Comment by fat0wl | Hacker News Reader

Comment by fat0wl | Hacker News Reader

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Hmm... but it's kindof scary that it's supposedly a currency but it's not really in practical use.

From Wikipedia: Speculators have been attracted to Bitcoin, fueling volatility and price swings. As of July 2013, the use of Bitcoin in the retail and commercial marketplace is relatively small compared with the use by speculators.

It reminds me of a similar analysis I read of Amway -- how only a small percentage of the products ever make it to retail consumers.

If you have a currency that is supposed to end in consumer exchange but can't make it back down to that level, what is it really? It's a huge bubble that will have to go through many more transformations before ending up back in your wallet. Maybe by that time the gov't will have figured out how to tax it, or more exchanges will have disappeared.

I don't know, seems odd. An interesting risk for those who believe in easy money, but it's strange to me that a gamble that so many are making would pay off for everyone involved. That's a very... ponzi scheme level of idealism. Once the price started to rise I think maybe it ceased being a viable currency and instead became a fantasy for those wanting to trade it at a profit. I mean, the price of currency isn't supposed to be so volatile, right? If the USD for example, were jumping around like this would people invest in it? Or would they lose faith in the dollar?

EDIT: I found this article that seems to address a lot of these issues. http://www.slate.com/articles/news_and_politics/view_from_ch...

I'm using it as a currency. Compared to PayPal it's heaven - there are no weird rules about to whom you can send money and when and what for, it's much easier to use (you don't have to spend weeks to confirm your account, wait for credit card bills, fill out a thousand forms, etc.) and transactions are free, even international ones. Another bonus is that all accounts are publicly visible, so before donating to someone you can check how they're doing and decide whether to donate or not.

P.S. Comparing it to banks... doesn't really make sense. It's like comparing the Internet not to a telephone, but to a telegraph. That's why I used PayPal.

But if you're using it as a currency how do you value it? Do you literally let people pay you 1 Bitcoin for $500 worth of merchandise?

Also your telegraph analogy is something I've seen in several places and doesn't seem to mean anything. Plus I'm not really comparing Bitcoins to bank I'm more curious about the viability of a pump-and-dump system with a finite amount of units. If it's all based on speculation who is ever gonna spend the stuff?

The logical point I keep ending at is that you need a buyer. AS SOON as it starts to dip down, everyone will smell "crash" and then how do you sell them? The bubble bursts. From then on I think 1 of 2 things will happen.

1. The system will completely fail in marvelous ways as the parties with large stake in it writhe in agony.

2. The value will reach a resting point and become ultra-stable because people will cease to believe in speculation for infinite profit margins.

The merchants have their prices fixed in USD, when I pay Coinbase tells me how much Bitcoins I should send to transfer the equivalent of say $10 and then they directly convert it to the merchant's preferred currency and deposit it at their bank account. This insulates the merchants from the price swings completely, which is cool for now, but I don't think will be needed later.

I'm aware of option 1), but I'm focusing on option 2), which is possible even if people don't stop speculating - the national currencies are pretty stable even though the exchange rates are only based on speculation. I believe this is just a question of volume and widespread adoption, which is happening for XBT with the recent large investments in many Bitcoin start-ups, so there's hope :)

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