How To Use Bitcoin – The Most Important Creation In The History Of Man

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mhaze said:
So your comments appear to be sort-of-related to the luxury status quo as has existed in the US in the past. Basically, that's over.
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In what sense? A dollar seems to be about as stable now as it has ever been. That is, it is expected to lose a couple percentage points of purchasing power over the course of a year. This is below the historical average in fact. A lot better than the 70s, for example. A report just released in the last couple hours actually shows prices fell in March compared to February. Compared to a year ago prices were up 1.5%. The historical average is over 3%.
 
Puppycow said:
In what sense? A dollar seems to be about as stable now as it has ever been. That is, it is expected to lose a couple percentage points of purchasing power over the course of a year. This is below the historical average in fact. A lot better than the 70s, for example. A report just released in the last couple hours actually shows prices fell in March compared to February. Compared to a year ago prices were up 1.5%. The historical average is over 3%.
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The "luxury status quo" is over. In the past, many of us worked our way through college and got out with no, or small loans, then bought a house.

Now kids get out with huge loans, lower job prospects than the past, and cannot or perhaps barely can consider buying a house.

Please don't pump government propaganda reports to support your position(s).

I'm off this forum for a while, and will check back in early 2014.

PsionIO, you deserve applause for trying with limitless patience to explain a revolutionary concept in economics to a general audience. Message me if you want to talk further.

Bye for now.
 
mhaze said:
Wild swings in value of bitcoin should not prevent it's commercial use for transactions. THe buyer and seller simply check the price at the instant of closing and agreeing on a transaction, then agree or disagree. THen they have a method of sending money internationally with practically zero fees - say for ebay transactions. This is a big dal to numerous sellers who currently have transaction costs at about the level of their net profits.
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It won't prevent bitcoin denominated transactions (and obviously it hasn't, since bitcoin commerce continues to function), but it will put a damper on them. This is because, for example, if a bitcoin vendor's inventory is denominated in dollars, he has to more or less adjust his sale prices in real time in order to remain competitive with other vendors who accept bitcoin. Either that or he is subjecting himself to either undue bitcoin or USD exposure, as well as arbitrage. These costs and potential risks have to be weighed of course against the benefits you outlined above for accepting bitcoin.

It's clear that most of the demand for bitcoin is speculation, presumably on the future utility of this disruptive technology, and it's clear that it is very volatile at the moment. In addition to the added risks for using it in commerce, it's high volatility makes it mostly unsuitable for the use in fixed contracts. I wouldn't want to issue bitcoin denominated bonds, or pay or receive a salary in bitcoin just yet. So I stand by my comment that it is far more of a speculative asset and a presumed store of digital "value", than it is a currency, but it has the potential to become a currency once an equilibrium is reached, and the volatility subsides (most likely at some price far higher from what it is at currently, unless some other digital crypto-currency supplants it).

That's the case with a lot of physical store merchants, also, who have high costs for mc/visa processing.

From the merchant point of view, he can receive funds instantly with no fees. Gee, that beats out MC/Visa and all it's hassle.

This is a more practical point of view than something like "finding equilibrium in a world with 30T USD."
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It does pose advantages for merchants, and it also avoids the problem of chargebacks. But what's good for the merchant is not necessarily good for the consumer, who has to bank on the merchant's reputation and good faith in order to honor problems with the goods sold. But since the money saved from bypassing the credit card transactions can be passed along to the consumer in the form of lower prices, that will help sweeten the deal for bitcoin spenders, especially with reputable firms.

As for your comment about "recognized as a digital store of value", that seems to be more about the process of education and exposure to the subject of bitcoin. This is because obviously, if someone receives bitcoin, they receive the value that comes with it.

It's certainly possible to conceive of a bitcoin or bitcoin like instrument being used in the instant, by both buyer and seller, to execute a transaction at great distance and at almost no cost. This is quite different than considering it "a store of value".
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Money has to represent a store of value. Much like the USD, after each transaction, someone is holding bitcoin, and thus has a long position. The fact that it can be used temporarily for foreign remittance, transactions on silk road or elsewhere, is irrelevant. Ultimately someone has to hold the hot potato.

Most assets have some combination of intrinsic and extrinsic value, derived from a combination of practical utility, and liquidity. Bitcoin has zero intrinsic value, but some extrinsic value, and it represents 100% liquidity premium unlike most other assets except fiat currencies. If the internet or underlying peer-to-peer network that supports the blockchain is damaged or destroyed, the extrinsic value of bitcoin will drop to zero, but then if solar flares or EMP weapons destroy or disable the internet, the same fate will happen to the USD.

I don't hold bitcoin because of this, even though I think it has a fairly bright future and represents something very important. Anything which draws attention to the subject of money, and the broken status quo is also a good thing. But ultimately, like I said, I think money, at least my money, must represent a store of not only value, but intrinsic value. This is why I choose precious metals, which have their own set of features and drawbacks, over bitcoin.
 
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Tippit said:
I think money, at least my money, must represent a store of not only value, but intrinsic value. This is why I choose precious metals, which have their own set of features and drawbacks, over bitcoin.
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Gold might have a history of being considered valuable but I'm afraid that precious metals have no more "intrinsic value" than bitcoins - or fiat money for that matter.

The laws of supply and demand are universal.
 
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shuttlt said:
Is the rate of doubling the right model for this? In any case, what would happen to the growth of the blockchain if it had as many transactions as Visa? Presumably if it were to become a serious international currency, it's got to ramp up to a serious number of transactions. I found a link:

http://corporate.visa.com/newsroom/press-releases/press604.jsp

From 2006 saying Visa peaked at 179 million transactions per day.

This site:
http://blockchain.info/charts/n-transactions
has bitcoin peaking at 70,000 transactions per day. That's ~0.04% of Visa.
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The difference is that Visa does not need to centrally validate each transaction. A typical transaction takes place like this:

1. The cardholder provides account details to the merchant.
2. Merchant's bank asks card network to determine the card's issuer.
3. Card network checks card security features and sends to the issuer for approval.
4. Issuer approves purchase.
5. Card network sends approval to the merchant's bank.
6. Bank sends approval the merchant.
7. Cardholder completes the purchase.

This looks complicated (and it is), but often the operation between 2 and 6 can be decreased. For example, if the merchant bank is the same as the card issuer, the transaction does not go all the way to the card network. Sometimes, the card networks are operated with local banking facilities, so the stress on the overall network lessens.

With Bitcoin, all transactions have to be verified by peers and then recorded in the blockchain.
 
stilicho said:
Slightly different topic but associated:

Do we have any reliable statistics on the number of merchants who accept them in transactions? Is there a growth component?
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This is an excellent question, and the answer is tricky. There is a list of people who take Bitcoins:
https://en.bitcoin.it/wiki/Trade

However, I have been looking at that list in detail from time to time, and it seems like a very large number of merchants are actually individuals who state that they will accept BTCs in lieu of services rendered (look for Creative Design in the list for several examples of this).

Then, I found many businesses listed that no longer seem to accept BTC, or do not have any facility or address to do so on their site, which leads me to believe that they have never actually taken any coins.

In short, there is very little evidence of bitcoins being used for anything other than speculation.
 
Roger Ramjets said:
Credit card transaction fees are 3% or less. If you are only making 3% on eBay sales then you're doing it wrong! And with PayPal you don't have the 'hassle' of dealing direct with multiple credit card companies.
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Exactly! Also, people tend to ignore that Bitcoin exchanges do charge per transaction:
https://mtgox.com/fee-schedule

The fees tend to be low, but they are not 0, as claimed by many bitcoiners.
 
anduin said:
With Bitcoin, all transactions have to be verified by peers and then recorded in the blockchain.
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Does that scale to bitcoin being widely accepted? The back of a fag packet maths so far makes it look as though if bitcoin did ever make it into the big time it would either have to change this, or fall over and die.
 
anduin said:
Then, I found many businesses listed that no longer seem to accept BTC, or do not have any facility or address to do so on their site, which leads me to believe that they have never actually taken any coins.

In short, there is very little evidence of bitcoins being used for anything other than speculation.
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Great, how much are you going to make by shorting them?
 
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