuming you mean you bought at a low price and cashed out at a high price?

what I'm wondering is, which BTC to $$$ service you used (Mt Gox?), how often you were able to cash out, what the daily $$$ limits were, what the transfer fees cost, etc.

I've seen alot of people yammering about BTC but few claim to have made a profit...i'd like to know more about how

Re:profit

[Clent]

I bought $20 USD worth of bitcoins, back when that bought more than one. Around the peak, located conveniently around the same time as black friday, I sold a fraction of one coin for a $250 USD Amazon gift card. The fee was in bitcoins and was (at the time) equivalent to less than $5 USD, I think it was closer to $2.50 USD. The process was not immediate but it took less than 4 hours. When I originally purchased bitcoin, getting it back to USD like this wasn't an option.

Re:profit

[Richy_T]

And while some sit there crying "Wah, it's too hard", others get out there and make things happen.

Re:profit

[Anonymous Coward]

Nice try IRS agent.

Re:profit

[Captain Kirk]

I got 2300 Bitcoin in 2011. I sold 500 at $119.99 earlier this year and bought a nice car. I sold 900 at $997 and am in the process of buying 3 rental apartments for case. I still have over 1000 Bitcoin.

Once you get Trusted on mt.gox you can withdraw $500k per month. Its not enough to do arbitrage but its not small change either.

I am not alone - lots of people have made huge profits on Bitcoin and we expect to make more. Its designed to work even if its made illegal to own Bitcoin. The price has always fluctuate violently because the markets are so small and liquidity is so poor. But its the most interesting social experiment on the Internet and I love being part of it.

Re:profit

[Derec01]

The Coinbase service based in the US works well for just buying and selling (not trading). I didn't buy way back in the day, I bought a dozen or so over the course of the summer, and sold about half at various points (usually not at the peak, sadly).

Of the exchanges I've tried, BTC-e is frankly the most stable. It's got a mild air of sketchiness from being Russian and spartan, but I've seen some of the other exchanges (Cryptsy, etc.) crap out or become unusable under load. Mt. Gox is a bit pointless given the difficulty of getting dollars out, and usually trades higher since speculators want a higher dollar return in exchange for the risk.

Sad to see BTC dropping right now, but I've already cashed out the initial speculation and a profit, so anything else is just gravy. I'll probably take out a bit more and just hold the rest indefinitely.

Re:profit

[Jack Griffin]

Good story, but you'd have to concede that you are most likely in the minority, since someone out there bought your 900 coins at $1000 and are now suicidal. Out of interest where did you get your original 2300 coins?

Re:profit

[AlphaWolf_HK]

Coinbase.

The transaction fee was about $10 and some change to sell. So far I've made about $500 in profit, not counting the bitcoins I spent to buy humble bundles and some silver coins (probably about $200 worth.) This is including the costs of GPU's that I bought for gaming and used for mining (and gaming) in addition to an ASIC I purchased with both cash and bitcoins. It also includes the cost of electricity.

I have not purchased any bitcoins, rather I've only sold them and/or bought stuff with them....mostly video games. Kind of fitting that my graphics cards do work which gets me more games.

Re:profit

[m.dillon]

Minus the taxes you owe for the capital gain.

-Matt

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[account_deleted]

Comment removed based on user account deletion

Re:and yet dogecoin trends upwards!

[sandytaru]

You'd be quite surprised what many 4channers do for a living. Yeah, the majority of them are teens and college kids, but some of the adults are doctors, professors, high level executive managers, software developers... guys (and the occasional girl) that log in there through 3-4 different VPN tunnels to blow off steam.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[AlphaWolf_HK]

I think the problem the government has with bitcoin is that bitcoin has the potential of destroying the US government. In fact, any currency other than the US dollar does actually.

The government currently has a habit of going perpetually further into debt (spending exceeds income every year for the last few decades, the only exception being during the economic bubble of the late 90's where tax revenues were artificially high.)

So long as the government maintains control of the value of the dollars that it spends with, it can simply devaluate the dollar to make up for its losses (which comes at the expense of you and me, as well as encouraging consumer borrowing instead of saving.) Of course, that house of cards will come crashing down should the dollar ever run into any serious trouble. Bitcoin has the greatest potential of causing that to happen than any other currency.

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[account_deleted]

Comment removed based on user account deletion

B-b-b-but...

[callmebill]

They promised that THIS time it's DIFFERENT!

Re:Not too worried

[Copid]

And with that comes its inability for supply and demand to move together to smooth out the insane price fluctuations. Bitcoin holders who are worried about the theoretical possibility of hyperinflation in a well-managed fiat currency scheme seem to be ignoring the actual hyperinflation and hyperdeflation of their currency.

Re:Bitcoiners on reddit are completely delusional

[IamTheRealMike]

The inability to charge back is the #1 reason that prevents any consumer from perceiving it as a safe currency against vendor fraud. It serves no benefit to the consumer.

Minor correction - dispute mediated transactions have been a part of the design since day one. The problem is lack of surrounding infrastructure like "file dispute" buttons in wallets and the various protocols needed to organise that, companies that run dispute mediation services with those protocols and so on. But there is widespread consensus that it's a good idea and basically, it's just waiting for someone to do the design and implementation work to make it happen.

Its incredible volatility is the #1 reason that prevents any vendor from seriously adopting it.

It's certainly a PITA at the moment, yes, although when Bitcoin is out of the public eye and governments aren't busy banning it there have been relatively long stretches of peace and stability. During those times you HAVE seen vendors price things in Bitcoins, actually, although yes most prefer to peg to an exchange rate.

Over time the instability will go away because governments will all decide on their policies around it, the technology will mature and become boring, most people will have heard about it and decided what they think, etc. The huge volatility you see at the moment is because almost every day there's some important piece of news that affects people's perception of future value.

As to the /r/bitcoin posters, yes, the over-excitability there is quite something. But that doesn't mean all people who use Bitcoin or like it think the same way.

Bitcoin analysis:

[Forget4it]

Bitcoin analysis: Bit = Zero or One Coin = Heads or Tails No wonder the value is fairly random (leading or trailing zeros - - toss a coin)

Re:Not too worried

[crypticedge]

You should realize by now all currency is fiat, including BTC, and especially included gold/precious metal backed. There is no value except what we decide it's worth. The gold is inherently not worth a specified amount, but has been decided to be worth an amount based on what someone thinks they can sell it for. This rage against nationalized currency is a fraud perpetuated by those attempting to rob the blind ignorant sheep who continue to buy their lies wholesale. Those same people bought up tons of gold when it was cheap, then told you to buy it because FIAT CURRENCY RAGE. Now their offloading all that gold onto you, where they take your money at 15x what they paid for the exact same product 5 years ago and you get stuck with a metal that you can't spend.

Lesson of the day

[iamnotasmurf]

Bubbles burst, news at 11.

Time to buy then?

[rvw]

Is it time to buy them now?

And here comes the rebound..

[jcr]

Looks like BITC is recovering fast. 585 USD as I write this.

-jcr

Re:And here comes the rebound..

[jcr]

No, this is way too big for a dead cat bounce. Over 600 now.

-jcr

Re:Bitcoiners on reddit are completely delusional

[Trepidity]

Bitcoiners on reddit are completely delusional.

A sentence that is guaranteed to be true for two independent reasons. ;-)

Re:Bitcoiners on reddit are completely delusional

[ljw1004]

Wake up people. This "currency" is never going to have anything close to wide adoption. The inability to charge back is the #1 reason that prevents any consumer from perceiving it as a safe currency against vendor fraud.

Do you feel the same way about cash?

Re:i got some bitcoins

[compro01]

Not really "the system" so much as the current client implementations. There is provision (Section 7, "Reclaiming Disk Space" in the original whitepaper) for reducing the size of the blockchain by discarding transactions where all the outputs have been spent again and those subsequent transactions themselves are buried under enough blocks. This lets you pare down the size of the blockchain considerably.

It's just that, AFAIK, no clients currently implement this.

thanks

[globaljustin]

Very interesting!

I like the Amazon gift card solution.

What exchange rate did Amazon use for the transaction? Was it based off Mt Gox?

Re:thanks

[Richy_T]

Amazon doesn't use anything. Bitpay handles the conversion and the supplier of the cards gets paid in dollars (This is something I believe you said was just too difficult to implement in a previous thread). The supplier of the cards gets them from Amazon (and other places) at a discount and makes their profit that way. Bitpay takes a slice so the purchaser pays a slight premium. Then again, if you bought your Bitcoins lower, you probably still come out ahead.

Re:thanks

[globaljustin]

Bitpay handles the conversion and the supplier of the cards gets paid in dollars (This is something I believe you said was just too difficult to implement in a previous thread

did I?

we're crossing implementation paths here...

I don't know which comment you're talking about but I definitely said that as a small business owner (which I am) taking BTC just doesnt make sense b/c of the 'last mile' where the BTC become $$$ in my biz bank account in real time.

Now as a global telecom/ecommerce/device maker (which I *hope* to be!) I would *still* not do it!

I think Amazon did the BTC thing more as marketing than for profit, but then again, Amazon could be **mining** BTC as an experimental business venture.

See, all this aside, it's still an **Amazon gift card**

I like GP's solution...but it's a hack of a hack of specie currency...not a criticism just wanting to clear up why I think his idea was cool but as a business owner I dont take BTC & the rest.

Re:thanks

[Richy_T]

Again, it is not Amazon. The company is gyft.com

I have no affiliation but have looked into what they offer.

Re:thanks

[simtel]

Amazon hasn't done anything with Bitcoin - the gift cards are sold by a third-party (gyft.com, IIRC). And gyft only takes bitcoin via a third-party payment processor. For merchants, "accepting bitcoin" in this way is almost identical as "accepting credit cards" with Square as the processor.

Re:thanks

[LF11]

BitPay allows you to take bitcoin as a merchant, then deposit the (USD) value directly into your bank account. That way, you can take advantage of bitcoin (no chargebacks, 1 percent transaction fee with no other fees, mobile payments, paying over a videoconferencing call, etc) without exposing yourself to any risk from volatility.

If you want, you can keep a portion of the transaction as bitcoin, none of it, or all of it. Simple, fast, effective, safe. It's cheap to set up, and LOTS cheaper than credit cards to accept. Did I say there are no chargebacks?

Re:thanks

[shaitand]

"I don't know which comment you're talking about but I definitely said that as a small business owner (which I am) taking BTC just doesnt make sense b/c of the 'last mile' where the BTC become $$$ in my biz bank account in real time."

There might be merchant accounts that do this for credit cards but I've yet to see one. They will often initiate a transfer to your bank daily which is exactly what Bitpay does, it converts the Bitcoin to the dollar amount of the transaction in realtime and initiates a bank transfer daily. There is a 1% fee for a free account or no fee for a $30/month account and unlike credit cards there are no charge backs.

Bitpay gives small businesses the option of accepting Bitcoin easily without any risk of being impacted by fluctuation in the speculative market. I can't understand why just about everyone isn't doing this. At 1% with no chargebacks you can accept and promote a new payment option that highly desirable vs credit card and just or more convenient than a credit card. Other than initial setup costs (labor) there is no ongoing cost, just leave a sticker up letting customers know the option is there and don't sweat it if the volume is low. If you have a high enough volume to need to pay the drop to 0% fee offsets it. Cash carries no fees or chargebacks as well but is less convenient for customers and has costs associated with counting/handling/counterfeits so if you do large quantities of currency Bitpay might be more desirable for you than cash as well.

Re:thanks

[shaitand]

Except with lower fees and no chargebacks.

Re:thanks

[shaitand]

If you do enough volume to qualify for the $30/month option with 0% fee it might end up being more desirable than cash as well. It costs money to count and process cash plus there are losses to counterfeits. There is no counterfeit bitcoin, that is it's unique property that gives it innate value.

Re: thanks

[LF11]

You get it.

Re:thanks

[globaljustin]

no fee for a $30/month

right, and for just a small percentage of my income & purchases, I get the privilege of not paying taxes...

thanks for the info but i remain unconvinced that it is worth my time

i will definitely reconsider if the situation improves

Re:thanks

[shaitand]

"right, and for just a small percentage of my income & purchases, I get the privilege of not paying taxes..."

Not sure where this comes in but it wouldn't be with using bitpay... it's crediting to your bank account.

As for whether or not it's worth ones time. There probably aren't enough customers wanting to pay in bitcoin at the moment for it to be. On the other hand, it is trivial to flip it on and costs nothing to maintain. 1% of transactions, no chargebacks, and $0 a month or 0% of transactions, no chargebacks, and $30/mo is better for everyone than any credit card merchant account.

For me it's worth it in the same way it's worth trying to support local businesses. Bitcoin is detached from government meddling, safe from creditors/bankruptcy/divorce, and a handy app on my smartphone that is much more handy than cash or credit cards.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[hippo]

Did you miss the Portuguese default?

Re:Comparison: Bitcoin is like 'Abortion' in the U

[JeffAtl]

So China is banning the currency because it wants to protect the United States?

Re:Comparison: Bitcoin is like 'Abortion' in the U

[njnnja]

One interpretation of "not governed" could be "not governed *well*". And it is fair to say that the Euro has not been governed well over the last few years. The ECB (i.e. Germany) has shown huge resistance to being a lender of last resort, and has run an overly tight monetary policy, risking deflation and only recently dropping interest rates to where the US Fed dropped them years ago (and even the Fed was not aggressive enough - witness the weak recovery).

This is the main problem with bitcoin. The decentralization and anti-counterfeiting measures (and crypto that does it properly) are, IMHO, phenomenal advances in the realm of e-money. However, the "set-and-forget" monetary policy is inappropriate for a modern economy. The "great moderation" in the US between the mid-80s to the early 2000's was a period of low inflation and generally mild recessions. However, to achieve that stability in outcomes, the Fed had to change policy inputs many times, sometimes quite drastically (e.g., 1987 stock market crash, LTCM, Asian crisis).

Re:Bitcoiners on reddit are completely delusional

[Anonymous Coward]

Reddit is a huge part of the bitcoin community. It is the home of most of the cheerleaders you see on the comments section of news articles.

4chan worthless?

[woot account]

I would argue that, at this point, /. is far more worthless of a site than 4chan. 4chan at least still has some degree of impact on the internet at large. When's the last time the slashdot effect was actually a thing? Not to mention that I'm pretty sure the Reddit community for dogecoin is at least as large as the 4chan community, if not larger.

Re:4chan worthless?

[dugancent]

Slashdit had its hayday, 4chan never did. Anonymous likes to think they had an impact, but they never did.

It's like "collectible" comic books all over again

[Chas]

"I have zillions of dollars worth of comic books! Wizard says I do!"
"I have zillions of dollars worth of Bitcoin! The exchange says I do!"

*Together* Let's cash out!

"WTF? Nobody wants to buy my comics at massively inflated prices!"
"WTF? Nobody wants to buy my Bitcoin at massively inflated prices!"

Cue the Python!

SCAM! SCAM! SCAM! SCAM! SCAM!

Re:scale & timing

[Richy_T]

I was about to write something but I see it's you again so nevermind. You just don't seem to get currency exchange.

Re:Bitcoiners on reddit are completely delusional

[qazsedcft]

Wake up people. This "currency" is never going to have anything close to wide adoption. The inability to charge back is the #1 reason that prevents any consumer from perceiving it as a safe currency against vendor fraud.

Do you feel the same way about cash?

With cash I can see/touch the goods I'm buying before paying for them. I have to physically meet the person selling the goods. Unless I'm paying for something illegal there's little chance of getting screwed over because it would be too risky for the other party.

Missing the point here...

[jddeluxe]

I would posit that the recent rise in Bitcoin pricing to $1000+ was the result of primarily Chinese speculation; inevitably the central govt. there was going to crack down on it as they couldn't control it / track ownership.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[dhaen]

So China is banning the currency because it wants to protect the United States?

Not for that reason only, but China has massive investment in the US in the form of US debts. China wouldn't want anyone defaulting. Nor would they like seeing the US$ fall in value.

Bitcoins traded for $10

[taikedz]

Amusingly, fake bitcoins are probably the only ones that'll have a stable enough price to be trusted. http://www.amazon.com/999-Fine-Copper-Bitcoin-Commemorative/dp/B00DEY7JYO

Re:Bitcoiners on reddit are completely delusional

[rubycodez]

anonymous liar lies big

Re:Not too worried

[Richy_T]

No. You need to look at the definition of fiat. Fiat needs authority. Fiat is worth something because someone says "I say it is". If anything, Bitcoin is a concordant currency, its value determined by agreement.

Re:yes halved

[Richy_T]

Or up.

Or maybe sideways.

Re:Bitcoiners on reddit are completely delusional

[egcagrac0]

Most people don't make purchases by mailing a bundle of cash to a distant stranger. If they did, charge back mechanisms would be equally important for cash transactions.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[phantomfive]

A few countries have received some large loans, all of which still look like they will be paid back in full.

What? Really?

Laugh

[koan]

So did they reduce the proof of work by half as well?

Re:Buttcoins!

[larry bagina]

I prefer ass quarters -- they're ribbed for your pleasure!

Re:Comparison: Bitcoin is like 'Abortion' in the U

[Captain_Chaos]

Yes, really. There have been a few extremely uneventful defaults against private creditors, but not against the EU bailout loans.

so far so good

[globaljustin]

as of this writing you're properly rated at +5 Insightful

I think how your comment gets rated will be a good litmus test for the quality of /. commetors vs reddit

reddit is fine for what it is, but when I want to see discussion about something like Bitcoin or Snowden I need something more

I'm curious to see how this plays out.

Re:It's like "collectible" comic books all over ag

[TheRealMindChild]

I have zillions of dollars worth of comic books! Wizard says I do!

Boy did I find that out. But in the days when I was collecting comics, access to the high valued ones were scarce. The internet had as many useful sights as I could write in a little notebook. Ecommerce wasn't a thing yet. Years later, I decided, "Hey, they are still holding their value! I'm going to sell these!" and BAM, it hit like a ton razorblades... with a global, online market, there is always someone out there willing to sell that $500 comic book for $1 plus shipping.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[phantomfive]

Well that's one thing, but you really think Greece will pay back their loans?

Re:and yet dogecoin trends upwards!

[myowntrueself]

Not the members of 4chan. Arguably the most worthless site on the internet.

From 4chan, specifically /b/, I learned of the existance of the 'Trailer Park Boys' series, to me thats value right there.

Re: scale & timing

[AvitarX]

I suppose that means tracking pennies instead if dollars changes things too?

Big ticket items

[hierofalcon]

Glad I didn't just sell a car for bitcoins

BREAKING NEWS!

[GameboyRMH]

Bitcoin value continues to be incredibly unstable! Also the sky is blue and water is wet! More updates as news develops!

Re:BREAKING NEWS!

[Neo-Rio-101]

The BTC is tracked against the USD, the most manipulated currency on the planet.

The Fed's Bernanke just called to an end to tapering, which caused massive market fluctuations (i.e. the banks managed to pick up and stop out orders on all sides of the recent trading range and pull in a huge profit for Christmas before going on holidays)

Anybody who understands trading at all knows that you sell into a buying spike and buy into a selling spike.
you do NOT chase a rising or falling currency, because they are market traps.

What happened with BTC is that huge upward spike caused market greed. Loading silly emotional investors up at high prices.
For the market to get the bitcoin back it sold off at expensive prices, it HAD TO drop the price, and now pick them up again at a discount... which is what happened.

Re:Bitcoiners on reddit are completely delusional

[Twinbee]

Is there an online/crypto currency you actually think would be genuinely useful to the world - which hasn't taken off yet?

Like Tesla Motors, I'd like to invest in something which benefits us all, and Bitcoin, while potentially promising, may be technically/practically inferior to another startup currency.

Re:It's like "collectible" comic books all over ag

[Chas]

That's because the comic book was never really worth $500 in the first place.
The reason some comics are so valuable is BECAUSE they're scarce.
In the last 40 years, they've been ANYTHING but scarce.
So, no matter how much some schmuck sets the value for it, unless just about every other of the tens or hundreds of thousands of copies are known to be destroyed, it probably isn't even worth the cover price.

Re:waves in the ocean

[Richy_T]

But the value isn't important. If you are a value speculator and you had $20,000 worth of Bitcoins, it went to $10,000 worth. It doesn't matter exactly how many actual Bitcoins you had. Sure, 500->50 would be more than 50->5 but if you calculated your Bitcoin stash in mBTC, you went from 0.5->0.05. Is that more or less than 500->50? It's a ratio thing. 10% is 10%.

Re:waves in the ocean

[Richy_T]

This is also why log charts are a big thing.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[Captain_Chaos]

Well obviously I don't have a crystal ball. But there is no evidence or reason to assume that they won't. All of the doomsayers are just speculating wildly. They're mostly hacks who are hoping to profit from it somehow.

It would be very bad for the Euro if Greece defaulted, or left the Eurozone. I think it simply won't be allowed to happen. Note that I'm not saying that that's necessarily a good thing.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:waves in the ocean

[HornWumpus]

GP is right. You just don't get it.

Hint: Express variance in %

Re:Comparison: Bitcoin is like 'Abortion' in the U

[JeffAtl]

I agree with the first part, but China has made pushes to replace petrodollars - that would be much more damaging to the value of american currency than embracing bitcoin.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[JeffAtl]

China has made efforts to undermine the US Dollar's status as reserve currency though. That would devalue the US$ much more than bitcoin.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[Captain_Chaos]

And it is fair to say that the Euro has not been governed well over the last few years.

I don't agree with that at all. The Euro has consistently remained strong, even during this so called "Euro crisis". Whether the way the Euro is being governed is good for the economies of the individual countries of the Eurozone is an entirely different question, but reality shows that it was good for the Euro and that the ECB is doing a good job of keeping its independence. There just is no comparison whatsoever (which the original poster was doing) between the Euro and the way it is governed, and Bitcoin.

Re:Not too worried

[crypticedge]

Bitcoin is valued at what it is because people say it is. Nothing more. It's still entirely fiat.

Same with gold. Same with silver, same with every other "backing" that people assume will fix the world and usher in a libertarian utopia that mirrors that of Somalia.

It's a scam, and your the sucker.

Re:Buttcoins!

[Anonymous Coward]

There's not even a point in making them ridged any more. Who's going to shave a copper/nickel alloy?

Re:Comparison: Bitcoin is like 'Abortion' in the U

[UnderCoverPenguin]

I get that sentiment, hence why I said that "libertarian utopians" would want it. Because they actually believe that gigantic defaults can be a good thing for an economy.

I think the GP was saying the default would have been much smaller because the bank would have (a) been less willing to loan out the money, and (b) had less money to lend out.

While (a) might be a reasonable assumption, I am not sure about (b). I think that the banks, regardless of the currency, would have figured out other ways to emass gigantic sums of money.

Next rev's most important feature

[istartedi]

For the next rev, they need a way to keep crypto-currency within an exchange rate band. The band could be a basket of currencies, commodities, etc. The currency needs to float *some* but not too much. That seems challenging since we're talking about pulling in data that's external to the protocol; but it's a real problem. Real functioning currencies have to be a more reliable store of value. Central banks are criticized these days for trashing their currencies; but they also have the ability to defend their currencies against attacks like this, peg them to other currencies and/or commodities, etc.

Re:Next rev's most important feature

[wvmarle]

For the next rev, they need a way to keep crypto-currency within an exchange rate band.

For that you need an organisation that acts as a central bank. And for that organisation you need money. A lot of it. In both the currency you want to protect (Bitcoin), and other currencies (USD, EUR, JPY, whatever).

Now it is feasible for someone, say a large company or a bank, to have a ready supply of these other currencies, and they could be that "bitcoin central bank".

It is however not feasible to have a sufficient supply of bitcoin, for the simple reason that there is a limited supply, and the only way to get more bitcoin is to buy them. When you link one currency to another (such as the HKD is linked to the USD at a mid rate of 7.8 HKD for 1 USD and a narrow trading band), there will be times you have to intervene in normal times to keep the thing stable. So start selling BTC when the price gets too high, buying them when the price gets too low. A central bank will print more money of their currency to sell if the price gets too high, and starts taking them back in when the price gets too low (effectively removing the currency from the system).

This part may work with BTC.

Until the market thinks the fixed value is off, and speculators band together and start attacking the currency, buying BTC in large quantities thinking the value will go up. Or if for another reason the demand for BTC increases dramatically. Before long, the central bank will run out of BTC, and with no means of producing more they lost the battle in the blink of an eye and the price shoots up again.

Now of course speculators know this. They know the capacity of the defending authority, versus their own power. And there is virtually no way for a BTC rate stabilising organisation to have any power against these speculators.

The HKD has been under attack before, and these attacks have always been fended off by the Hong Kong government. Speculators now know that they do not have the power to dislodge this exchange rate, and don't try. The currency is stable against the USD.

Probably some time in the future the speculators will try again. Probably they will lose, again, confirming the strength and stability of the currency. Maybe they win, like they did when attacking the THB, at the time triggering the Asian financial crisis.

Bitcoin Christmas

[zerosomething]

I've managed to make about 90% of my Christmas gift purchases using 0.7 Bitcoin. I managed to trade most of that at the $1100 value, lucky me. That trade payed for my Bitcoin mining. As more people use this option for taking payment it will only help to stabilize the value. Right now there are several online retailers taking them directly and there's a number of gift cards you can get using them. Gift cards are an easy way to trade coins into real products until more retailers start taking them directly.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[UnderCoverPenguin]

it just sends a powerful message from governments that only suckers try to save money because governments will inevitably confiscate it from you.... Bitcoin does not allow governments to do this.

I think you greatly under estimate the ingenuity of motivated tax collectors. This is "merely" a "technical limit". They will find ways to work around it.

Re:waves in the ocean

[Sloppy]

if you and your bro were watching the game on the couch and he said he'd give you $5 to get him a fresh beer, you'd at least consider it...b/c you can buy a beer at the bar later w/ it

if you refused, but he then offered you $50 to get him the beer, most ppl wouldn't turn that down!

"Get me a beer and I'll give you $5."

"No. Get it yourself."

"Sudo get me a beer and I'll give you a tenth of $50."

"Okay! Here's your beer."

"Get me a beer and I'll give you a hundredth of $500."

"No. Get it yourself."

"Sudo get me a beer and I'll give you a thousandth of $5000."

"Okay! Here's your beer."

globaljustin, you appear to be correct that the responses are varying, so I must reluctantly agree that your model is perfectly accurate.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[u38cg]

The guy is not talking about cryptography. He's talking about basic economics.

Question for financial gurus

[GodfatherofSoul]

Is there a way to effect a short on bitcoin values?

Re:Question for financial gurus

[edelbrp]

Yes, there's nothing magical about it. All you'd need to do is find somebody who trusts you to pay them back and you effectively make a bet with them. They don't even need to own any Bitcoins themselves. For example, I might agree to give you today's value of 5 bitcoins but you'd need to pay that back to me within, say, 6 months and when you do so you have to pay what the value of bitcoin is at the time. Depending on how savvy and how much the other person trusts you, they may want you to put up some amount of cash in an escrow so you can't flake on them and run with the money without finishing the deal.

Re:Question for financial gurus

[michelcolman]

Some exchanges allow you to short bitcoin, or take leveraged positions. Kraken.com, for example.

Re:Question for financial gurus

[m.dillon]

Yes, but without the protections of a government regulated middleman, which is what normal exchanges have, the traders involved will be subject to extraordinary risks on those sorts of contracts (totally separate from the actual trading value of a bitcoin which itself carries extraordinary risks). Even the current Bitcoin exchanges are subject to severe carry risks (as people using one of the Chinese exchanges that pulled up stakes and disappeared along with all of their money found out recently).

I think there are a lot of people who don't really understand how the public stock or derivatives markets work and believe, falsely, that the mechanisms can be safely replicated by an unregulated entity. Frankly, it takes supreme stupidity to trust any amount of money to these businesses.

-Matt

Re:Not too worried

[Richy_T]

Somalia? It's at times like this I wish Slashdot supported :rolleyes:

When Does Bitcoin News Get Its Own?

[ambidextroustech]

Since there is so much news on this topic, when will it be added to the list, like "hardware," "linux," "security," etc?

Re:and yet dogecoin trends upwards!

[marsu_k]

guys (and the occasional girl) that log in there through 3-4 different VPN tunnels to blow off steam

...I thought it was seven proxies?

Re:Comparison: Bitcoin is like 'Abortion' in the U

[kaatochacha]

China wants both:
1) Undermining of the US dollar's status as a reserve currency.
2) Absolute control over their own currency.

Thus, they like Bitcoin for #1, but are wary of it when it encroaches on #2.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[LynnwoodRooster]

What the EU is doing - via confiscation/excessive one-time "special need" taxation of savings - is essentially a distributed default. It is taking from Peter to pay Paul, and in the process you're not teaching Paul how to better manage his finances and you're upsetting Peter and teaching him to NOT save up money because it's not his.

A big default is usually the best way to settle things out. Yes, it's painful. Yes, millions of people are left near-destitute. However, the alternative is to bring everyone down significantly (equality of misery) and to lose the lesson - don't be careless with your assets, nor promise away your future income stream (bird in the hand worth two in the bush).

Re:Comparison: Bitcoin is like 'Abortion' in the U

[LynnwoodRooster]

I think the problem the government has with bitcoin is that bitcoin has the potential of destroying the US government. In fact, any currency other than the US dollar does actually.

The government currently has a habit of going perpetually further into debt (spending exceeds income every year for the last few decades, the only exception being during the economic bubble of the late 90's where tax revenues were artificially high.)

Just to point out, the last time the US Government ran an honest-to-goodness surplus of income, and paid down its debt because it had money left over (rather than increased its annual debt) was in 1957 under President Eisenhower.

It's been 3 generations since we've actually had a surplus at the Governmental level. The surpluses of the late 90s were strictly on-paper/on-budget items only, but every fiscal year since 1957 has seen the US Federal debt increase. Sometimes by huge amounts (like now), sometimes by small amounts (late 90s, mid 2000s), but an increase in debt annually nevertheless.

Re:Bitcoiners on reddit are completely delusional

[LynnwoodRooster]

Anonymous Cowards always do well, it seems...

Re:scale & timing

[AK Marc]

Someone who holds 10 coins at 100-50-100 vs someone who holds 1 coin at 1000-500-1000. Please explain the difference.

Re:Bitcoiners on reddit are completely delusional

[JesseMcDonald]

The inability to charge back is the #1 reason that prevents any consumer from perceiving it as a safe currency against vendor fraud. It serves no benefit to the consumer.

Nonsense. There is a mechanism for chargebacks in Bitcoin. It's known as "escrow". Given a non-reversible payment mechanism, it's trivial to add reversible transactions as a layer on top. Implementing a non-reversible payment scheme on top of reversible transactions, on the other hand, is nearly impossible. Which kind you need depends on the situation. For an individual ordering durable goods from the smaller online venders, you want escrow to protect both sides. For the provision of services or highly non-durable goods, where there is no way to recover costs in the event of a chargeback, a more permanent form of payment makes sense. Disputes in such cases need to be handled through arbitration anyway.

This is exactly what Bitcoin needs!

[es330td]

Bitcoin has a legitimate purpose; a truly portable store of value not needing physical storage that is also not under the control of any government entity has a fundamental value. The true mark of the legitimacy of any currency is the existence of as-of-yet unknown 3rd parties willing to accept said currency. Shells, salt & grain have all been used in the past because a person accepting said currency trusted that somebody else would take that same currency in return for goods or services at some future date. Bitcoin is going to swing between overvalued and undervalued for a while, but eventually a critical mass of parties willing to trade in Bitcoin alone will exist. Someday a farmer will accept Bitcoin for his wheat, and then use those Bitcoins to pay for his diesel and tractors and not once will any party have to convert Bitcoins to

It make take a while, but so long as Bitcoin remains uncorrupted by counterfeiting it will stabilize because it will remain out of the sphere of government influence.

Re:This is exactly what Bitcoin needs!

[Animats]

Bitcoin has a legitimate purpose; a truly portable store of value

As a store of value, Bitcoin has trouble holding its value for a week. Some days, hours. This limits its usefulness for transactions.

Re:This is exactly what Bitcoin needs!

[goose-incarnated]

Bitcoin has a legitimate purpose; a truly portable store of value not needing physical storage that is also not under the control of any government entity has a fundamental value.

Currencies don't store value, they measure it. Much like a ruler doesn't store distance and a clock doesn't store time. This is why bitcoin is not a currency - it stores value (it's a commodity - a stupid one for stupid people - but still just a commodity).

Eheh, said by a WoW gold seller

[SmallFurryCreature]

Oooh, what a trustworthy source! Nobody rich is wasting their time on slashdot.

Now excuse me while I go back to my orgy with super models.

Re:Eheh, said by a WoW gold seller

[LF11]

Rich nerds do. It's not like we have anywhere else to hang out and money isn't everything.

Re:Eheh, said by a WoW gold seller

[AlphaWolf_HK]

You mean like Steve Wozniak?

http://slashdot.org/~SteveWoz

Dollar coins

[drnb]

There's not even a point in making them ridged any more. Who's going to shave a copper/nickel alloy?

The ridges help tell quarters from dollar coins.

Re:Dollar coins

[g0bshiTe]

I would have guessed it a throwback from when coins were silver, if it has raised ridges it would be obvious if someone were shaving some off.

Re:Dollar coins

[drnb]

I'm sure that was once a consideration. Its just that the ridges found a new purpose once a very similarly sized dollar coin was introduced.

not a speculator

[globaljustin]

But the value isn't important. If you are a value speculator...

exactly...**'I'M NOT A SPECULATOR**

you need to think about it from a system design perspective, not as a hacker

see, you're thinking like an outsider who is intruding on a system for an immediate personal gain

i'm evaluating BTC as part of the system looking to constantly improve on a sustainable long term path

that's why all the BTC fanbois arguments are so infuriating...you're coming from the perspective of a parasite not someone trying to make their own independent system

Re:not a speculator

[Richy_T]

I try not to be a fanboy. When I read about Bitcoin, I was excited by the possibilities it offered to so many, including people in your position.

If Bitcoin is too volatile for your business right now (and I can hardly blame you for feeling that way), there are ways to mitigate that (Bitpay and others) or you may just want to hold off.

And you are not a speculator but that is not really the issue. If you sold your gadget for 1BTC , worth $1000, the exchange rate drop (assuming you were holding bitcoins for that long) would have been to $500. If you were selling that item back when 1BTC was worth 100, you would have sold it for 10BTC and a similar drop to $50/BTC would have left the value of those BTC holdings at... $500

That is why it is the ratio that is important.

If you would have held on to those bitcoins, by the way, the amount you received for your gadget would currently be worth more than $5000.

The real question is can you feel confident in quantifying your risk and can you mitigate that exposure. You may consider immediate exchange to dollars and charging more to cover any increased expenses and risk. Unlike Visa, Bitcoin doesn't mind you doing that.

either explain it or dont post

[globaljustin]

GP is right. You just don't get it.

Hint: Express variance in %

no YOU don't get it

Hint: Stop thinking only in abstractions

Really...if I don't get it...if its all about variance...if it's so simple...fucking explain it and interact w/ my examples.

Don't just post some random shit and think you've contributed to the conversation.

This pisses me off because I get downmodded not for content but b/c people disagree w/ my opinions...i'm not trolling, many of my respondents, like HornWumpus, just toss off random bon mots, and of course my comment gets downmodded

Re:either explain it or dont post

[HornWumpus]

This is not a matter of opinion; you are not entitled to your own facts. You are simply wrong and too egotistical to listen.

Sudo you stole that from XKCD

[globaljustin]

http://xkcd.com/149/

the world is already using it

[globaljustin]

someone traded bitcoins for an Amazon gift card. It must truly be ready for the world to use

it's interesting because of all the BTC fanbois it was an actual story of actual evidence of how BTC made some one a profit, with full details

no one said it was 'ready for the world to use'...b/c **the world is already using it**

i'm the opposite of a BTC fanboi, but i think your perspective is wrong too

you should take an hour or two and learn how BTC actually works, because...something about knowledge...idk...power and knowledge...w/e nevermind just keep on moving...nothing to see here

thnx

[globaljustin]

word thanks

I'm just curious about numbers...whatever you want to share

I always thought that your strategy, the "slow and steady wins the race" strategy would be foiled by the transfer fees

it's tricky to get back into USD without a little research

thanks for saying this...this is all I ever wanted to see acknowledge...I'm not a BTC hater but this "last mile" thing is overlooked in the conversation

as I said, I bought 1 BTC on a lark but lost my wallet info (probably on my laptop that died)...I'm looking at BTC now as a business owner who is considering taking BTC payments.

thnx Cptn.

[globaljustin]

word I looked at the process for getting "trusted" on Mt. Gox

I thought I'd use them if/when I ever did any BTC trading, but the fact that they are not based in the US was problematic.

As a business, if something went sour with BTC and the broker gets shut down in the US I might be able to sue or at least claim it as capital loss on my taxes.

Re:Not too worried

[Jack Griffin]

But in the West, "I" is the people, therefore it is also determined by agreement isn't it? And there is the added benefit of a govt issued currency having a police force, military, govt, insurance etc to defend and protect the currency. When someone steals your BTC, who you gonna call? The anarchist argument has never been very well thought through...

Re:Bitcoiners on reddit are completely delusional

[LF11]

Chargebacks and volatility seem not be a concern for the growing number of merchants and their customers who are adopting bitcoin.

You have clearly never used bitcoin. Volatility is not the problem you make it out to be. If you were speaking from experience instead of helpless raging impotence that you missed the biggest boat of a lifetime, you would know this.

Re:Bitcoiners on reddit are completely delusional

[LF11]

You'd be stupid to admit to owning that much on a public forum. But then you admit to owning guns on a public forum so maybe some folks just don't care about getting doxxed.

Re:Bitcoiners on reddit are completely delusional

[Jack Griffin]

You're just making stuff up to suit your argument. There is no evidence that BTC will ever be stable. The very nature of it's inability to be centrally regulated will guarantee that it can never be stable. Regulation is a stabilising force, it's why prosperous, healthy and wealthy countries all have the most regulations. Don't get caught in the Tea Party anarchist hype. If you want anarchy go take a holiday in Mogadishu or Kabul and then come back and tell us how well that works out.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[I AOk]

Did you miss the Portuguese default?

Yes. When did it happen? /checks news on tv...

Re:Comparison: Bitcoin is like 'Abortion' in the U

[hippo]

s/purtuguese/greek/

Re:Comparison: Bitcoin is like 'Abortion' in the U

[DanielRavenNest]

That paper has factual errors. For example, on page 6 it says "...because bitcoins are mined in integer units, not satoshis". This is incorrect. The mining reward halves every 210,000 blocks (about 4 years). It dropped from 50 in Jan 2009 to 25 in Nov 2012, the current rate. The next halving, in about 3 years, will reduce it to 12.5 bitcoin units per block. The arithmetic series 50 + 25 + 12.5 + . . . = 100, and since it stays at that level for 210,000 blocks at a time, the total number of coins has a limit at 100 x 210,000 = 21,000,000.

The mining algorithm is a basic feature of the bitcoin system. If the paper's author got that wrong, I don't have much confidence in the rest of his arguments.

Re:Bitcoiners on reddit are completely delusional

[IamTheRealMike]

You're just making stuff up to suit your argument. There is no evidence that BTC will ever be stable. The very nature of it's inability to be centrally regulated will guarantee that it can never be stable. Regulation is a stabilising force, it's why prosperous, healthy and wealthy countries all have the most regulations. Don't get caught in the Tea Party anarchist hype. If you want anarchy go take a holiday in Mogadishu or Kabul and then come back and tell us how well that works out.

What a ridiculous load of nonsense. Firstly, I'm not making stuff up to suit my argument. There really have been periods of stability. For instance I remember that when Bitcoin was at about $5 it stayed there for around 6 months or so, iirc, and after that it spent another six months floating around $10-$12 mark, which is the sort of volatility associated with national currencies. The reason is that back then it wasn't in the media much, governments weren't paying attention and so on. When I argue that in future it will be stable again, it's an argument based on both common sense and historical experience.

Regulation is a stabilising force? Regulation is an ossifying force. If you confuse "stagnant " with "stable" then it might superficially appear that way, but all it really does is lock in the status quo. The global recession of 2008 started in America, it was triggered by subprime US housing loans, and the USA has probably the most heavily regulated financial sector in the entire world. It's also got one of the most backwards. The USA still uses cheques, it still uses 1970's era magstripe credit cards, most online banks don't even seem to use two-factor authentication, internal wire transfers take days and are not free: all these things are commonplace outside the USA. If regulation is so great, why is the financial system in the USA such a mess despite vast, sprawling financial regulatory bureaucracies?

Finally, your belief that I'm a tea-partier is hilarious. I'm not even American. I think the tea party are a bunch of nutters. They're certainly not for small government, that would require them to heavily slash military spending, something they are very visibly not doing. I certainly don't want to live in Somalia. However Somalia's problem is not lack of financial regulation (there aren't even any banks there), it's very recent and massive wars that wrecked any semblence of civilisation.

In fact, it's funny you bring up Somalia, because badly thought out financial regulations (around making bankers liable for the crimes of their account holders regardless of whether the bankers knew anything) are about to start killing large numbers of innocent Somalis. Somalia relies heavily on the diaspora sending back money to their families, in particular from the UK. Many of those families use money from family members who work abroad to buy food. British banks have all terminated the accounts of money transmitting firms who send money into Somalia because they're afraid the US government will accuse them of aiding al Shabab. Barclays was the last bank to allow these companies to have an account, and the threat of the Somali diaspora being cut off from their families was so great that 45 MP's wrote to Barclay's, begging them to not comply with the governments own financial regulations! Barclays didn't listen of course, nor would you if you faced jail sentences for the actions of account-holders-of-account-holders, and a UK court had to force them to keep the accounts open via injunctions. God knows how that will play out.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[shaitand]

He's talking about economic "theory" (which is hypothesis to anyone who knows what a theory is supposed to be) which has been tested for less than a century on a system with investments that old or older and 20% of that duration common and which was more less debunked when it led to global economic meltdown. Deflation on the other hand was the basis for essentially every economy in the world for a few thousand years before that. Inflation was only implemented because there weren't enough currency units to go around. Bitcoin does not have that problem.

Re:It's like "collectible" comic books all over ag

[vinn01]

The same as diamonds as far as resale goes. A diamond can be "worth" thousands of dollars, until you try to sell it. No buyers to be found.

Re:Bitcoiners on reddit are completely delusional

[m.dillon]

Heh. Talk is cheap. I hear stories like that all the time on financial forums, but rarely is it actually true. Still, at least some of the stories are going to be true... the problem is that most of them are not, and the far larger numbers of people who got cleaned out on the other side of the trade instead don't boast about their losses so...

Hope you paid your taxes when you cashed them out!

-Matt

Bitcoin Value

[DanielRavenNest]

> If anything, Bitcoin is a concordant currency, its value determined by agreement.

The Bitcoin network provides a useful service - moving money from one person to another. It does it faster and cheaper than many of the alternatives, therefore people value the *network*. In order to use the network, you need some of the bitcoin currency units. Thus demand to use the network also drives demand for the currency units. Since the number of units grows slowly (1.1% per month), but the demand measured by number of merchants and online wallet accounts grows fast (25-30%/month), the price of a unit is driven up by simple supply and demand at about 25% per month.

The number of units available to buy, and the demand for those units, both vary on a daily or even minute to minute basis, thus the market rate fluctuates. But seen on longer time scales of several months or more, it sticks to the expected average growth pretty well. Events like China caused in the original article create a predictable drop in demand (people can't use their Yuan to buy bitcoins) and an increase in supply (speculators dump their coins on the market before it drops), leading to the big drop in exchange rate we have seen.

But that is a temporary disturbance in the market. Once people return to their normal use of the network to move money around, supply and demand will come into balance at a "normal" price.

Re:Bitcoiners on reddit are completely delusional

[DanielRavenNest]

> The inability to charge back is the #1 reason that prevents any consumer from perceiving it as a safe currency against vendor fraud.

Although they dealt in illegal products, the now closed Silk Road marketplace solved that problem. They had to, because vendor fraud is an especially high risk buying an illegal product online from an unknown seller. The solution was simple. The Silk Road held the payment in escrow until the buyer reported receipt and posted a positive review. A seller that racked up too many negative reviews (a) didn't get paid, and (b) stopped having customers. That was a good enough incentive that very few people got screwed over, reportedly less than with in-person deals.

It's true that bitcoin transactions are irreversible, but that does not stop you from using a third party who can send the money back. Think of it as programmable money. At an assembler language level, moving data from one memory location to another is not reversible when you only look at a single line of code. But nothing prevents creating more complex results by using longer programs. Similarly, you can build more complex payment methods on top of the atomic one way transactions. In fact, the bitcoin protocol has scriptable transactions with conditional events, though they are rarely used so far. People are too busy building payment networks and smartphone apps so you can more easily use it. They haven't had time to do fancy transactions.

Re:China believed to execute more people than the

[xvan]

Even whith 1K executions, China would have less executions per capita than US.

And that 43 are only prisioner executions, no war executions numbers (Bin Laden is the first one that comes to my mind).
I assume the "several thousands" figure includes disident executions without public trial, then that wouldn't be a fair comparission

You gave no Amnesty estimates, not even confirmed cases. That doesn't mean I'd prefer to live in China than the US.

Re:i got some bitcoins

[DanielRavenNest]

The full block chain has been growing at an average of 700 MB/month the past year. At the cost of my last hard drive purchase, that is 2.5 cents a month. If I save mailing one paper check, that pays for two years of block chain storage (49 cents for postage, and 20 cents for check printing and envelope). I can deal with that flaw for a while. Eventually people will come up with a solution. The simplest would be dedicated block chain servers, who do nothing else but store a copy, and people subscribe to using it.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[wvmarle]

The Euro was not "dramatically volatile" at any point. It's been trading for about $1.20 to $1.40 consistently for the last ten years

The Euro was perfectly stable - especially for those using it within the Eurozone. It was the USD that showed this serious volatility!

On a more serious note: Bitcoin is not a currency as such, so it's indeed Bitcoin that's volatile. For the traditional currencies, it's not so clear. However over the past few years it's mostly USD that's gone down against most other currencies. Not the EUR that's gone up so much.

General misunderstanding of inflation

[m.dillon]

There seems to be a general misunderstanding by many folks on who inflation hurts the most... I guess because a lot of people want to blame inflation for all their troubles. But inflation is not the cause of your troubles, folks.

Inflation hurts people with more money the most, because inflation only affects people who actually hold money for long periods of time. People with very little money (for example, who live pay-check to pay-check or have only a few thousand or a few tens of thousands of dollars in the bank) simply do not carry the cash long enough for inflation to have any effect.

Even at modest levels of inflation a person working pay-check to pay-check is spending the cash almost immediately after receiving it. Most people... most of the population, spends the cash within a year (or sooner). Losses from inflation are minimal in those situations. But for anyone with real savings inflation is a problem that can only be solved by investing the cash and receiving a better return... outpacing the inflation.

How does inflation transfer more money to the government? People seem confused about this too. The answer is also simple: Through taxes on gains. If I own stock in company X and it is worth $100, and 25 years later through inflation the company is valued at $200 and I cash it out, I owe taxes on the $100 difference even though the intrinsic value of my stock has not changed. This also tends to have a lower effect on the less affluent because the less affluent tend to be in a lower tax bracket. Taxes due to inflation wind up being a huge component for the affluent, and near zero if you are poor.

Inflation is the bane of the rich, not of the poor, and always has been.

What people misunderstand the most is the relationship between wages and inflation, particularly when the average worker is losing ground due to wages not keeping up. Wages not keeping up is not really a function of inflation, but more a function of supply and demand. The supply of jobs and the number of people looking for jobs, in various categories. As inflation occurs and wages become insufficient, workers demand raises. This is why we see strikes here and there in different industries all the time.

It is true that inflation makes it easier for employers to allow worker wages to stagnate. It would be hard to argue against that, but employers can only stretch the mechanic so far. The bigger problem for the average worker is that the skill requirements for jobs change and older workers tend to not keep up with the changing environment, becoming marginalized. For example, working a metal cutting tool in the old days required significant labor but little education. In modern times it requires having factory programming skills and enough knowledge to ensure that you do not accidentally destroy a $50,000 piece of machinery or kill yourself.

All this talk about bitcoin somehow magically being a way to work around inflation is just hogwash. There are many things which work around inflation with FAR less volatility and risk than bitcoin... bonds, stocks, and so forth. None of these things are riskless, and many work on the similar principle of having a fairly limited supply (a blue-chip stock, for example), and thus for a stable business tends to be immune from inflation in the long-run (except for taxes later on when you sell, but bitcoin won't save you from taxes either).

The idea that one can simply conjure money out of thin air with no risk and no investment has NEVER worked in the past and won't work for bitcoin either, but I guess there's a siren's song involved here similar to the siren's song that attracts so many people to casino gambling (despite 'gambling' in the stock market being more lucrative than 'gambling' in a casino).

The lack of education prevalent in this age of boundless information just astounds me. People are literally blind to proven facts that they don't happen to agree with.

-Matt

Re:Comparison: Bitcoin is like 'Abortion' in the U

[njnnja]

This really goes to the main point about how one should judge a currency, and specifically the central bank when it is the monopoly supplier of the currency. I strongly disagree with using strength/value w.r.t. other currencies as the main metric for quality. Instead, one should judge the currency based on how well it reduces the risk of price instability (this is not the same as zero inflation) thereby supporting the real economy that uses it as the medium of exchange.

So the first place I look is at the performance of the real economy. Granted, non-monetary events can hurt the real economy (e.g., war, natural disasters), but decent monetary policy is a necessary though not sufficient condition for good economic performance. And on that measure, the ECB has not done as well as the US, dipping back into a recession while the US has managed positive, albeit slow, growth since the great recession ended.

And this goes back to my point about bitcoin. It is designed to maintain its value against other currencies, but there is no function that I can see that tries to counteract economic shocks and lay the groundwork for economic growth. In the US, the political structure, and yes, only quasi-independence of the Fed ensures that economic growth is a priority of the central bank. With the ECB it is less so, and bitcoin almost not at all.

He found them

[justthinkit]

He found them at the corner of Smith & Wesson.

Re:Comparison: Bitcoin is like 'Abortion' in the U

[Captain_Chaos]

... decent monetary policy is a necessary though not sufficient condition for good economic performance.

Exactly. In other words, without a lot of scientific research you can't conclude from the fact that the Eurozone did worse than the US for the last few years economically that the ECB therefore did a worse job of making monetary policy. They could have just been dealt a much worse hand. Ultimately I don't think you can make comparisons like this between the Eurozone and the US anyway. The Eurozone is not one country, which makes a huge difference in practice and invalidates all kinds of comparisons.

It is designed to maintain its value against other currencies, ...

I have to disagree again. It can't maintain its value against other currencies if it is to be a success. There will only ever be 21 million bitcoins. If it ever becomes a large and stable economy then the bitcoin will have to be worth much more than it is worth today against other currencies. That's what I'm banking on anyway... ;)

I AM HODLING

[aces_of_clubs]

I don't care .. HODL rulez

Re:Comparison: Bitcoin is like 'Abortion' in the U

[njnnja]

I agree that it is very difficult to compare different countries but the Fed fairly quickly went to ZIRP and QE and avoided a double dip recession while Europe did not take those steps, went into a recession, then took those steps to try to fix the problem. Not proof, but a convincing argument to me that they probably should have done it in the first place. The reason they didn't was because of excessive independence.

And yes what I meant was bitcoin is designed to maintain it's value against a basket of goods and services better than other currencies will

Re:Comparison: Bitcoin is like 'Abortion' in the U

[cusco]

bitcoin is that bitcoin has the potential of destroying the US government.

And here I thought that coldfjiord had a monopoly on the 'Theatre of the Absurd' postings.