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

[EGarrett]

Yes, because nothing convinces people that bitcoin is worthwhile like responses which completely ignore everything the other person has said and contain nothing but six-year-old playground chatter.

How's Romney doing these days?

It's not his job to convince you that Bitcoin is worthwhile. He has no stake whatsoever in your personal interest in Bitcoin. It doesn't help him or me or anyone else in any significant amount.

Bitcoin, like any other product or service, will live or die due to how useful the people that try it find it to be. If they do, it will spread, and no argument will be necessary, in the same way that no one had to "argue me" into buying a computer.

Your tone and smiley faces also make you seem very immature and unconstructive.

 

[EGarrett]

The biggest point that folks are making is that the Bitcoin is simply too volatile to do business with. If the value varies minute to minute, as I have seen, then there is a huge risk in operating on day to day costs. Right now, at 2340, 1 BTC is worth 146.8 USD.

[EDIT] 0003, and BTC has risen to 147.3 USD, then dropped down to 146.0 USD.

What folks are actually doing is using a "God of the Gaps" creationist style of behavior where they can't be bothered to do actual research into the relevant technical concepts (evolution or in this case, economics and how the Bitcoin client functions), but they have an emotional dislike of what they view as "libertarian nuts" or pre-rational external political bias that makes them dislike the idea, so they seize on whatever is easiest at hand in order to complain about or "find holes in" in the thing they dislike.

In the same way that people called it a baseless bubble, until the "bubble" refused to burst over years and that argument faded to a minimum, now they are seizing on the "volatility" as their latest faux-"complaint." But since it's not actually based on real knowledge or study, it melts away like cotton candy with the slightest bit of actual research.

If you actually look into the way Bitcoin functions and the dynamics of the market (specifically how volatility depends on size, and size will change based on utility, which Bitcoin has), this "volatility" is not an actual concern or problem for Bitcoins future growth or usefulness.

 

[EGarrett]

I already ran those numbers for you. Did you not understand them?

He didn't reply to them and I think he's not interested in understanding them.

Anyway...

If you guys (and by "you guys" I don't mean psionl0 but all the people who are trying to argue against Bitcoin) want to know the REAL problems with Bitcoins, why don't you ask those of us who actually use them and have been involved with the people and programmers, the program itself, and economic principles behind them?

Believe it or not, if you actually approached in a mature, respectful or friendly manner, I and others who are more knowledgeable than I am could tell you a lot about the reality of the situation, and what is exciting and what is a legitimate concern.

Right now, the biggest problem with Bitcoin is that the current system of services and providers cannot handle the sheer number of people who want to use them. MtGox goes down constantly and has massive delays in processing accounts, deposits and withdrawals. The large number of trades in relation to this small infrastructure are also what create the volatility.

Long-term, Bitcoins non-physical status is going to be an issue if it ever hopes to become a major world currency. Power outages or being away from an internet connection cannot be something that shuts down an economy or reduces a community to barter. And methods for instituting a paper or physical form of trading Bitcoins will all run into a number of tricky problems.

I would love to discuss these real issues more, rather than spend so much time repeating fundamental information.

 

[Vermonter]

If you're not interested in additional revenue then business is not for you.

Petrol prices in Australia are just as volatile. They can vary by more than 20 cpl in a single day. By your reasoning, a transport industry would not be viable in Australia because businesses would not be sure what their fuel bill would be.

Shot up to 152.5 USD in the span of three hours. Ooops, back down to 151.0 as I am writing this. And now back down to 148.6, and 147.4.

The issue is that the agreed-upon price can vary between the time of the initial agreement ("I will pay X BTC for your services/widget/whatever") and that of the time of delivery and exchange of money. For something like an extended contract, this could be disastrous for either party. I'm sure there are some who'd be fine taking that kind of risk, however.

Apparently the transport industry IS viable in Australia since it exists. I can't speak to the calculations used in the industry, perhaps you can fill me in on it?

If I were to invest in BTC, I'd invest in making the mining rigs. That is where the money is at. As it is, BTC seems to fluctuate by the whole dollar on a minute-to-minute basis. Like I said, awesome to observe, but I'd invest my money in something else.

 

[psionl0]

If businesses can cope with volatility in fuel prices then why not bitcoin prices?

Is the fact that bitcoin prices are volatile more important than how much profit you make?

ETA Re-read (or rather, read for the first time) posts #1938 , #1940 and 1951 before responding.

 

[Belz...]

If businesses can cope with volatility in fuel prices then why not bitcoin prices?

Fuel prices don't usually represent 100% of the price you pay, nor does it vary by up to 50% in a single day.

 

[psionl0]

Fuel prices don't usually represent 100% of the price you pay, nor does it vary by up to 50% in a single day.

Are you arguing that bitcoin receipts represent 100% of your revenue?

 

[Vermonter]

What folks are actually doing is using a "God of the Gaps" creationist style of behavior where they can't be bothered to do actual research into the relevant technical concepts (evolution or in this case, economics and how the Bitcoin client functions), but they have an emotional dislike of what they view as "libertarian nuts" or pre-rational external political bias that makes them dislike the idea, so they seize on whatever is easiest at hand in order to complain about or "find holes in" in the thing they dislike.

In the same way that people called it a baseless bubble, until the "bubble" refused to burst over years and that argument faded to a minimum, now they are seizing on the "volatility" as their latest faux-"complaint." But since it's not actually based on real knowledge or study, it melts away like cotton candy with the slightest bit of actual research.

If you actually look into the way Bitcoin functions and the dynamics of the market (specifically how volatility depends on size, and size will change based on utility, which Bitcoin has), this "volatility" is not an actual concern or problem for Bitcoins future growth or usefulness.

I have some libertarian leanings of my own. More to the point, I find Bitcoin to be interesting, and I like watching where it's going, but I have no desire to get into it myself. That said, I'll watch other people fret about it! I think one would have to admit, however, that the Bitcoin is volatile in that the exchange rate can rise or drop by several dollars in the span of minutes. Granted, that isn't terribly different fron some stocks. Who knows, maybe it'll grow in acceptance. My personal, unqualified guess is "no".

 

[Random]

If businesses can cope with volatility in fuel prices then why not bitcoin prices?

Is the fact that bitcoin prices are volatile more important than how much profit you make?

ETA Re-read (or rather, read for the first time) posts #1938 , #1940 and 1951 before responding.

Businesses don't usually accept payment in fuel.

If merchants are accepting bitcoins for payment because they think they can trade those bitcoins for things they need, then bitcoins are a currency. If merchants are accepting bitcoins because they think they can trade them in for "real" money, then bitcoins are simply a commodity.

The transition from commodity to currency requires, among other things, a relatively stable value. People need to believe that their paycheck will be worth roughly the same amount from the moment they recieve it to the moment that they go across the street to pick up some groceries. Bitcoin does not currently have this.

 

[psionl0]

Businesses don't usually accept payment in fuel.

If merchants are accepting bitcoins for payment because they think they can trade those bitcoins for things they need, then bitcoins are a currency. If merchants are accepting bitcoins because they think they can trade them in for "real" money, then bitcoins are simply a commodity.

The transition from commodity to currency requires, among other things, a relatively stable value. People need to believe that their paycheck will be worth roughly the same amount from the moment they recieve it to the moment that they go across the street to pick up some groceries. Bitcoin does not currently have this.

It is obvious from this post that you haven't read anything that I have posted.

I am discussing the possibility of allowing those customers who wanted to, to settle their accounts with bitcoins then exchanging those bitcoins for cash in a timely manner. The question is what effect a policy like this would have on the bottom line.

What difference could it possibly make to the bottom line if you call bitcoin a currency or a commodity? Who said anything about paying wages with bitcoin? How could you possibly think that I was talking about accepting payments in fuel? Wasn't your argument about price volatility?

Pure straw.

 

[remirol]

The speculation-based volatility of Bitcoin has no effect on its utility-based value, and the utility-based value is what will cause it to grow in acceptance, and that growth in acceptance will disperse the market and thus decrease the volatility over time.

Wrong.

 

[Random]

It is obvious from this post that you haven't read anything that I have posted.

I am discussing the possibility of allowing those customers who wanted to, to settle their accounts with bitcoins then exchanging those bitcoins for cash in a timely manner. The question is what effect a policy like this would have on the bottom line.

What difference could it possibly make to the bottom line if you call bitcoin a currency or a commodity? Who said anything about paying wages with bitcoin? How could you possibly think that I was talking about accepting payments in fuel? Wasn't your argument about price volatility?

Pure straw.

Fuel has several uses. It can be used to produce electricity, heat buildings, and move goods from one area to another. If the cost of fuel increases, the cost of doing these things increases, and business must adapt to different cost structures. One year, heating your factory will be your biggest cost, next year, it might be labor. Businesses cope with these changes all the time.

Bitcoins have only one use, as an instrument of trade. Their value is solely determined by what you can get for them. Its perceived value is its only value.

I suppose a merchant could arrange it so that he could accept bitcoins, then instantly resell and convert them to US dollars, placing all the price volatility risks on the customer, but why bother? You might want to ask why most stores in the US do not accept foreign currencies either.

 

[remirol]

Out of curiosity, is there anyone in this thread using Bitcoin as anything other than a speculation vehicle? I hear a lot about "running businesses" but I'm curious if anyone in here is actually trying to use Bitcoin that way, as well as if anyone in here has actually run a non-Internet business?

I'll start. No and no.

 

[psionl0]

Fuel has several uses. It can be used to produce electricity, heat buildings, and move goods from one area to another. If the cost of fuel increases, the cost of doing these things increases, and business must adapt to different cost structures. One year, heating your factory will be your biggest cost, next year, it might be labor. Businesses cope with these changes all the time.

Bitcoins have only one use, as an instrument of trade. Their value is solely determined by what you can get for them. Its perceived value is its only value.

Still not relevant to what I am discussing.

I suppose a merchant could arrange it so that he could accept bitcoins, then instantly resell and convert them to US dollars, placing all the price volatility risks on the customer, but why bother?

The bottom line.

You might want to ask why most stores in the US do not accept foreign currencies either.

Actually, the last motel I worked at did accept foreign currencies (a number of its guests came directly from the international air terminal). It didn't offer as good a rate of exchange as the official rate and its foreign currency takings were relatively small. Before the Euro, I believe that a lot of European businesses would accept any currency - or at least the major European currencies.

 

[psionl0]

Out of curiosity, is there anyone in this thread using Bitcoin as anything other than a speculation vehicle? I hear a lot about "running businesses" but I'm curious if anyone in here is actually trying to use Bitcoin that way, as well as if anyone in here has actually run a non-Internet business?

OK I'll bite. No, nobody has ever asked me if they could pay for my services in bitcoin.

If they do in the future, then as well as the volatility issues that I have discussed, I would also have to consider the costs associated with converting the bitcoins back into legal tender (Mt Gox charges $10 for each withdrawal) before saying yea or nay.

Unless my bitcoin takings were to be quite high, I would probably have to pass on those costs to the customer which would probably put the kibosh on the whole deal.

 

[Belz...]

Are you arguing that bitcoin receipts represent 100% of your revenue?

No, I am saying that, if you get paid in BTC, then that's 100% of the payment. If gas prices to up 20%, not everything goes straight up by 20% because gas isn't the whole of the cost.

 

[mhaze]

.....anyone in here is actually trying to use Bitcoin that way, as well as if anyone in here has actually run a non-Internet business?

I'll start. No and no.

Many times and many businesses.

Of course your phrasing is ridiculous "actually trying" but that's a minor point. It ignores the reality of the pizza I bought with a couple clicks.

Here's a very good article on the whole issue, and with this note, I'm gone and will check back in Jan 2014. Have fun!

http://detlevschlichter.com/2013/04/could-bitcoin-be-the-money-of-the-future/

 

[remirol]

Many times and many businesses.

For you specifically: Tax returns or it didn't happen.

 

[remirol]

OK I'll bite. No, nobody has ever asked me if they could pay for my services in bitcoin.

Have you ever advertised that you might be willing to accept bitcoin in exchange for your services?

If they do in the future, then as well as the volatility issues that I have discussed, I would also have to consider the costs associated with converting the bitcoins back into legal tender (Mt Gox charges $10 for each withdrawal) before saying yea or nay.

Unless my bitcoin takings were to be quite high, I would probably have to pass on those costs to the customer which would probably put the kibosh on the whole deal.

Indeed. Though if your business is sufficiently successful from a USD perspective, it at least makes it plausible to take a flyer on bitcoin payments even while passing that cost down the chain -- as mentioned before, if this means that pizza costs $10 in USD and $20 in bitcoin, so be it. It's not like you're gonna lose USD orders by suddenly starting to charge a buttload in bitcoin for the same product.

With regard to your earlier remarks: you are assuming that you would be gaining new revenue streams (ideal) as opposed to simply converting the form of existing revenue streams (dangerous). [PANOOTA alert] If you sell 200 pizzas a month while accepting only USD, starting to accept bitcoin has three (well, four) possible outcomes:

1) Nobody or almost nobody orders in bitcoin, ever. Effectively a wash.
2) You start selling 225 pizzas a month and 25 of them are via bitcoin.
(likely a win because your USD cashflow can cover your bitcoin risks)
3) You sell 200 pizzas a month and 25 of them are via bitcoin.
(risky because you've actually lost cashflow due to bitcoin; if bitcoin doesn't do what you want it to, you could take a beating)
4) You sell 200 pizzas a month and 100 of them are via bitcoin.
(potentially catastrophic in the long run, and now you probably piss off people if you stop accepting bitcoin and will head back to 175-180 pizzas a month in USD).

#4 is really unlikely, but I'm including it as the "oh ****" case. The short version, though: unless there are new revenue streams available by supporting bitcoin... which it doesn't appear that there are since it's so volatile and chock full of speculators... it won't be a particularly good idea to go down that path.

By the way, this is not intended to be a 'gotcha' question (well, except for mhaze, but TBH if he said the sky was blue I'd look out a window before agreeing) in any way; it's more that I'm trying to establish that we're all operating on the same relative footing here in this discussion. Someone who successfully has run/is running a non-Internet business would have a greater insight into what it actually takes to make it from day to day, and as such I could ask much more specific questions of them.

 

[psionl0]

Have you ever advertised that you might be willing to accept bitcoin in exchange for your services?

In the real world, almost nobody knows what a bitcoin is and the people who have them aren't in a hurry to spend them. So I would consider it wasted advertising. I would only consider payment via bitcoin an option if the request came from the client.

(Actually I don't need to advertise because I get clients referred to me by an agency for a fee).

1) Nobody or almost nobody orders in bitcoin, ever. Effectively a wash.
2) You start selling 225 pizzas a month and 25 of them are via bitcoin.
(likely a win because your USD cashflow can cover your bitcoin risks)
3) You sell 200 pizzas a month and 25 of them are via bitcoin.
(risky because you've actually lost cashflow due to bitcoin; if bitcoin doesn't do what you want it to, you could take a beating)
4) You sell 200 pizzas a month and 100 of them are via bitcoin.
(potentially catastrophic in the long run, and now you probably piss off people if you stop accepting bitcoin and will head back to 175-180 pizzas a month in USD).

You forgot:
5) I sell 400 pizzas a month and 200 of them are via bitcoin.
(Maybe PIZZAMAKERS is operating in the heart of CT territory and got a big thumbs up from the preppers ).

Less frivolously, if bitcoin receipts form a small part of my total takings (most likely) then it isn't likely to cause any cash flow problems. I wouldn't be in business for long if cash was that tight!

If bitcoin receipts were to form a big part of my takings then since PIZZAMAKERS is in the business of making pizzas - not speculating in bitcoins, I would probably set up a BITCOINSPECULATORS company to buy the bitcoins from PIZZAMAKERS and speculate with them. If bitcoin went into a death spiral like it did in 2011 then it would take down BITCOINSPECULATORS but it would still be business as usual for PIZZAMAKERS (albeit without the bitcoin payment option).

Who knows? If bitcoin usage becomes that common, maybe there will be bitcoin speculator companies already offering that service.