Virgin Galactic to accept Bitcoin [video]
cnbc.com
cnbc.com
I wouldn't be surprised if in coming years at least some bitcoin users start measuring their wealth in bitcoins, and therefore also evaluating exchange rates, not in terms of how many US dollars, euros, etc. they can buy with a bitcoin, but the other way around: what is the cost, in bitcoins, of a single dollar, euro, etc.?
Looking at exchange rates in this manner changes people's perspective on volatility, which is always a relative measure. For example, since the beginning of this year, the price of a US dollar has declined by more than 98%, from BTC 0.074 to just over BTC 0.001, which makes the dollar look extremely volatile!
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PS. I'm NOT saying the dollar is extremely volatile! I'm also NOT saying that Bitcoin is more stable! What I'm saying is that if and as Bitcoin adopters start measuring their wealth in bitcoins, their perspective on what is and isn't volatile will change, as demonstrated by my example.
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Edits: expanded second and third paragraphs; added PS.
There are others if you have a more specific interest: http://web.tmxmoney.com/indices.php?locale=EN
Drop that qualifier and we can talk Bitcoin.
Can we talk now?
Consider the last month:
2013-11-01 212.87 USD = 1 BTC
2013-11-22 733.71 USD = 1 BTC
If you think Bitcoin is a great investment and can sell your BTC to get other assets in at a high point, this is a good thing, though slightly worrying because of the boom and bust pattern and extreme volatility.
If you think Bitcoin is a stable currency, this is a terrible thing. I'm not even sure what the implications would be if buying raw materials one day cost more than selling a finished product the next due to rapid deflation, but it surely wouldn't be much better than rapid inflation which we have seen in other currencies.
Like a loaf of bread which is 1.6 trillion Zimbabwe dollars, one which cost 0.0000000001 Bitcoins would not be desirable either if that figure keeps changing rapidly and the next day becomes 0.00000000001 etc. Any extreme fluctuations in price are really undesirable for a currency, and I do think this mechanism of ratcheting up the difficulty of mining and an ever-increasing value is really damaging for Bitcoin's credibility as a currency, though presumably it was designed to boost adoption by encouraging people to see it as investment first, currency second.
I like the idea of a currency which doesn't allow politicians to introduce inflation, but perhaps we should have one which has a finite set of tokens on setup, and doesn't attempt to also attract people as some sort of investment with mining etc. - is that side of Bitcoin even useful except to turn it into a sort of pyramid scheme where early adopters are rewarded disproportionately?
[EDIT I am aware of the proposed 21m Bitcoin limit, which they're about half way to reaching, that's why I said on setup, which Bitcoin doesn't have]
Bitcoins are limited and when they run out miners will start getting bitcoins from fees.
>I like the idea of a currency which doesn't allow politicians to introduce inflation, but perhaps we should have one which has a finite set of tokens on setup, and doesn't attempt to also attract people as some sort of investment with mining etc.
I'm sure someone will correct me, but as I understand it this is how Ripple[0] works. From my recollection (I haven't checked in on how Ripple has been progressing over the past 6-8 months or so), Ripple's currency (XRP) are established with a finite supply and all XRP is in reserve, not requiring any "mining" or similar. Also, it looks like Ripple is kind of an exchange as well? It seems to be able to cross-process payments between USD, EUR, BTC, LTC, XRP, and more (I believe most international currencies are supported currently)[1]. It's interesting but, like I said earlier, I'm not sure if I fully understand it.
[0] https://ripple.com/ [1] https://ripple.com/guide-to-currency-trading-on-the-ripple-n...
Payment Network (with protocol)
Exchange
Currency
All in one place. The advantage to that if you trust them of course is that you can expect the exchange/payment processor isn't a buggy webapp sitting on an insecure VPS with multiple ways to be hacked (I hope!). If you don't trust them it's even more scary than bitcoin though.
I wish alternatives to Bitcoin got half the attention Bitcoin has been getting on HN over the last few months - a currency is not a success because it constantly shoots up in value, quite the reverse.
Bitcoin _does_ have a fixed set of tokens on setup: 21 million of them... but you need a way of giving out those tokens without handing a windfall to a centralized decider that gives them out.
Mining isn't an "investment" thing: It's the @#$@ fundamental consensus process that makes the whole thing possible: Node autonomously validate the rules, but transaction order is not decidable autonomously and so mining produces a hard to rig / cheap to verify 'vote' on the order of transactions.
Bitcoin smarty aligned these two processes by making participation in the consensus also accomplish giving out the original tokens.
Sorry, that's clearly nonsense given that the dollar wasn't similarly volatile against other currencies.
Would you slam on your breaks in the middle of a road full of fast moving cars and believe that it was actually them all suddenly accelerating?
From the position of relative perspective that may be a valid theory, however in it's not the one best explains what is being observed.
This kind of volatility is actually really harmful to it being adopted as a primary currency. It's pretty dumb to actually spend bitcoins if you could just hold onto them and sell a week or two later at twice the price, and then spend the USD for twice the goods you would have been able to buy last week with the same number of BTC. It's also pretty dumb to accept BTC as payment, especially when it's at an unsupportable high, because it's likely to crash soon and you'll now have half the value you had earlier. The volatility is valuable for speculators, but could be ruinous if you were trying to run a business based on it. Yes, you could get lucky and it could go in the direction that favors you, but that's speculation, that's not business.
A similar question can be asked about USD: why would you ever save it instead of spending it immediately, since it's only going to lose value over time due to inflation?
Of course, the difference right now is that the deflation rate in bitcoin is much higher than the inflation rate in USD. But clearly, if bitcoin ever becomes a major currency and the deflation levels off, there will be plenty of motivation to spend bitcoins, the same way there is currently plenty of motivation to save USD.
Unstable currencies you generally need to convert to a more stable currency immediately, if you don't want to be subject to the sudden swings in value.
Yes, I agree and stated as such in my post.
My point is that I don't think you're pointing out a fundamental flaw in bitcoin. Deflation in a currency is not a deal breaker. Bitcoin is volatile right now because it is so young. People are predicting it will reach a huge market capitalization, which would necessarily entail a huge USD price per bitcoin because there are so incredibly few bitcoins in comparison to USD. Anytime something is increasing in value there will be considerable gambling and speculation to come along with it as random people jump on and off the train repeatedly.
What bitcoin really needs is a unique and innovative service which could not exist without it. This would encourage people to hold a small balance in bitcoin which they would be willing to spend in order to enable participation in this service not otherwise possible. As the currency stabilizes and more and more use cases emerge, people will slowly but steadily become more comfortable holding larger balances in bitcoin.
Its pretty much a deal breaker in the use of currency as a the general medium of exchange and pricing. Its not a deal breaker in its use as a store of value, obviously, but that's more about being an investment vehicle than a currency.
> As the currency stabilizes and more and more use cases emerge
What I'm missing here is any explanation of why we should expect bitcoin volatility to stabilize.
More than that it loses value predictably enough, with an active financial system around it to make and hedge out those predictions for you.
Except for relatively small amounts for liquidity for known or potential immediate needs, it doesn't make sense to hold US dollars (or any other modern fiat currency), it makes a lot more sense to invest them in productive assets which can be converted easily back to US dollars (or other fiat currency) when necessary.
This is not an accidental feature of modern fiat currency, its pretty much the whole point of the transition from commodity-based (e.g., gold standard) to fiat currency -- so that broad downturns don't have a dangerous positive feedback effect where poor investment market conditions lead to currency being a more attractive place to hold money than the investment markets, which leads to even poorer performance in the investment markets and even more people pulling money out of those markets and into currency, etc.
> But clearly, if bitcoin ever becomes a major currency and the deflation levels off [...]
Please explain how increasing interest in using bitcoin is going to cause the price increase relative to other currencies or goods to slow down.
> [...] there will be plenty of motivation to spend bitcoins, the same way there is currently plenty of motivation to save USD.
What motivation to save USD?
Seriously? How about buying a house? Buying a car? Going to college? Going on vacation? ... Most people cannot save up enough for these things overnight, and they aren't going to put their downpayment savings fund into stocks because it's not worth the risk of losing it for them.
In all those cases, saving USD as dollars is generally a suboptimal idea (unless its over a particularly short term, but that gets back to the short-term liquidity, not long-term investment, case.)
Using the dollars to buy investments that are expected to be worth more when converted back to cash is what you usually want to do.
Many people do it in practice. Stuffing dollars in your mattress is "saving dollars". Loaning money at interest who will aggregate it with other money and invest in productive assets is an indirect investment in productive assets other than dollars.
Consider the humble savings account. Those accounts may be dollar-denominated, but under the hood they're really a type of security. You're making a loan to the bank at interest - a special kind of loan that you can call at any time, in part or in full, but a loan all the same. The bank then takes that money and loans it out at interest to people who want to borrow money to buy houses cars, whatever.
There is risk involved - the people at the end of the chain might default on their loans, in which case the bank loses their money. Historically, if the bank lost enough money then they wouldn't be able to pay back the money they borrowed from you, in which case you also lose it. Nowadays banks are required to carry deposit insurance, so instead when the bank defaults the FDIC loses their money, but you still get paid. But if enough banks default then the FDIC also won't be able to make good on their guarantee to you, and you're still out your money. Meaning that when you stick your cash in a savings account, it's not really money anymore. It's an IOU - a promise to give you money when you ask for it. Probably.
The answer to this question lies at the heart of why economists generally believe a little inflation is better than no inflation nowadays. That little bit of inflation makes it more attractive to invest money in things that increase one's ability to generate money in the future instead of just stuffing it under a mattress. That makes the economy as a whole more vigorous, which means everyone tends to get more wealthy in the long run.
As for deflation in Bitcoin: Since the total number of BTC that can ever exist is asymptotically bounded, but potential economic productivity of a population of humans isn't (as far as we know), there's really only a few scenarios where BTC deflation might level off, and arguably all of them fall under the category of "economic crisis".
Just like monetary policy attempts to set inflation at such a rate (~1%) that it isn't irrational to save, but it is slightly more rational to spend.
I think, though, that if everyone agreed, BitCoin could eventually change to borrow some concepts from PPCoin, and restart the production of currency, once it reached a plateau of adoption. It isn't impossible to change the current production limits - just difficult. At that point BitCoin would probably splinter into two currencies, one which has a deflationary monetary policy and one which has an inflationary one.
At that point - is it still a libertarian currency? We've just traded one governing body - the US govt - for another - the BitCoin Foundation.
Similarly it's pretty dumb to hold on to dollars if you know you could double them in a week by buying bitcoin. The ideal solution is to spend bitcoin and immediately replenish them by exchanging USD to bitcoin. That way, you still have the same amount of bitcoin and simultaneously more bitcoins are going into the economy.
> The volatility is valuable for speculators, but could be ruinous if you were trying to run a business based on it.
Immediately converting to fiat removes the risk. The beauty is you get to decide what you want to do with them.
Seems no different than if the buyer had sold her Bitcoin and paid Virgin Galactic in cash. The real trick will be when they can accept Bitcoin, keep the Bitcoin, and make any refunds and adjustments in Bitcoin.
I'm not sure if this differs for six-figure transactions, but transacting fiat currency generally costs a vendor ~3%.
Receiving bitcoins and immediately converting them back to USD/GBP can be done for less than one percent of the amount of the transaction.
1. Bitcoin is no less a fiat currency than the U.S. dollar or Japanese yen.
2. For small retail transactions, yes, 3% seems right. Larger transactions, however, are generally done by wire. These transfers carry a fixed fee and are generally a very small percentage of the transaction value.
Depends on what you mean by "fiat currency", which tends to get used with a few different (if related) meanings. One is "non-backed state-issued currency". Under that definition it isn't. Another is "currency with no intrinsic value". Under that definition it is.
I don't see any other way to bootstrap a new currency.
I'd be surprised if corporations would gamble so dangerously by keeping a Bitcoin store. As long as they price against USD and convert immediately, they can only suffer limited losses from price swings.
Hopefully you will see me posting much less about this and much more about music signal processing + machine learning apps I'm working on :P
Looking through your comments... maybe you want to join me on some anti-Bitcoin venture? I'm thinking of compiling a site providing a detailed argument of why it makes no sense just so that I don't have to keep wasting my breath lol. But I mean the truth is a lot of these arguments are freely available (especially if you check the manifestos written up by some of Bitcoin's competitors or qualified economists). I just feel bad that naive people think it's some sort of tech "investment" and if you don't write negative stuff on the threads their first comment is "Where do I get some?". I bet this is how all pyramid schemers feel at first. Like you're investing in a company, it's just that the company doesn't make anything or do anything... Then Bitcoiners try to say that the worth is in the "ingenuity of the process" or something but then its like... THIS IS AN OPEN SOURCE CRYPTO GAME FOR F__K'S SAKE
The point is... Bitcoin is an international hoax and I get bored at work! I also tend to think that HN is turning into watered-down pseudo tech and Bitcoin is the epitome of that. All these "crypto-miners" who just execute pre-compiled code or whatever... yeesh.
Fantasy adds romanticism to peoples lives, but this one will cause too many ruined fortunes.
(Side note: It seems you & I are always arguing with the same guys, lolololol.... some of these handles are all too familiar)
If that's the case, it's not a currency. I do think this is something Bitcoin needs to address if it is to be taken seriously as a medium of exchange.
You see, if anything the last 5 years has taught us, is that Bitcoin's adoption can continue to dramatically increase despite wild volatility. (Data point: Bitpay signed up 10,000 merchants through a period when 1 BTC was sometimes losing 50% of its value intra-day!)
Volatility is unfortunate, that's for sure, and it is expected to decline over time as trading volume increases. But if you want to measure Bitcoin's success/adoption, look at actual adoption, instead of volatility.
Notice how none of the tech-giants want to get involved with it. Bitcoin isn't for the technologically advanced who are "being rewarded for being sooooo smart and adopting early", it's a scammer platform.
I heard a suggestion for a gold-backed digital currency once. That makes much more sense to me. Instead of getting into magic bean territory with monstrous gains/losses, just put 100k into gold, design a system with 100k "eGoldcoin" or whatever u wanna call it then just trade the coins. The platform would never tank because people know roughly what it's worth. It would be way less exciting, well... because it's sane.
I think you fell for a joke.
In a gold-backed online currency if it failed the users could just be beneficiaries of the trust. I'm not saying this is the ideal solution because I think maybe a completely fiat digital currency COULD work, just not with the Bitcoin scheme.
And I'm not saying Bitcoin can't work in the long-run. I'm saying it's not working NOW. It is not performing its intended function... unless that intended function is as a volatile speculator market.
(Credit Cards || Google Wallet) > All this junk
The only reason I bothered with the gold argument is because Bitcoin's volatility is its downfall. If it were pegged to a real-world asset this would essentially be solved. But credit cards already do this -- they are pegged to bank accounts.
Chamath Palihapitiya, Kevin Rose, the Winklevii
I don't care what VC hipsters are doing, and who the hell were the Winklevii before they started hyping bitcoin?
You don't understand the virtual currency space. There are many good arguments against virtual currencies or bitcoin specifically, but the lack of Silicon Valley interest is absolutely not one of them.
I'm not surprised at all that Google invested in an alternative. In fact, maybe that will catalyze Bitcoin's demise.
But I don't even care about that so much -- the reason I have an axe to grind is because all the interest seems to be fueled by greed. So these hypocrites rail against "the systemmmm" but really all they want is a new system in which they start out with the upper hand -- which they believe they have due to early adoption, investment in mining rigs, and collective delusions of bidding wars / price will go up up.
If Bitcoin were now the same way it was back in the day when it was a nerd trying to buy a pizza because he believed in the merit of the technology, I would think that is pretty endearing. But let's all just admit it -- it's NOT. It's a platform of collective greed and anyone who can resist the urge to try to make a buck off it would probably do better to go gain some knowledge and try to accomplish something more interesting than a "futristic-anarcho" (whatever) copycat version of Wall Street.
But again, it doesn't look like Google is accepting Bitcoin in exchange for their services. They just invested in a company that is going to try to make cash skimming transaction fees off the ecosystem and probably converting to USD.
You Bitcoiners claim to be more than just a mound of greedy speculators yet you view everything as a hoarder/trading scenario.
So what exactly is the worth of one ounce of gold? The current market price? Or another price? What's the difference to Bitcoin in regards to pricing?
I'm pretty sure Bitcoin just takes it's sticker price (whatever it's currently been bid upto) and then does a bunch of arbitrary currency conversions.
Again, I THINK this, do not know... but i THINK if you took the amount of gold and multiplied by its USD price to arrive at some figure of how much the "gold pool" is worth (bitcoiners do this all the time) gold traders would laugh their asses off at you. The medium needs to be tightly interwoven into individual economies through usage and growth/settling.
Bitcoin is like this thing that is sitting out in the ether totally untested and people are making random claims about how much its worth, supported only by bidding wars in trading.
No, it is not "priced". Nobody sets an "official price" for gold. Every actor in the market who sells and buys gold is free to set his own price, via "asks" and "bids" in the market. This is what gst highlighted for you: Bitcoin functions exactly like gold, their value fluctuates freely on international and national markets via trading, and nothing else.
"if you took the amount of gold and multiplied by its USD price to arrive at some figure of how much the "gold pool" is worth gold traders would laugh their asses off at you"
Actually, no. Analysts do this all the time. Google for "gold reserves". Here is the latest data from the World Bank: http://data.worldbank.org/indicator/FI.RES.TOTL.CD
I don't know too much about gold though so I'll let the convo go. To be honest I think CreditCards are where it's at & the small fees involved are to provide consumer protection so I don't mind.
If Bitcoin reaches a comparable infrastructure I'm sure they'll be charging fees for everything too (the exchange services already do, no?).
Actually, it is interpreted by comparing gold's price with exchange rates. When gold is, say, underpriced in yen on chinese markets when compared to its price in US dollar on american markets, this creates a condition where "arbitrage" is possible. So people who see this buy it up on the chinese market and resell it on the american market, making a profit. This naturally re-aligns the price of gold in various markets with exchange rates. The exact same thing is done by Bitcoin traders, and forex traders, and commodities traders, etc.
I wasn't saying gold doesn't have an exchange rate. I was saying it DOES have one for EACH currency (allowing this arbitrage scenario) and that's part of what makes it strong. My impression of Bitcoin was that they simply price it in Yen or USD or whatever is their best market, then convert from THAT currency into whatever other currencies they want through the real-world exchange rates of existing currencies, in order to display it with a unified favorable price.
However, these arguments aren't even worth it really since the price is so varied from exchange to exchange that let's face it -- the numbers are pretty much all distorted BS regardless of how the prices are determined. All they represent is real-time bids. It's like watching a big eBay auction on nothing and claiming the true value of the item is evidenced by the current bid.
No, exactly like gold, Bitcoin does have an exchange rate for each currency. Again, there is zero difference between how gold is traded and how Bitcoin is traded. It's all multiple independent exchanges, with their own asks and bids.
If, by your argument, "this is what makes gold strong", then this is what makes Bitcoin strong as well. Both are traded in the same ways. I am unsure why you think there is some difference.
I have a long comment history you can look through if you want to understand why I think it's a scheme. USD is strong as a currency because its stable. Bitcoin is a speculative trading platform, nothing more nothing less. There's real value in it today because a ton of people have just decided to invest in something they don't fully understand.
If you have invested in Bitcoin I understand your interest in making it seem viable.
I have traded commodities, and bitcoin, for multiple years. I know this stuff.
Yep, and now go look up how that went.
It's not possible to "gold back" a digital currency without centralization which carries a multitude of risk, as has been demonstrated by the many failures along the way.
Bitcoin may not be backed by anything, but the fact that it can't be counterfeited or inflated gives it very interesting properties.
> Branson—an early bitcoin investor himself