What are your thoughts on BitCoin?

[Zelig]

I'm going to focus on this one for now:



And I'm going to return to this for the third time: explain to me how to quickly and reliably turn BitCoin back into real money.

A concrete answer, if you would please. Preferably in an easy to follow format.

https://www.cavirtex.com/withdraw_methods

The 1st two points are are going to be inevitably true.

No, they're really not.

You can't make more bitcoins so if you lose your Harddrive, the Bitcoins are just going to drop out of circulation, causing rapid deflation.

Okay?

With other currencies, you can just replace lost bills by printing more.

Other currencies are used as a store of value. (Albeit not a very good one.)

That is a huge problem.

Why?

The blockchain its going to limit scaling.

Yes, you just quoted an explanation of how it would limit scaling.

I doubt it'll really become a major worldwide currency player anytime.

Straw man.

 

[dutchfire]

I'm going to focus on this one for now:



And I'm going to return to this for the third time: explain to me how to quickly and reliably turn BitCoin back into real money.

A concrete answer, if you would please. Preferably in an easy to follow format.

Dutch pizza salesmen are able to do it, so it can't be that difficult.

 

[bhsup]

Well yeah, but the Dutch have instant access to that drug trade. Isn't that where bitcoin earned its chops to begin with?

 

[dutchfire]

In other news, according to the newspapers (http://www.volkskrant.nl/vk/nl/2680...-Nederlanders-in-het-bezit-van-Bitcoins.dhtml), 1% of Dutch people (well, it was a 'representative' internet survey, so probably you should make that Dutch internet users) owns Bitcoin. I'm pretty sceptical about that poll. I don't know anyone who owns Bitcoin, or at least anyone who admits to owning Bitcoin.

edit: xpost

 

[Masada]

Sample size of a thousand internet users aged 18 and above. 1% = 10. I'm surprised given the medium and the self-selection issues that it was so low.

 

[dutchfire]

Hence my skepsis. Would be nice to have better figures. Maybe we can convince Arwon to include it in the Census?

 

[Masada]

Haha. Unfortunately, the questions for the next Census are set already, I believe.

 

[Tahuti]

Volkskrant methodology:
"Ever heard of BitCoins?"
Yes!

"Do you hear of BitCoins every day?"
Yes!

"Do you hear of BitCoins every hour?"
Yes!

"So your keen on BitCoins?"
Yes!

"Do you support our editorial policies in regards to economics?"
Yes! ... eh, what was the question again?

"...okay, he owns BitCoins"

 

[El_Machinae]

Seriously, how is it significantly different from investing in gold?

 

[Crezth]

Seriously, how is it significantly different from investing in gold?

http://www.forbes.com/sites/maggiem...old-art-and-bitcoin-worth-your-money-in-2014/

tl;dr: bitcoins are a trendy investment, gold is old

 

[Tahuti]

"Hoarding gold is for libertarians. Bitcoin mining is for nerds."

 

[Symphony D.]

I have not done it, but a quick search gives:https://www.bitstamp.net/help/how-to-sell/

Alright, I'll go ahead and accept the existence of AML/KYC exchanges starting to appear.

https://www.cavirtex.com/withdraw_methods

You've been complaining about currency exchanges, and you provide a method that only works for CAD? Okay.

1. an inability to scale due to the P2P nature of the blockchain, wherein linear growth of transfers will create exponential or geometric growth of blockchain updates

1. This is false.

Prove it. Show me how it's false.

2. an inability to scale in transaction size*

2. If we're just going to quote from the bitcoin wiki: "Assuming no upgrades to lightweight/SPV clients, so just batch verification, we can reach 40,000 transactions per second which is far beyond the traffic levels of the entire credit card system. And with ed25519 we could go up to nearly half a million transactions per second - with todays hardware!"

All without a centralized system that has to send every single one of these transactions to every single blockchain in every single wallet, huh? Tell me how (1) is false again?

4. a difficulty in limiting market volatility given the decentralized nature of the operation

4. This isn't a problem if it isn't used as a storage of value.

Too bad that's one of its main selling points. I don't care if you recognize it shouldn't be; most of its users don't. Also, not a problem most currencies have.

5. no backing beyond the faith of its true believers

5. This is true of any currency.

You are aware that, for example, the USD is backed by among many other things an installed tax base of several hundred million people, tens of trillions of dollars in hard assets, and five thousand nuclear warheads, correct? Remind me what BitCoin has other than some ASIC USB drives and graphics cards, by design?

6. no way of ensuring the reliability of the exchanges

6. I don't know what you mean?

The flagrant and routine collapse and/or theft of BitCoin exchanges? This chart hasn't even been really updated for most of 2013, so it doesn't include things like the Sheep Marketplace heist. None of the exchanges are backed up or insured in any way (as opposed to say FDIC insurance on US banks) so if your exchange operator chooses to defect and take your coins, you're screwed.

7. a wild disparity in value between the different exchanges

7. This is true of any currency.

No, it isn't. The Yen and the Dollar have a defined trading value. As I write this it's $1:¥103.06. Now admittedly, that value might be locked in at intervals by an exchanger. Conversely right now, Bitstamp is giving $682.01:BTC1 and MtGox is giving $736.01:BTC1. Do you see how that might be a problem?

8. widespread institutional disdain

8. Confirmation bias.

Yeah, you're right, when the European Banking Authority and People's Bank of China take concrete moves against BitCoin, and the FBI routinely seizes assets, as do the German Federal police, really that's just most of the world's developed economy, who cares? BitCoin has a bright future.

9. the inevitable decline of the currency after 2040 (at best) due to the limited volume of BitCoins and their inevitable loss or destruction eroding the market cap of the economy

9. This isn't a problem if it isn't used as a storage of value.

Except that it is, and this is again not a problem most currencies have.

10. mining being increasingly unprofitable

10. Okay?

BitCoin requires an influx of new mined coins to continue functioning due to loses and destruction. The ability to generate these "casually" has become essentially impossible; only large mining pools with extremely specialized hardware are remotely profitable (and then only if they somehow get free electricity). So BitCoin only continues to function due to people with more money than sense, to the benefit of the early adopters. That's commonly called a Ponzi scheme. And no, this is also not a standard feature of the average currency.

So to sum up, you didn't really explain jack, and you were mostly wrong or deliberately misleading. Congratulations.

Seriously, how is it significantly different from investing in gold?

Less flippantly: at the end of the day, if you've got a gold brick, you've got a gold brick. If you're got a BitCoin, you've got a meaningless character string.

 

[Cutlass]

http://www.theatlantic.com/business...-will-never-be-a-currency-in-2-charts/282364/

Why Bitcoin Will Never Be a Currency—in 2 Charts
Bitcoin could be Paypal 2.0, but it will never be the dollar 2.0. Not when prices would have had to fall 98.5 percent the past year if they'd been set in terms of Bitcoin.
Matthew O'Brien Dec 15 2013, 9:17 AM ET

Falling prices sound like a good thing, but they're not.

When prices fall, people put off buying things. And when people put off buying things, companies put off investing. And then the economy slumps—and keeps slumping. Even worse, people are stuck trying to pay back debts that don't fall with wages that do. So bankruptcies pile up, and so do bank losses. That makes people too scared to borrow, and banks too scared to lend, which only makes prices fall even more.

This self-perpetuating cycle of doom is what sunk the global economy in the 1930s, and what, to a lesser extent, has sunk Japan since the 1990s. And it's what has been sinking us since 2008, though this time central banks have at least kept prices from falling, just barely.

Now, it doesn't make much sense, but there's actually a currency designed to create these kind of economic calamities. A currency designed for deflation. That's Bitcoin, the virtual currency you can theoretically use to buy things online. See, there's a predetermined number of bitcoins that will only grow at a low rate until 2040—and then stop. This artificial scarcity means that the dollar value of a bitcoin should go up considerably. And it has. In just the last year, it's gone up something like 64 times. That's enough that "Bitcoin millionaires" are now a thing.

Of course, a stronger Bitcoin is just another way of saying that things cost less in terms of Bitcoin. In other words, there's Bitcoin deflation. Just how much? Well, as you can see below, Peter Coy calculates that prices would have had to fall 98.5 percent the past year if they had been set in terms of Bitcoin. As point of comparison, prices fell about 10 percent a year during the worst of the Great Depression.

But prices aren't set in terms of Bitcoin. They're set in terms of dollars. So it doesn't hurt the real economy when the price of Bitcoin goes up. People just go on living their lives, mostly unaware of the virtual currency. But it does hurt the Bitcoin economy, such as it is, when the price of Bitcoin goes up. Why would anyone use their bitcoins to buy things when those bitcoins might double in value in a day—or hour—or two?

They wouldn't. Researchers found that 64 percent of bitcoins are in accounts that have never been used. And the ones that are being used aren't being used more. You can see that in the chart below from Jason Kuznicki, which looks at the dollar value of all bitcoin transactions each day divided by the dollar value of all bitcoins each day. It's hard to see any pattern here—and that's the point. If people were using bitcoins more, this ratio would be going up. It's not.

Matthew O'Brien Dec 15 2013, 9:17 AM ET
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Reuters

Falling prices sound like a good thing, but they're not.

When prices fall, people put off buying things. And when people put off buying things, companies put off investing. And then the economy slumps—and keeps slumping. Even worse, people are stuck trying to pay back debts that don't fall with wages that do. So bankruptcies pile up, and so do bank losses. That makes people too scared to borrow, and banks too scared to lend, which only makes prices fall even more.

This self-perpetuating cycle of doom is what sunk the global economy in the 1930s, and what, to a lesser extent, has sunk Japan since the 1990s. And it's what has been sinking us since 2008, though this time central banks have at least kept prices from falling, just barely.

Now, it doesn't make much sense, but there's actually a currency designed to create these kind of economic calamities. A currency designed for deflation. That's Bitcoin, the virtual currency you can theoretically use to buy things online. See, there's a predetermined number of bitcoins that will only grow at a low rate until 2040—and then stop. This artificial scarcity means that the dollar value of a bitcoin should go up considerably. And it has. In just the last year, it's gone up something like 64 times. That's enough that "Bitcoin millionaires" are now a thing.

Of course, a stronger Bitcoin is just another way of saying that things cost less in terms of Bitcoin. In other words, there's Bitcoin deflation. Just how much? Well, as you can see below, Peter Coy calculates that prices would have had to fall 98.5 percent the past year if they had been set in terms of Bitcoin. As point of comparison, prices fell about 10 percent a year during the worst of the Great Depression.

But prices aren't set in terms of Bitcoin. They're set in terms of dollars. So it doesn't hurt the real economy when the price of Bitcoin goes up. People just go on living their lives, mostly unaware of the virtual currency. But it does hurt the Bitcoin economy, such as it is, when the price of Bitcoin goes up. Why would anyone use their bitcoins to buy things when those bitcoins might double in value in a day—or hour—or two?

They wouldn't. Researchers found that 64 percent of bitcoins are in accounts that have never been used. And the ones that are being used aren't being used more. You can see that in the chart below from Jason Kuznicki, which looks at the dollar value of all bitcoin transactions each day divided by the dollar value of all bitcoins each day. It's hard to see any pattern here—and that's the point. If people were using bitcoins more, this ratio would be going up. It's not.

Bitcoin won't work as a currency as long as it's so deflationary. Why spend bitcoins today when they might be worth much more tomorrow? The only reason would be to buy or do things online that you can't buy or do with dollars (or euros or yuan)—something illegal. Now, black markets can be big markets, especially when it comes to evading capital controls, but not so big that Bitcoin would ever become more than a niche "currency."

What Bitcoin really needs is a central bank to stabilize its value. When the demand for Bitcoin goes up, they need to print more to keep it from skyrocketing. That is, they need to decide whether they want Bitcoin to be a Ponzi scheme for techno-libertarians or an actual medium of exchange. See, the technology of Bitcoin really is revolutionary, but the currency of Bitcoin is holding it back. In other words, Bitcoin really could have use as a payments system if it had a stable value. But it doesn't, so it's just a dotcom stock. And one that could be co-opted by banks that take its technology and use it with dollars instead.

So who's the perfect person to run Bitcoin? It'd have to be someone with central banking experience. Someone who understands why deflation is a problem. And someone who thinks virtual currencies hold promise. Someone like ... Ben Bernanke.

 

[Crezth]

enough is enough

 

[Kaitzilla]

http://www.theatlantic.com/business...-will-never-be-a-currency-in-2-charts/282364/

...Bitcoin won't work as a currency as long as it's so deflationary. Why spend bitcoins today when they might be worth much more tomorrow? The only reason would be to buy or do things online that you can't buy or do with dollars (or euros or yuan)—something illegal. Now, black markets can be big markets, especially when it comes to evading capital controls, but not so big that Bitcoin would ever become more than a niche "currency."

What Bitcoin really needs is a central bank to stabilize its value. When the demand for Bitcoin goes up, they need to print more to keep it from skyrocketing. That is, they need to decide whether they want Bitcoin to be a Ponzi scheme for techno-libertarians or an actual medium of exchange. See, the technology of Bitcoin really is revolutionary, but the currency of Bitcoin is holding it back. In other words, Bitcoin really could have use as a payments system if it had a stable value. But it doesn't, so it's just a dotcom stock. And one that could be co-opted by banks that take its technology and use it with dollars instead.

So who's the perfect person to run Bitcoin? It'd have to be someone with central banking experience. Someone who understands why deflation is a problem. And someone who thinks virtual currencies hold promise. Someone like ... Ben Bernanke.

Is this a joke?
I know I'm gullible but I really can't tell on this one

Bitcoin needs a central bank? To arbitrarily make more of them when demand for them goes up?

Maybe it is popular because they can't be created with Control+P. Did anyone ever think of that?


I'd like to see a bank co-opt it.
Maybe a big powerful one like JP Morgan, who's failed 175 times trying.
http://www.zerohedge.com/news/2013-12-15/jpmorgans-bitcoin-alternative-patent-rejected-175-times


The main thing standing in Bitcoin's way are countries taxing it.
http://www.bloomberg.com/news/2013-...-test-in-scandinavia-s-wealthiest-nation.html

Bitcoins were dealt a blow in Norway as the government of Scandinavia’s richest nation said the virtual currency doesn’t qualify as real money.

“Bitcoins don’t fall under the usual definition of money or currency,” Hans Christian Holte, director general of taxation in Norway, said in an interview. “We’ve done some assessments on what’s the right and sound way to handle this in the tax system.”

Norway will instead treat Bitcoins as an asset and charge a capital gains tax, after Germany in August said it will impose a levy on the virtual currency.

Let me get this straight.
A government prints more money, the value of Bitcoin goes up because of that, and then the government taxes the appreciation?

Man, the mob has nothing compared to the racket nation states have going.

==================================================================================

When prices fall, people put off buying things. And when people put off buying things, companies put off investing. And then the economy slumps—and keeps slumping.

Yes, when prices go down, people buy less stuff
Even the slightest deflation encounters a positive feedback loop similar to a black hole and has annihilated every country that has ever experienced it for even brief moments

Right now companies are too busy borrowing printed money and buying back their stock to invest in growth.
http://www.nasdaq.com/article/stock...ighs-poor-use-of-corporation-capital-cm310954

This has definitely been the era of stock buybacks with such low borrowing costs as companies are borrowing at very low rates not to expand the business, create innovative products, increase research and development but to buy back their own stock which isn`t cheap considering the multiple expansion in markets the last five years.

But earnings from a revenue side have been subpar to say the least and companies are buying back stock each quarter just to make their quarterly numbers look better than they actually are based upon the year over year business growth.

The funny thing is that this has been going on for four years, these are public companies right? At what point do the floats become so small that for all intents and purposes these are private companies? I am being a little facetious here, but this has to be the longest continuous era of stock buybacks on record all fueled by the Fed`s never before witnessed five straight years with the Fed Funds Rate at near zero percent.

 

[Cutlass]

Is this a joke?
I know I'm gullible but I really can't tell on this one

Bitcoin needs a central bank? To arbitrarily make more of them when demand for them goes up?

Maybe it is popular because they can't be created with Control+P. Did anyone ever think of that?

Everyone has thought of that. And of course that's one of the reasons that it is popular.

It is also the reason that bitcoin can never replace real money. Bitcoin is incapable of functioning as real money because the quantity of it is fixed. It could never be more than a poor supplement to real money. Because the quantity is fixed, no economy could function with bitcoin exclusively.

But people who don't give a flying frak about whether the economy functions like bitcoin because they think the universe owes them a free lunch. And bitcoin promises, they think to give them one.

I'd like to see a bank co-opt it.
Maybe a big powerful one like JP Morgan, who's failed 175 times trying.
http://www.zerohedge.com/news/2013-12-15/jpmorgans-bitcoin-alternative-patent-rejected-175-times


The main thing standing in Bitcoin's way are countries taxing it.
http://www.bloomberg.com/news/2013-...-test-in-scandinavia-s-wealthiest-nation.html



Let me get this straight.
A government prints more money, the value of Bitcoin goes up because of that, and then the government taxes the appreciation?

Man, the mob has nothing compared to the racket nation states have going.

==================================================================================



Yes, when prices go down, people buy less stuff
Even the slightest deflation encounters a positive feedback loop similar to a black hole and has annihilated every country that has ever experienced it for even brief moments

Right now companies are too busy borrowing printed money and buying back their stock to invest in growth.
http://www.nasdaq.com/article/stock...ighs-poor-use-of-corporation-capital-cm310954

When prices go down due to money constraints, the purchasing power of labor goes down the most. Deflation increases the amount of work you have to do to purchase any given good or service.

 

[Archbob]

I actually totally agree with cutlass for once.

 

[Crezth]

I actually totally agree with cutlass for once.

Same, but I usually feel Cutlass is right when he talks about banks/currencies anyway.

 

[Cutlass]

Well, I try anyways. But as I said in starting my thread on the subject, it isn't that it's a hard subject that I've mastered, but rather that it's a fairly easy subject, but one where there's just tons of misinformation and misperceptions going around. Often deliberately fueled ones, for a political motive.

 

[Archbob]

My main objection against Bitcoin is that the exchanges aren't insured and that you can't easily buy everyday items with them. Despite Zelig saying I can buy groceries and pizza from some obscure place in the Netherlands, I can't buy anything around where I live with Bitcoins and trading Bitcoins for cash is limited on the amount you can trade.