Hopefully someone can clear this up for me: With the price rising so quickly what incentive is there to actually use BTC as intended, as a currency?
Because the maximum number of coins is fixed it's pretty easy to project where the valuation is headed, and so anyone in their right mind should just hoard their BTC instead of spending it, which in turn should drive the price down, no?
Bitcoin worshippers will tell you, "no it does not matter, why would you not spend bitcoins, it's better than fiat", blah blah blah...
Yet if you look at /r/BitCoin, there are dozens of "OMG!! I spent all my bitcoins on Pizza instead of holding on to them, look at this gif of me being sad"
So to answer your question, it's just insanity.
I miss the days before this month when BitCoin prices were stable for a couple of months. Spending it was actually pretty cool.
This is a valid question. One that I think about often.
It's not easy to predict the valuation. For that, we would need to know how much business is done in bitcoin in the future. That's anyone's guess. Will it do $1 trillion or will it do more ?
The price isn't always going to rise at this rate. That's for certain. However, yes, there will probably be a long term rise until bitcoin finds it true usage, market cap, and as a result of this, it's value with steady deflation going forward.
While, I'm not sure what an economist's opinion on this is, the fact that you are encouraged to spend money because it's worth less in the future (inflationary fiat money) leaves a really bad taste in my mouth. Consumerism is a horrible disease and our planet is suffering from it every. single. day.
That brings me to bitcoin and it's deflationary nature. Well, you're still going to buy the stuff you want to buy. Then, you'll save more because you know it'll be worth more later. Why wouldn't you buy the things you always need ? (food, shelter, a few gadgets, etc.) Should I spend on a new iPad when I might be able to buy 6 months worth of food with that money a year or two later ?
You'll save as much as you can. You'll consume less junk. Isn't that a good thing ? Shouldn't we ask ourselves if we really need all the crap we keep buying ?
These are interesting questions that challenge the entire nature of mindless consumerism that most of us indulge in these days.
Also, if the only reason you spend your money is because it's going to be worth less tomorrow then you have bigger problems than bitcoin ;)
PS - I don't mean you personally, just stating some thoughts.
Using BTC as money is an independent decision from holding BTC as an "investment."
If you have 0.02 BTC (~$20), you can spend $20 on a pizza, keeping your 0.02 BTC. Or you can spend 0.02 BTC on the pizza, and have $20 more USD to buy BTC with.
This of course assumes you can easily transact with BTC, and convert USD <-> BTC, which seems to be anything but a sure thing.
If the price keeps rising, you are right a smaller percentage of all bitcoins will be in active circulation, because people want to save their coins instead of spending them. However, SOME coins will always be spent (people gotta eat.)
Here's the counterintuitive part: The currency "notices" the low rate of spending and will increase its own value to make sure the amount being circulated, though lower in face value, remains constant in its real value.
In short: Hoarding is fine, because the un-hoarded coins increase in value to compensate. As economists say, this is not a "zero sum game", we can have high spending AND high hoarding without difficulty, if the currency has a large enough market cap.
well; for me its fun. before bitcoin went through the roof i would invest in bitcoin and periodically buy stuff that i could only buy with bitcoin; or replace my bitcoin as i spent it (using coinbase).
now for me, as well as probably others.. i got so much upside on my bitcoin i don't mind spending a bit here and there. i still hold it mainly as speculation because i deeply believe in its long term value--but i bought a plane ticket at like $860/btc .. no regrets whatsoever. i got to buy a frickin plane ticket with frickin bitcoin.. that might seem like 'oh yeah whatever' to most people, but if you have been watching bitcoin for years, as I have.. as many people with decent stashes have, that is one of the main things people came back to again and again to say "it will be a real currency when".
i am waaaay over vested in bitcoin so i can't justify 'replacing' my bitcoin anymore; when i am so exposed to the exchange rate; but 'spending it' is like cashing it out
Its vital to understand that even if bitcoin is never used for any commercial transaction, application , services or goods, it can be very valuable just as a fiat to transfer dollars/yuan/currency from one place to another. This is a very international, expensive problem. I wouldnt be surprised to see that china is leading BTC trading because of chinese people sending money to their homeland, this time, with a much smaller fee than Wester Union or wire transfers. For giving money to someone else, its better than banks (which you might not have an account to, or the wires are expensive), WU (very high fees), mailing money (gets stolen).
I share a negative feeling when i think that someone with 10k U$S in BTC last year is now a multi-millionaire, i find it hard to believe that much value was created.
My surprise is that those insta-millionaire's arent cashing out. Or if they are, the demmand is so big its still working out.
Bitcoin will have an S curve of growth. Spending once you're at the flat top of the S curve is a different proposition than doing so while you're on the vertical. Store of value stage must come first before the currency stage.
Anyone going on about "intrinsic value" is missing the "intrinsic value" of the protocol.
I agree mtgox prices are borked, but historically mtgox prices were used as the "official" price, and I think this is going to continue well into the future. Since these price milestones are arbitrary anyway, does it really matter?
I think bitcoin is extremely interesting, but price reports like this are not intellectually stimulating. 1,000 is an arbitrary number. Let's talk about bitcoin, but for a volatile currency, let's not fire off news articles every time it crossed another arbitrary threshold?
I don't think it's fair to say that it's entirely arbitrary. The 1000$ mark holds significant psychological impact. When the price rises, it's going to be reported on, and it makes sense for it to be reported on when it hits a psychologically important value like 1000$ rather than 947.13$
Exactly. If the goal of bitcoin is to be a great buy/sell commodity, then it's definitely looking like a fun rollercoaster ride!
However if it truly wants to be considered a currency, the developments it needs are more ATMs (like the one Vancouver), more merchants accepting bitcoin, and more adoption in terms of velocity.
Primary value of Bitcoin is being money. To be good money it must be widely valuable, there must be as many hands willing to hold it, as possible. Since the supply is fixed, price must grow. So price acts as an indicator of liquidity. Other functions based on blockchain (contracts, timestamping, escrows etc.) are only valuable if Bitcoin has enormous hashrate and is trusted by everyone as money. Hashrate is supported by high demand for generated bitcoins and desire to make transactions (reflected in voluntary fees).
I waffle on this point. Obviously with limited adoption in terms of actual exchange of goods, $1,000 is an arbitrary threshold. That said, with limite adopton in terms of actual exchange of goods I can't really judge how much bitcoin is worth. I have a good understand of what $1 is work (1/2 of a carton milk, a candy bar, and so on) but really no concept of what a bitcoin buys me. So it makes perfect sense for me to relate its value to something I already understand the value of.
Wow -- $1030 per BTC as I write this. This is happening way faster than anyone ever expected.[1]
All else being equal, the more people who decide to use or hold Bitcoin, the higher its price will be, because the maximum number of bitcoins that can ever exist is permanently fixed. It's a scarce commodity by design.
If BTC did become a de facto currency, what's to stop a government printing "I promise to pay the bearer 10BTC" notes, and just carry on "printing money" (I know it's not literally done these days but it's the effect) as they always have done?
The gold standard was broken, can they not have a "bitcoin standard" and then break that in the same way?
If at some point chain reaction is triggered (people are not afraid it's another bubble and jump in non-stop until everyone has some coins), then the growth must be not exponential, but even faster.
You should take into account that if things go as usual, there will probably be a crash in the next few days, leaving the price around $500 for a while.
Wow! I remember PG's wrote in one of his essays "What hackers are using today will be used by regular people in 10 or so years." Though BTC is statistically yet to claim the status of being used by "regular" people, it has certainly passed the early adopter status it seems.
Back in 2010 I did mine 160 BTC in 3 days just with my average CPU, however at some point I stopped caring, because 3 years ago there weren't much blabling about bitcoin and everyone that I told at that time did't care. Months later I had to format hard disk because ArchLinux did a great job breaking the whole system in a update, in the moment I just didn't remember that there were a BitCoin wallet in my system. Now about 2 years later I am hopping to recovery the wallet using a recovery program, but I already know that there is almost no chance. Today I just can't stop thinking about what happened.
Damn ArchLinux, I really hope you die in hell. At the moment around USD160000 lost. Anyway I am still sticking with you, in sickness and in health, in poverty or in wealth. Because you know, despite what you have done, you will be always by my side.
Remember kids, it's only real once you sell. Until then it's paper money. With a price rise, either there's more demand from speculators or more people holding.
My supply-side model, which I felt pretty smug about for the last couple of months, only calls for a price of $450-500, so it clearly can't account for the current price. So much for that.
Seems likely then that this is coming from an increase in demand. Does anyone have any good guesses about where that increase in demand is coming from?
man, this has been fascinating to watch (and not just because i have a little skin in the game).
the tech and theory underlying the currency; its mysterious founder; the idea of massive "mining" operations where people are essentially printing their own money; the fact that one of the major exchanges was orginally a MTG exchange; the senate hearings; the tor black markets and FBI "seizures"; the absurdly juvenile chatter in the "troll box" on BTC-E, a major exchange; and of course, the goldrush-like nature of the skyrocketing prices.
i'm looking forward to hearing what people have to say about all this a few years down the line
The value of any currency to someoneis how much real stuff they need that they can exchange it for.
Any cryptocurrency that is effectively limited in volume and viable to be used will grow. Because of the growing number users of the currency, some are developers who will make it easier for sellers to accept it.
What bitcoin had going for it is that it DIDNT have mass adoption - it had a long way to go. Now the same is true of peercoin and litecoin - they are where bitcoin was a year ago. There's no reason they can't go to 1000 also.
In short there are a few factors determining the price of a currency:
Short term fads:
1. being newly listed on an exchange as exchangeable for the local currency of the country
2. news stories about the currency
Long term fundamentals:
3. The increase in acceptance by merchants and metcalfe's law (I think n log n is more realistic than n^2 though)
4. Limit on new currency being produced.
In this respect I feel litecoin beats peercoin in #4 and peercoin beats litecoin in #3, it has a longer way to go but it is more sustainable and is further behind so it has a longer way to grow from now.
Academics hate Bitcoin for 51% attack and lack of formal proofs. Theoretically it's not cool invention. Practically, it can change the whole world and be viable economically for a very long time.
Could someone explain how is the blockchain going to maintain integrity and the transfer lag is taken into account "when" bitcoin is globally used everywhere and thousands if not millions of transactions are happening every single second?
I'm curious about this too. Miners who maintain the blockchain will have to do more work for less bitcoins. If miners are earning less bitcoins, the value will have to continue increasing in order to encourage the miners to maintain the blockchain. At what point is this unsustainable?
Bitcoin just doesn't support thousands of transactions per second, so that won't happen. Most likely people will be driven to use some non-Bitcoin system that is denominated in BTC (e.g. banks).
holy cr!9 - I was thinking of trying to mine some to get a handle on the whole thing - last week when it was 800 bucks.What the hell?
If I understand it, there is a upper limit to number of bitcoins available ever - what is that number and when will it be equal to the total asset value of the planet? I mean is it feasible that bitcoins could really work?
Edit: ok there is a limit of 21million bitcoins by 2030, and a world assignable wealth of ~210 trillion USD. So, if bitcoin works and can be the repository for all worlds currency, it would have to be worth 10,000 USD per bitcoin.
Then any growth in value.
So ... this might just work folks. And if not it still makes for a great DHT
What makes bitcoin special? It's not like we've seen widespread adoption of this particular cryptocurrency. Do litecoin, feathercoin, et al. use the same algorithm with different seeds? I dont't understand why bitcoin is gaining so much value. It seems that an identical cryptocurrency could be created with or without the coins already mined. It seems to me that $1000 per bc can only be speculation by the wealthy at this point. It is surely a bubble waiting to implode.
I was following BTC when it had hit $200-300 and was in the news quite often. I considered buying some but after reading lots of opinion pieces, decided against it. Many people were showing graphs comparing the dot com bubble and the bitcoin bubble and warning others that BTC would settle nicely into a lower price. Those people were obviously wrong, wish I hadn't listened to them.
I'm afraid of Bitcoin becoming the world's only currency. Someone with enough computing power can massively game the system. I'm not saying that that can't happen with today's government driven currencies, but that there are at least other options right now. Maybe we shouldn't all switch to Bitcoin.
I'd be afraid of it becoming even a common currency. The problem is bitcoin does not encourage economic growth. It is smarter to hold then to spend. In a good currency, the demand for the money itself should not cause prices to fluctuate.
I think this could be solved if instead of the difficulty target being determined based on a steady release, was instead determined in someway based on the quantity theory of money (MV = PY) so as there is greater demand for coins more coins would be produced, and the opposite, when we have enough coins, less are produced.
[+] [-] seanalltogether|12 years ago|reply
[+] [-] rescripting|12 years ago|reply
Because the maximum number of coins is fixed it's pretty easy to project where the valuation is headed, and so anyone in their right mind should just hoard their BTC instead of spending it, which in turn should drive the price down, no?
[+] [-] vinhboy|12 years ago|reply
Yet if you look at /r/BitCoin, there are dozens of "OMG!! I spent all my bitcoins on Pizza instead of holding on to them, look at this gif of me being sad"
So to answer your question, it's just insanity.
I miss the days before this month when BitCoin prices were stable for a couple of months. Spending it was actually pretty cool.
[+] [-] ashray|12 years ago|reply
It's not easy to predict the valuation. For that, we would need to know how much business is done in bitcoin in the future. That's anyone's guess. Will it do $1 trillion or will it do more ?
The price isn't always going to rise at this rate. That's for certain. However, yes, there will probably be a long term rise until bitcoin finds it true usage, market cap, and as a result of this, it's value with steady deflation going forward.
While, I'm not sure what an economist's opinion on this is, the fact that you are encouraged to spend money because it's worth less in the future (inflationary fiat money) leaves a really bad taste in my mouth. Consumerism is a horrible disease and our planet is suffering from it every. single. day.
That brings me to bitcoin and it's deflationary nature. Well, you're still going to buy the stuff you want to buy. Then, you'll save more because you know it'll be worth more later. Why wouldn't you buy the things you always need ? (food, shelter, a few gadgets, etc.) Should I spend on a new iPad when I might be able to buy 6 months worth of food with that money a year or two later ?
You'll save as much as you can. You'll consume less junk. Isn't that a good thing ? Shouldn't we ask ourselves if we really need all the crap we keep buying ?
These are interesting questions that challenge the entire nature of mindless consumerism that most of us indulge in these days.
Also, if the only reason you spend your money is because it's going to be worth less tomorrow then you have bigger problems than bitcoin ;)
PS - I don't mean you personally, just stating some thoughts.
[+] [-] wikwocket|12 years ago|reply
If you have 0.02 BTC (~$20), you can spend $20 on a pizza, keeping your 0.02 BTC. Or you can spend 0.02 BTC on the pizza, and have $20 more USD to buy BTC with.
This of course assumes you can easily transact with BTC, and convert USD <-> BTC, which seems to be anything but a sure thing.
[+] [-] drcode|12 years ago|reply
If the price keeps rising, you are right a smaller percentage of all bitcoins will be in active circulation, because people want to save their coins instead of spending them. However, SOME coins will always be spent (people gotta eat.)
Here's the counterintuitive part: The currency "notices" the low rate of spending and will increase its own value to make sure the amount being circulated, though lower in face value, remains constant in its real value.
In short: Hoarding is fine, because the un-hoarded coins increase in value to compensate. As economists say, this is not a "zero sum game", we can have high spending AND high hoarding without difficulty, if the currency has a large enough market cap.
[+] [-] eof|12 years ago|reply
now for me, as well as probably others.. i got so much upside on my bitcoin i don't mind spending a bit here and there. i still hold it mainly as speculation because i deeply believe in its long term value--but i bought a plane ticket at like $860/btc .. no regrets whatsoever. i got to buy a frickin plane ticket with frickin bitcoin.. that might seem like 'oh yeah whatever' to most people, but if you have been watching bitcoin for years, as I have.. as many people with decent stashes have, that is one of the main things people came back to again and again to say "it will be a real currency when".
i am waaaay over vested in bitcoin so i can't justify 'replacing' my bitcoin anymore; when i am so exposed to the exchange rate; but 'spending it' is like cashing it out
[+] [-] conanbatt|12 years ago|reply
I share a negative feeling when i think that someone with 10k U$S in BTC last year is now a multi-millionaire, i find it hard to believe that much value was created. My surprise is that those insta-millionaire's arent cashing out. Or if they are, the demmand is so big its still working out.
[+] [-] ericb|12 years ago|reply
Anyone going on about "intrinsic value" is missing the "intrinsic value" of the protocol.
[+] [-] Nursie|12 years ago|reply
Up surely, as the hoarding scarcity makes buying harder and creates demand?
Either way, yes, it destroys the utility as a currency. Which is probably a good thing, I don't like BTC as a currency.
[+] [-] shawabawa3|12 years ago|reply
[+] [-] drcode|12 years ago|reply
[+] [-] Datsundere|12 years ago|reply
You can compare bitsmap with EUs market since that's what they seem to support better
[+] [-] carbocation|12 years ago|reply
[+] [-] wwwtyro|12 years ago|reply
[+] [-] tokenizer|12 years ago|reply
However if it truly wants to be considered a currency, the developments it needs are more ATMs (like the one Vancouver), more merchants accepting bitcoin, and more adoption in terms of velocity.
[+] [-] oleganza|12 years ago|reply
I wrote about it here: http://blog.oleganza.com/post/66953255676/transactional-curr...
[+] [-] stinkytaco|12 years ago|reply
[+] [-] downandout|12 years ago|reply
[+] [-] cs702|12 years ago|reply
All else being equal, the more people who decide to use or hold Bitcoin, the higher its price will be, because the maximum number of bitcoins that can ever exist is permanently fixed. It's a scarce commodity by design.
So, greater adoption = higher price.
--
[1] In early 2011, I speculated it could take a decade for price to reach the thousands of US dollars per Bitcoin: http://cs702.wordpress.com/2011/05/29/on-the-potential-adopt...
[+] [-] eterm|12 years ago|reply
The gold standard was broken, can they not have a "bitcoin standard" and then break that in the same way?
[+] [-] VMG|12 years ago|reply
http://capitalideasonline.com/articles/index.php?id=2270
[+] [-] oleganza|12 years ago|reply
[+] [-] joelthelion|12 years ago|reply
[+] [-] dschiptsov|12 years ago|reply
[+] [-] kr4|12 years ago|reply
[+] [-] wwwtyro|12 years ago|reply
And higher price will tend to lead towards greater adoption.
[+] [-] boldpanda|12 years ago|reply
[+] [-] edubart|12 years ago|reply
Damn ArchLinux, I really hope you die in hell. At the moment around USD160000 lost. Anyway I am still sticking with you, in sickness and in health, in poverty or in wealth. Because you know, despite what you have done, you will be always by my side.
[+] [-] brainburn|12 years ago|reply
Think of it like you're losing 3 days of cpu cycles, not 160K.
[+] [-] brador|12 years ago|reply
[+] [-] snorkel|12 years ago|reply
[+] [-] saalweachter|12 years ago|reply
My supply-side model, which I felt pretty smug about for the last couple of months, only calls for a price of $450-500, so it clearly can't account for the current price. So much for that.
Seems likely then that this is coming from an increase in demand. Does anyone have any good guesses about where that increase in demand is coming from?
[+] [-] granfalloon|12 years ago|reply
the tech and theory underlying the currency; its mysterious founder; the idea of massive "mining" operations where people are essentially printing their own money; the fact that one of the major exchanges was orginally a MTG exchange; the senate hearings; the tor black markets and FBI "seizures"; the absurdly juvenile chatter in the "troll box" on BTC-E, a major exchange; and of course, the goldrush-like nature of the skyrocketing prices.
i'm looking forward to hearing what people have to say about all this a few years down the line
[+] [-] EGreg|12 years ago|reply
The value of any currency to someoneis how much real stuff they need that they can exchange it for.
Any cryptocurrency that is effectively limited in volume and viable to be used will grow. Because of the growing number users of the currency, some are developers who will make it easier for sellers to accept it.
What bitcoin had going for it is that it DIDNT have mass adoption - it had a long way to go. Now the same is true of peercoin and litecoin - they are where bitcoin was a year ago. There's no reason they can't go to 1000 also.
In short there are a few factors determining the price of a currency:
Short term fads:
1. being newly listed on an exchange as exchangeable for the local currency of the country
2. news stories about the currency
Long term fundamentals:
3. The increase in acceptance by merchants and metcalfe's law (I think n log n is more realistic than n^2 though)
4. Limit on new currency being produced.
In this respect I feel litecoin beats peercoin in #4 and peercoin beats litecoin in #3, it has a longer way to go but it is more sustainable and is further behind so it has a longer way to grow from now.
[+] [-] eegilbert|12 years ago|reply
[1] http://users.encs.concordia.ca/~clark/biblio.html
[+] [-] oleganza|12 years ago|reply
[+] [-] archQuestions|12 years ago|reply
[+] [-] gerhardi|12 years ago|reply
[+] [-] 00rion|12 years ago|reply
[+] [-] wmf|12 years ago|reply
[+] [-] MattyRad|12 years ago|reply
[+] [-] lifeisstillgood|12 years ago|reply
If I understand it, there is a upper limit to number of bitcoins available ever - what is that number and when will it be equal to the total asset value of the planet? I mean is it feasible that bitcoins could really work?
Edit: ok there is a limit of 21million bitcoins by 2030, and a world assignable wealth of ~210 trillion USD. So, if bitcoin works and can be the repository for all worlds currency, it would have to be worth 10,000 USD per bitcoin.
Then any growth in value.
So ... this might just work folks. And if not it still makes for a great DHT
[+] [-] bottled_poe|12 years ago|reply
[+] [-] gnister|12 years ago|reply
It's more like gold or another scarce commodity.
Bitcoin is an electronic commodity with no intrinsic value that has been rigged to be perfect for speculation.
What would a national bank do if the value of its currency exploded like this?
It would print more money, regulate interest rate or take other actions to keep the currency value more stable compared to other currencies.
There is no "bank" supporting Bitcoin.
Comparing Bitcoin to traditional currencies make people think about Bitcoin the wrong way.
[+] [-] ck2|12 years ago|reply
[+] [-] giarc|12 years ago|reply
[+] [-] gagege|12 years ago|reply
[+] [-] swalsh|12 years ago|reply
I think this could be solved if instead of the difficulty target being determined based on a steady release, was instead determined in someway based on the quantity theory of money (MV = PY) so as there is greater demand for coins more coins would be produced, and the opposite, when we have enough coins, less are produced.
[+] [-] oleganza|12 years ago|reply
Malicious miner has little to gain, a lot to invest and it's easy for the rest of the network to censor him.
Edit: "haven't read" instead of "have read".