Bitcoins up another 42% since August 1st
bitcoincharts.com
bitcoincharts.com
AFTER EDIT:
See a somewhat related story with interesting comments
http://news.ycombinator.com/item?id=4391312
posted on Hacker News today.
I most certainly wish this was the case, however the cycle of booms and busts rarely teach anyone anything. Think about how they were documented in the 1800s, Extraordinary Popular Delusions and the Madness of Crowds specifically, they STILL teach that book in plenty of schools, and yet the same idiots believe this time, things'll be different.
Hopefully, the current growth in price is not a bubble.
I'm not so sure if this is 'inevitable' since bitcoins in itself have no value at all. I know the same can be said about fiat money, but at least that's what everyone agrees is legal tender, as opposed to just a bunch of idealists or people who need a way to pay for shady stuff. But bitcoins are not like commodities, or labour, or whatever else has limited supply and non-zero utility.
Personally I'm not even touching bitcoins with a 10-foot pole. The day some government decides bitcoins are becoming a real alternative or even a threat to government-controlled money, they will shut the whole gig down and all your bitcoins will be worth nothing.
One thing I never understood about bitcoins, is what other problem they solve besides scratching some ideological itch some people have with money controlled by central bankers and governments (which I can imagine are valid concerns for some people). Effectively bitcoins are just like fiat money; worthless tokens that have no intrinsic value besides the trust that some people have in them to hold their value. Trust that is not actually based on anything either. At least the dollar has a government with a big military behind it that can assert their influence on areas where real wealth is concentrated. I'm not saying this is a good thing, just making the observation.
I think you misread my comment. I'm aware of the fact that people like Bitcoins because there is no government/central bank that can manipulate them. To me, that's a red herring though, the proverbial 'itch that Bitcoins scratch' for some people. I don't think Bitcoins solve any issues related to wealth preservation, and I don't think they offer any advantages as a store of value compared to other forms of wealth/value or currency that are not (directly) government controlled (at least not in similar ways as fiat money), such as commodities, precious metals, art, production capacity, etc. In fact, I think anyone holding lots of wealth in Bitcoins will someday lose all of it, in an instant.
The point is, that even though there is a limited amount of bitcoins, and even though governments have no influence on the supply of bitcoins or who holds them, they can still affect the value of bitcoins in dramatic ways. For example by legislation that makes any form of bitcoin trade illegal. Or maybe it doesn't even require legislation, maybe just the threat of legislation to curb bitcoin trade will cause people to lose trust in Bitcoins altogether. Just because the government can't inflate Bitcoins, doesn't mean it cannot destroy the trust some people have in it.
I mentioned military power not because I think it's a good thing, or an insurance against the depreciation of wealth expressed in fiat money, but as an example why fiat money is at least backed by something, unsustainable as it is. In times of resource scarcity or world-wide economic collapse, military power will 'buy' you (or at least some) the means to survive, not some virtual currency that nobody has a use for in times of distress.
> Since there is a finite number of bitcoins that can ever be mined, it acts much more like gold than like the dollar.
It acts like gold, but it is not gold. Gold is a tangible asset that has been a proven store of wealth since as long as we know about the history of human civilization. Gold is shiny, you can store it somewhere, make handy pieces out of it and and take it with you, people like holding and looking at gold, almost anybody, anywhere in the world will take gold in exchange for other goods or services. Smart governments are stockpiling gold at an accelerating rate, because they damn well understand that someday in the future dollars, euro's or yens will be worthless. Bitcoins are nothing like that. They are purely virtual, strings of bits, just like Linden dollars, or WoW gold. I think it is extremely unlikely people will ever lose faith in gold as a store of wealth, but I can imagine many scenario's where people will lose faith in Bitcoins. It will happen, trust me.
The money supply and inflation/deflation thing is purely theoretical. Hyperinflation doesn't occur because governements purposefully manipulate the money supply, but because paper rectangles and metal circles are useless if nobody has a use for them. I know the same can be said about gold, but I would bet everything on gold outliving Bitcoins as store of wealth. You don't need a PhD in economics to recognize this.
My advice: don't put your money in bitcoins. If you don't trust fiat money, buy tangible assets, invest in yourself, learn how to generate utility and wealth after the inevitable fiat money crash.
Once somebody mine an asteroid full of gold, the whole Gold as money will come to an end. However, gold will become a more useful commodity in industrial/medical/electronic/etc applications since they are cheap.
Thousand years of history mean nothing when something change the whole playing field. There's nothing remotely implausible about asteroid mining except the necessary development of a space industry. As far as I am concerned, gold is living on borrowed time.
There are individual asteroids that have more easily extractable precious metals than the entire present earth supply, should we have a good method of returning them to earth. The mere existence of these ought to start playing a number on the metals markets once planetary resources starts doing something newsworthy.
Just because some nutters invest their excess money in some sci-fi fantasy doesn't make it real.
Outright bullshit. Gold became money because you could make statues of the Sumerian gods out of it. Silver for almost exactly the same reason.
There is nothing actually valuable about some rotten piece of metal, or at least, their industrial uses can't back up their price.
Good luck when the gold bubble pops.
> There is nothing actually valuable about some rotten piece of metal, or at least, their industrial uses can't back up their price.
Not valuable compared to what? A string of bits identifying some kind of cryptographic hash? Give me a break. If you really think it will be Bitcoins that will provide for your well-being after a complete monetary collapse, sooner than tangible, hard assets such as gold, you should get your head checked.
Forgetting about gold for a moment, go check how many proven, explorable reserves of silver there are right now, and at what rate they are being dug up for industrial use.
> Good luck when the gold bubble pops.
People have been saying this since as long as I can remember. Wait until the bubble pops... It just shows a complete lack of understanding of what actually constitutes a bubble, in economic terms. But feel free to disagree, who am I to tell you how to manage whatever fortune you have managed to gather.
That said, anyone with a brain will make sure they diversify into different asset classes. Apparently you seem to think I'm a goldbug or something, but this couldn't be farther from the truth.
Compared to tally sticks, say, or bushels of wheat, or time-banked labor hours.
With that said, I'd recommend you to lookup some history of monetary systems, and see what systems survived for how long, and how they came to collapse. Just because bitcoins are digital, a product of technology, doesn't make them any different from tally sticks. It's just a way to exchange stuff without having to barter. Maybe bitcoins are much harder to counterfeit then tally sticks, but then again, it is probably also much easier to sabotage the systems required to trade them. In the end, the currency that sticks around the longest when all the other systems fail, will be the most reliable one to preserve wealth. It's a self-reinforcing process even.
Now go try and see how many bushels of wheat you can get your hands on with just exchanging tally sticks. Then try to buy some using gold.
No farmers near me take payment in anything except United States Dollars.
If deflation outstrips investment returns, then yes - that would cause capital to stay in one place, as people wouldn't want to spend money that would be worth more tomorrow. Investment would stop, businesses couldn't get financing, and everything would grind to a halt.
That's not a sustainable situation though; there will never be a time when all units of currency are held, nothing changes hands, and value is infinite. Instead, as value increases there will be profit-taking, which will hold down the value to some point. With the current relative lack of liquidity, you get a boom/bust cycle (the price will shoot up as more people try to get in on the value incrase, then confidence falters and the price crashes back to near baseline).
This has already happened once for Bitcoin, and it's important to note that the value over time has been somewhat linear when you account for the impact of the boom/bust.
As the liquidity of the market increases due to wider adoption, then you'll start to see the cycles increase in duration, as the market seeks balance. There will always be fluctuations, though, so the ultimate goal is ubiquitous use of Bitcoin in the general economy, and years- or decades- long variance in value.
I believe we're entering a new phase of growth, which will be sustained. I predict we'll see a good-sized correction relatively soon, and lots of smaller ones on the way up, but otherwise the value of Bitcoin in USD will steadily rise for the foreseeable future.
This doesn't look like another boom to me. This looks like people moving wealth to Bitcoin, and actually using it to buy things other than banknotes.
Gold may have started being used as money because it was already demanded for, say, jewellery. Bitcoin may have started for "fun" or belief in future growth and even bigger demand. The truth is in both cases the initial value was purely subjective.
The dollar isn't necessarily Bitcoin's competitor. So maybe the dollar is good because it has such a power behind it. But what about all the other currencies of the world? Can you say they are all better than Bitcoin also? Try thinking about it in a less US-centric way.
Which will work just as well as stopping global piracy, i.e. not at all.
I don't think there is any kind of currency that survived for more than a few hundred years, there have probably been hundreds if not thousands. Stamps, sticks with carvings on them, silver coins when fiat coins where still actually made of gold (can you believe it?), seashhells, etc. The ones that survived the longest have been government-controlled fiat currencies.
Once again, just to make myself clear, I'm not saying this is a good thing, just making the observation.
On the other hand a 51% attack on the blockchain by _anyone_ would have a near 100% chance of destroying Bitcoin.
Miners who have been on the network for longer would have greater authority than new miners, regardless of computational ability. If a 51% attack occurs, it would in effect fork the blockchain, because the WoT-enabled miners would not accept their signed blocks.
You can fork the blockchain now if you want - it's just a matter of getting enough people to agree with you for those coins to have value.
I'm not saying it would be _good_ for Bitcoin - but this is not an insurmountable problem from a tech standpoint.
Then all you are doing is pegging your wealth to the stability of a nation, which statistically speaking is not that good a bet.
See also my comment above about subjective value of gold.
Also the transaction speed is really low - usually like 10 minutes to really confirm payment and at least half an hour to really confirm (around 10 mins a new block is created, and to ensure that block will stay in the chain you want some more blocks on top of that as well.)
Also.. the transaction rate isn't even 1 per second, if Bitcoin replaced visa for instance it'd be 2000/s, which means new blocks might contain 2000/s over 10 minutes of transactions, so new blocks are going to get huge.
All in all, bitcoin is going to need some big central bitcoin banks to speed transactions, and store the blockchain which isn't necessarily bad. Your bitcoins can still be stored locally under your private key, but banks will provide processing, while multiple banks provide verification of each other's stored blockchains.
And then they decide to call it the Federal Reserve Bitcoin Bank
This is a factor of bitcoin being "decentralized" that I don't think many people fully internalize. Anybody could change the protocol, and all that will count toward acceptance is the number of nodes acknowledging their transactions. If a change is unpopular or made without widespread consensus, the blockchains split and now you've got two mutually incompatible currencies. In practice this will probably just mean that you're always under threat of a split unless everybody accedes to the changes that mining pools propose, since they control so many transactions. Alternately, new mining pools could be created that let members vote proportionally to the work they've done for the pool. It's both scary and interesting.
It's why we don't store all of our money in a mattress underneath our bed.
Of course, analysis of transaction history will require the full chain, but this isn't necessary for the average bitcoin user.
Today there are distinct classes of society, and social mobility is decreasing in the US [1] and is frustratingly slow in the developing world.
The problem we are facing is that the producers are have become extremely productive due to capital and technology and are able crush those who do not have the access to the capital and technology. The people who are not in this privileged group are caught in a vicious cycle are forced to remain consumers and are getting more and more dependent on these super producers.
What money essentially does is facilitates information flow in an economy and enables complex contracts between a number of producers and consumers. The problem is not the information flow is not correct, the problem is that there is terrible inequality.
Bitcoins are seen as a hedge against large scale systemic collapse or slow corrosion of the nation-state. If the collapse / corrosion happens, we really do not know what kind of alternative systems will emerge.
The only way, to prevent such a collapse, in my view is to encourage local products and services in a big way. Bitcoins may not really help.
[1] http://www.nytimes.com/2012/01/05/us/harder-for-americans-to...
This is a common mercantilist fallacy -- that the problem is we just have too much production. I submit that we have the opposite problem: goods and resources are too scarce, rather than too abundant. More efficient production is the solution, rather than the problem.
> The people who are not in this privileged group are caught in a vicious cycle are forced to remain consumers and are getting more and more dependent on these super producers.
I agree that the focus of the economy is consumption, but this is indicative of the problem as well. We need to encourage entrepreneurship. By this I do not mean subsidies -- more in terms of cultural encouragement and removal of legislative and regulatory obstacles.
By the way, the whole point of the economy is to enable consumption. If there was no consumption, there would be no point to economic activity.
Really? You are saying this on Hacker News? Where we gather to assemble and identify our comparative advantages and engage in entrepreneurship with capital on the order of thousands of dollars?
You can also be a agricultural entrepreneur or a mining entrepreneur or steel entrepreneur. Admittedly, the competition in these arenas is indeed very stiff, and they have invested a lot of money in efficient production. As an individual, you have little comparative advantage in such industries. But if you have some insight into how to make these industries even more efficient, then you will have no problems securing income or even starting a consulting business.
> This creates self-perpetuating oligopolies.
I disagree. The bigger they are, and especially once the economies of scale diminish as the market is saturated, the harder they fall. Waste and communication issues provide a natural limit. We run into problems when the state intervenes to keep dinosaurs alive. What's good for GM is good for the country, and all that.
> By the way, the whole point of the economy is to enable consumption.
Yep, consumption is enabled by production. Human needs and wants are limitless. If we actually lived in a world of abundance and not scarcity, people would not need jobs and there would be no need for production. We would lounge around all day in the land of milk and honey.
> If there was no consumption, there would be no point to economic activity.
Consumption will never go away. We consume food, water, shelter, etc. The only way consumption goes away is if humans go away. And when humans (or preference-satisfying agents, to be clear) go away, then economic activity ceases.
As Western countries have overvalued their currencies, lowered taxes on the wealthy, and weakened their labor standards, they thus ballooned their median costs of living - forcing labor to live on credit. As they then purchased lowered trade barriers for manufacturing from the elites of mostly ex-colonies (while carefully protecting intellectual capital and professional services), they have offloaded what their working class once did to poverty stricken countries, lowering median income, which is slightly offset by cheaper imported goods. This exacerbates income equality even more, creating a glut of the ex-working and management classes attempting to enter the professional middle class.
This, combined with lowered barriers to trade in professional services (and the radical progression in communications technology), will serve to lower the wages of the professional middle class, causing many of them to drop to the largely welfare supported lower class and to become entirely credit bound.
Bitcoins are seen as a way to avoid taxes, launder money, and perform illegal transactions:)
I am writing this on an Apple laptop. I love this machine and it is reasonably affordable for me. There is no incentive for an Indian company to ever produce a good laptop. Even worse is that there is never going to be an ecosystem in India that will work on complex engineering problems that go into making such a machine.
So while I enjoy as a consumer, I am only adding to the imbalance. It is not only for engineering products. China has become the producer for many simpler products that could have been made in India. I chose to become an entrepreneur and maybe will try and fix a miniscule part that imbalance some day, but I am not sure how many will. Are Indian producers better off because of China? I don't know.
For many decades, my country has been running a trade deficit at the cost of inflation. It all seems fine so far, but there is something surely wrong here. China has been doing the opposite, they have decided to become super producers, which is never possible in India because of the complex decision making.
In the ideal scenario, there must be a balance between global and local. It cannot be all global and no local (or the other way round), which is often a matter of perception. Globalization + technology has led to concentration of capital and the the playing field is not level. I still feel people everywhere must try and level the field.
This is a good thing for individual liberty and self determination.
But I would disagree when you propose that the only solution is to prevent the most efficient producers of a good or service from selling as much as they can into their market.
I rather put my hopes on open access and competition; both of which are enhanced by a means of exchange that does not require the friction of a trusted intermediary.
I realize the above is a simplification and there are many other factors (and there could be malicious participants), but overall this will continue to push the price up.
Would there be a lot of regulations to deal with, or no?
In fact, just today a margin trading website was exposed as having tons of SQL injections and storing user passwords with unsalted MD5 hashes. Until somebody can step up to the plate stability will be an issue.
Which reminds me, I have a rather nice domain name and experience with bitcoins and security, if only I had the financial/regulatory know-how...
Internet Libertopia!
There was a service that allowed shorting (Bitcoinica). But all that seemed to come to a very abrupt and painful end. While it was running it did serve a valuable purpose.
This could be a sign that a lot of people want to get into the market quickly without reasoning about the price. When we look in the order book of one of the larger exchanges (mtgox) we see that there is not much market depth on either side[1].
This coincides with large volume peaks when articles are published, for example August 3 when bitcoin broke the $10.00 price this was widely published about (also on HN).
Deflation does encourage saving over consumption, yes. But I love the fact that products in the electronics markets have had long term predictable price declines over many decades.