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Comment by cs702 | Hacker News Reader

Bitcoin befuddles experts who analyze it from a narrow perspective, because it is not just a new medium of exchange or a new store of value: it is also a new kind of point-of-sale payment system (one that doesn't require payment processors), a new kind of global financial transfer system (one that doesn't require financial institutions), a new kind of time-stamping certification system (one that doesn't require notaries or county clerks), a new kind of contract-enforcing mechanism (one that doesn't require lawyers), etc.

With rising global adoption, many new kinds of applications are likely to be created to take advantage of the Bitcoin network, the design of which even specifies a built-in script for defining and executing new types of transactions involving any arbitrary number of parties.[1]

In short, Bitcoin is a technology platform -- one that is benefiting from network effects.

It may fail as "money" (in a narrow sense) and still succeed as a global platform.

In fact, Bitcoin is already a success.

[1] https://en.bitcoin.it/wiki/Script

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Please explain how bitcoin can discern vicarious liability. You're still going to need lawyers.

Please explain how a bitcoin blockchain record can testify in court that a copy of a document is authentic. Hint, you're infront of a jury, you have a blockchain hash, and opposing council has a notary public with 40 years of experience, both copies of the document differ, the original cannot be found. Hers has an official looking seal, you have some random numbers.

Please explain how I can buy a pack of cigarettes at 11 pm in under 5 minutes with bitcoin.

In short most of your claims are highly exaggerated and don't work beyond the most trivial scenarios.

Do you remember when computers used to take whole rooms and apparently "Computers in the future may weigh no more than 1.5 tons." and "There is no reason anyone would want a computer in their home."

Now iam replying to this from a phone

Just saying technologies improve over time, bitcoin is a very interesting mix of technologies, probably the most exciting thing to come along since email, web, bittorent and social networks

The most exciting thing since the web? Really? It's an interesting technology, but let's not forget Foursquare launched the same year and has had more of an impact on business, and Instagram launched a year after and has had more of an impact on the general population.

Bitcoin was engineered to take time, it wouldn't be as popular as it is now if things played out differently.

In fact the whole value of the currency is based on the fact it takes work, and therefore time, to create.

Foursquare? Yeah, right... and Instagram is basically imgur with filters... Compared to peer-to-peer money, your examples aren't very good.

For now, you cannot buy a pack of cigarettes with it, but as more vendords accept it, you will have apps on your phone that will let you easily do that.

Look, bitcoin is a platform and it is in it's infant stages. But, it has huge potential. Potential does not mean odds of success are 100%

I don't think you understand even if the vendor accepts bitcoins, and even if I bring my laptop I still can't buy anything in under 5 minutes.

https://blockchain.info/charts/avg-confirmation-time

Yes you can. You do not necessarily need a confirmation if you are willing to take a small risk (and a vendor accepts risks much bigger than that if he's in business).

Considering the extent to which cigarette vendors around here keep their merchandise locked up, I don't think they're willing to take on a lot of "I hope these bitcoins are legit" risk.

Merchant software can listen to the network for 10 seconds. If no contradicting transactions have been broadcasted, the probability of the bitcoins not being legit is EXTREMELY small. You only need confirmations for large transactions. Zero-conf are completely safe for the large majority of transctions.

Bitcoin-type technology has tons of potential, my friend.

Or I can use actual money and forget all this nonsense ... Which do I choose?

What about credit cards? Chargebacks are quite common.

Credit cards are not a feature of a currency. You could just have credit cards that keep debt in BTC instead of USD.

The point of the person you're replying to is that, for 99.999999% of businesses, there is no benefit to using BTC. It doesn't offer the buyer any protection, it's extremely volatile, and it would require an overhaul of the entire economy's infrastructure to implement in any meaningful way.

This is incorrect, see my post: https://news.ycombinator.com/item?id=6812657

Also, nice strawman with the laptop. Ever heard of smartphones?

Actually, you have an expert (or more than one expert) who can testify to the nature of the block chain and the difficulty and expense involved in altering its history.

> Please explain how a bitcoin blockchain record can testify in court that a copy of a document is authentic. Hint, you're infront of a jury, you have a blockchain hash, and opposing council has a notary public with 40 years of experience, both copies of the document differ, the original cannot be found. Hers has an official looking seal, you have some random numbers.

Here's an imaginary possibility. A hundred and fifty years from now, courtrooms come with computer systems built from scratch and operated by court clerks. Their sole purpose is verifying blockchain records. The jury knows to trust the machine. In fact, the jury instructions tell them to.

None of the jury members have ever seen official documents on physical paper. They only know about paper documents from watching historical fiction movies. In such movies, the possibility that the documents are forged is always a major plot factor.

I think in practice, the first time someone needed to do this, a bunch of high grade academic cryptographers would acts as expert witnesses pro-bono. From there, it would be like a hacking case - an expert explains the issue to the jury, who take a decision. Assuming it is technically sound, bitchain certification would win.

Subsequent cases would be able to use the precedent, and win with less interesting experts.

These comments are actually making me think of this case:

http://en.wikipedia.org/wiki/Howland_will_forgery_trial

Bitcoin might let you say things like "both parties signed this document on this date" but you will still need a jury to decide "Action [foo] does or does not constitute a violation of this document which they both signed on this date".

I've faced these authentication issues in Asia and the Middle East. There is an increasing willingness of authorities to trust non-traditional means of authentication through neutral third parties. For example, I recent pointed to a commercial corporate records provider as a source of authentication of a foreign corporation being in good standing and the local Middle Eastern authority was willing to go online, look for themselves and conclude that the information was correct. I beleive that such forward-thinking authorities will begin to participate in BTC hashing and be willing to gather the information for themselves.

If you think about it, this is a lot more convincing than getting a ribbon-covered document from a foreign jurisdiction that you may not be able to read, even if it authenticated by a series of trusted authorities (a chain of embassies in this case).

They are applying old-world money ideas to something that is so new that we don't have useful models yet for deciding how it will behave, thinking that they do apply without loss of content. The rules of supply and demand apply, sure, but none of the other common-sense intuitions about how money works.

BitCoins don't have any resistance to movement, or very little. Physical money does. This means the difference between BitCoins and physical money is perhaps comparable to the difference between massive particles like atoms and massless particles like photons, or to the difference between a classical conductor and a superconductor. Which is only to say that the same rules don't apply - new behaviors are observed.

We are in a new world and the study of economics is about to take a huge left-turn.

That's because Bitcoins are relatively easy to buy and very difficult to cash out into real currency. Once enough people see how hard it is to liquidate their Bitcoins back to USD the realization will follow.

Sounds like nonsense to me: if you buy 1 BTC from me, then at the same time I've sold 1 BTC? That makes it by definition as equally hard (or easy) to buy as to sell?

Depends on who is in the middle of that transaction and how long that one takes to fullfill that operation, in this case, exchanges.

Are you all really having trouble understanding how instability in currency makes it difficult to trade in a currency?

Also there is some basic lapse in logic here. Just because a WoW nerd can trace the currency on a technical level, does not mean it is "easy."

No.

Try buying an iPhone 3g right now on Craigslist. I bet it takes you all of two minutes.

Then try selling it. I bet it takes quite a bit more time.

Asymmetry.

That would imply there are currently more people wanting to sell an IPhone 3G than people want to buy it. Certainly the price of IPhone 3G's isn't rising. And that makes sense.

Currently (and for the last years), the price of BTC has been rising implying that's actually easier to sell BTC than to buy? Moreover there are exchanges that are entirely symmetric (when opening accounts you do not need to qualify as a buyer or seller).

Asymmetry is a nice word but I don't see what's asymmetric here?

I'm not familiar enough with Bitcoin to engage in dialogue about its market dynamics specifically. I only wanted to point out that the mere fact that all sales involve both a buyer and a seller doesn't make it "by definition as equally hard (or easy) to buy as to sell".

Bitcoins are a currency, there's no need to convert them. It's just happening now because some people want into this environment.

>Bitcoins are a currency, there's no need to convert them

Yes, unless you want to, you know, buy something...

https://en.bitcoin.it/wiki/Trade

You realize this list proves the parent's point, not yours? Many categories there have a single provider and none would even breach 1% of providers in your vicinity. I would estimate the probability of not hearing "err... what?" after asking your favorite provider of anything about paying in bitcoins about 1/1000.

Many businesses accept Bitcoins as payment for physical things. The last Bitcoin meetup that I went to was at a bar/grill that accepts BTC as payment. Most of the attendees paid for their drinks with Bitcoin. You don't need to convert to cash in order to buy things with Bitcoin.

How long did the transaction take?

"Many businesses" is a very relative term. A more accurate term would be "almost no businesses."

"Many" as in? 0.0x%?

That bar/grill is a novelty -- and it probably only accepted BTC in the first place because there was a BTC EVENT held at it.

well use it as it's intended, buy something in bitcoins.

There's even projects that accept donations in bitcoins, you'll see wallet addresses like this: 1JBEGFXW6ywMtZnCbjvKGJXDtdR6g6KmMi

Their utility isn't tied to the fact that you can turn them into more of your favorite currency later, that stupidity is what's driving the current bitcoin bubble. Wait till people realize what you can do with them.

I suppose there's nothing I'd ever want to buy from one of the merchants advertising here: http://www.bitcoinblackfriday.com/

Woo, bacon lollipops, server hosting, and pizza. Truly the essentials.

You need grocery stores, gas stations, clothing stores, and restaurants to start accepting it. Until then, it's really just a novelty for middle class college Libertarians.

I love saying this:

Do you think that cryptocurrencies spring fully-formed from the forehead of Zeus?

No, but maybe Minerva?

Possibly Eris?

No, but I think they are not destined to become gods either...

If your available merchant options fit in a page, and contain "sriracha-bacon lolipops", t-shirts, honey and donations, you might as well use monopoly money...

>there's no need to convert them.

Have you tried paying your taxes in Bitcoin? The IRS (or regional equivalent) is not going to accept bitcoin any time soon and they will want you to pay taxes on, for example, profits. There is a need to convert, don't believe otherwise.

Taxes is not the big problem. Try buying a meal or filling up your gas tank or rent an apartment or paying an electricity bill with bitcoin. 99.(9)% of merchants you'll encounter in the course of your regular life accept local money and about the same do not accept bitcoin.

Out of curiosity, are people seriously using bitcoin stocks as a bank? Or are they just investing part of their money in bitcoin and hoping it goes somewhere? This requirement of conversion only makes sense if people are fully and completely invested. I would be shocked if there were such people at this stage.

There are indeed people at this stage.

No, but I imagine coinbase has. As will many other people who accept bitcoin payments.

It doesn't matter, you still have to pay your taxes in USD. Even if you earned your salary in bitcoins you would have to convert some to USD in order to pay your taxes.

And if you're a multinational, you'll have to convert all sorts of currencies in all sorts of other currencies constantly.

Companies regularly complains that this costs them 1% or so of revenue.

>Have you tried paying your taxes in Bitcoin?

Not yet.

I think these kinds of views are what make the bitcoin community seem ridiculous ... It's just constant downplaying of actual upplaying of conspiracy like goldbugs do and it just seems hard for serious and educated people to take seriously.

I'm not downplaying anyting. Bitcoins intention is to be a real currency. You don't turn your dollars into Canadian Tire money to shop at Canadian Tire.

Saying you're not supposed to convert bitcoin is the statement of someone who thinks bitcoin is NOT an investment. So... not a goldbug.

There are only two ways that you could have a work where Bitcoin does not need to be converted to other currency:

1. People stop bothering to follow the law, and governments throw their hands in the air and do nothing about it.

2. Governments start accepting Bitcoin for tax purposes.

I am not confident that either of these will happen...

The problem right now is that Bitcoin is not (used as) a currency. A currency facilitates the exchange of services of goods. Bitcoin now is more like a plot of land in the middle of London, or gold a few years ago. You buy bitcoins to hold and speculate, not to spend and pay your purchases with it. The resurrection of Bitcoin as as currency after the bubble will be a very interesting transition to watch and it's not 100% sure that Bitcoin will survive it.

Howso? If it's easy to buy BTC with USD, doesnt't that imply successful liquidation of BTC?

If it's easy to buy subprime mortgages with cash does that imply it's just as easy to sell said subprime mortgages for cash? Substitute any illiquid asset(relative to U.S. dollars) if you wish and the statement holds true.

I think the asymmetry revolves around the ease/difficulty in getting USD in and out of an exchange like mtgox. You can take physical paper money to the bank and transfer to an exchange, no problem. You can buy BTC at the exchange, no problem. You can sell your BTC at the exchange, no problem. You can transfer USD from the exchange to your bank and withdraw physical paper money, maybe a problem. Perhaps a slight delay.

News flash: A transaction requires a buyer and a seller. If you bought Bitcoin, someone else sold Bitcoin.

There is no balanced ledger - Bitcoins can be spun into existence through mining, i.e. without the transfer of hard currency.

Mining is strictly planned, everyone knows how much and when will be produced. New bitcoins are already accounted for in the price.

That doesn't account for an imbalance in the number of potential buyers and sellers. It's very easy to buy a house for $100 million. Go to your real estate agent and say "Here's a $100 million. Buy me a house." It is, however, considerably harder to sell a house for $100 million.

I'm not convinced.

It's only easy to buy a house for $100M if you have $100M you can spare for house-buying. And then you only get to choose from the rather limited range of $100M houses that are available for sale.

Similarly, you only get to sell a house for $100M if you have a house that nice to sell. And then you only get to sell to the rather limited range of people willing to buy a house for $100M.

But perhaps I've misunderstood. If you happen to have $100M burning a hole in your pocket, it's easy to buy a house that would normally cost $1M with it, because most people with $1M houses will happily sell them for $100M. But the parallel to that is that if you happen to have a house that would normally cost $100M, it's easy to sell it for $1M. Which it would be.

The point is the liquidity of houses is less than liquidity of cash. Likewise, the liquidity of bitcoins is less than liquidity of dollars. You can easily buy bitcoins(houses) if you have the money, but the reverse is not true.

How is this true? Everywhere you can buy Bitcoins will let you sell them with roughly the same effort involved (except MtGox perhaps).

>You can easily buy bitcoins(houses) if you have the money, but the reverse is not true.

With the exception of Mt. Gox, this is simply not true. It's hard to both buy and sell Bitcoins if you've not been verified at an exchange, but once you do that (not very hard), it's equally easy to both buy and sell. The only delay is the time needed for the wire or ACH to arrive.

I get the feeling that many of you are talking confidently about something you have no experience with. Where are you getting the idea that it's hard to sell Bitcoins?

What do you think determines the price? If you can't sell a bitcoin, you lower the price til you can sell it. If you can't buy a bitcoin, you raise how much you will pay until you can buy one.

The only reasons it is different with houses is because people are emotionally invested in them, not all houses are equivalent (and thus their value is unique per house), and liquidity is hence really low, and market prices adjust slowly.

Bitcoins are worth a thousand dollars because people who own them are not willing to part with them for less, and people who are buying them are willing to pay that much. This is economics 101. You can always cash out at the market price, unless liquidity is low; the only time that happens is in a teeny market or a crash.

So profound a concept, yet so simple, and often at the root of so much fallacious thinking. Thanks for taking the time to educate our economically challenged friends.

Is the market price of houses $100 million though? No? That's what I thought.

Yes, but did they cash out into real currency? There are lots of "US dollars" on MtGox sitting in the accounts of people who sold bitcoins. It's clear someone has the US dollars; it's not clear it's in the hands of the sellers (or ever will be).

I'm sorry, but this is simply not true. It's plain wrong.

I'll happily cash your bitcoins out into real currency at ten cents a bitcoin.

Wrong. Have you actually tried to buy a Bitcoin? If not, ask someone who has. At the moment, it's hard for Bitcoin novices to buy Bitcoins, and much less hard to sell them.

Actually, once you've been verified by an exchange (required prior to buying Bitcoins unless you do a private party sale), selling Bitcoins is easy; it's getting your USD wired/ACHed to your bank account that can be time-consuming. This is due to the legacy banking system, and not some problem inherent to Bitcoin.

EDIT: By the way, it's not "very difficult" to sell Bitcoins. If I want to sell a Bitcoin, I log onto my Bitstamp account, put in a limit order. When the sale is executed, I submit a short, pre-filled form for a wire transfer to my bank. I then wait a few days and the money is in my bank account, in USD. Not hard.

I think he's making a liquidity point. It may be easy from a process standpoint to cash out, but the question is how much the value of your bitcoins may change whenever you cash out.

http://www.investopedia.com/terms/l/liquidity.asp

Part of the value of dollars as a medium of exchange is that the value does not fluctuate greatly from day to day or minute to minute. In the short term, you can rely on prices remaining fairly stable.

I'm familiar with the term liquidity. However, you seem to be making a point about Bitcoin's volatility, which is completely orthogonal to its liquidity. An asset could have no volatility, but have very poor liquidity (e.g., a house under normal circumstances).

jnbiche, it's not letting me reply to you so I'm doing it here.

You make a good point, and my above explanation was a bit confused.

I think BTC faces both problems:

There's high volatility, driven by the current level of speculation and the fixed quantity of Bitcoins that exist on the market. This makes Bitcoin a fairly poor medium of exchange since it is unlikely to hold a stable value from one day to the next.

There's also (I suspect) poor liquidity, driven by the low number of people involved in the exchanges (compared to other assets and currencies). While it may be easy to exchange Bitcoin from a process standpoint, you may not be able to get a price sufficiently close to the last quoted price when you go to exchange for dollars. It may be more liquid than a house, but it is much less liquid than USD, EUR, GBP, etc.

Is my liquidity assumption mistaken?

Well, your liquidity assumption is quite accurate in comparison to other currencies such as USD/EUR/GBP. For example on the mtgox exchange there seems to be only about 30 million US worth of volume per day which is quite low.

US/EUR seems to commonly be around 100 billion or so a day.

> Is my liquidity assumption mistaken?

Unless you're an investment banker, yes. There are multiple exchanges that handle daily volume in the 10's of millions USD, with order books deep enough that you could cash out millions of dollars worth of bitcoin without moving the price more than a few percent.

That's nothing compared to what Wall St or the city is used to, but it is plenty enough liquidity for all but the most well off individuals, and growing. When the Winklevoss twins get their bitcoin ETF to IPO, I expect these numbers to increase by orders of magnitude.

Also, none of that is counting the significant volume of transactions which occur non-public or off-exchange.

>Is my liquidity assumption mistaken?

You're absolute (and obviously) correct about Bitcoin's volatility, but you're mistaken about its liquidity.

Bitcoin is quite liquid if you're in the U.S. and many other countries around the world. The only delay is the time required by the legacy banking system to wire or ACH funds in/out of your exchange account.

Interesting. I did some digging and have a few follow ups:

1) Bid Ask spreads vary by exchange and currency, but it seems that with the exception of BT China an MtGox, the bid ask spreads can be quite wide. Prices for BTC/USD also very a good bit by exchange, meaning the price a merchant sets might be influenced by which exchange they use.

[1] http://bitcoinwatch.com

2) The MtGox live chart seems to imply that an order of a few bitcoins (or a few thousand dollars) could have a profound impact on the actual price of BTC/USD. This does not seem particularly liquid to me, unless I misunderstand the chart.

http://mtgoxlive.com/orders

No one is using MtGox anymore, exactly because it isn't very liquid (money hard to get in and out). Take a look at Bitstamp.

Did you forget about wire transfers? At least where I live it is possible to live without touching physical money for a long long time, we have pretty advanced e-banking and m-banking (and we never had checkbooks). Yes id does involve the bank, but from the end user perspective it is almost no overhead and sometimes even saves the trouble. Is stuff like direct-debit even possible with bitcoin?

I haven't heard of any, but AFAIK there's nothing preventing someone from writing a wallet that allows automated payments or the equivalent of direct-debit, with or without the involvement of a bank.

Direct-debit is undoable. That's one of its key-features.

You can add direct-debit to bitcoint with a trusted third party. (And there might even be clever ways to do direct debit in bitcoin without that third party.)

That is true for me locally also but you realise when you travel or do business international the current systems all fail to do their job.

I use my Visa wherever I go in the world without any problem, and for business money transfers are fast and easy.

I really fail to see what problem that isn't already solved in this regard.

CoinKite [0] is a new Bitcoin debit/merchant machine company based in Toronto. The key to driving Bitcoin's value is increasing its utility, and this is done by enabling every day transactions.

CoinKite will be interesting to watch.

[0] https://coinkite.com/

> Bitcoin befuddles experts

Why is this guy an expert? He was an equity analyst for a long-time, but obviously not good enough to get rich. And there are thousands of Wall St. analysts walking around in NYC. I wouldn't even trust their opinion on equities, much less something new. Never read opinion pieces written by journalists.

I can't help but think a lot of these "experts" can ONLY see from their narrow perspective. Bitcoin the protocol is just scratching the surface.

Exactly...

Even if you take the assumption that bitcoin will fail, the problems/issues the protocol or something similar solves are far too beneficial to ignore.

So basically if bitcoin fails, some other similar form of digital currency will rise up in its place. I feel as though its a 'cat is out of the bag' scenario.

Yes it does seem like bitcoin is lacking in a few places. You could (try to) add things like

* disconnected operation (solve the double spend problem in a disconnected setting) (this would really make something gold-equivalent)

* a provably correct, but cryptographically secure ledger (meaning real anonymity)

* proof of work based on a single crypto standard seems risky. Use 5 of them.

* provably no way to compromise the network even with overwhelming computational power

Zerocoin is trying to solve the second problem.

Combining 5 proof of work standards just gives you 1 new one. (There might be some robustness to be gained, though.)

Cool, I didn't know about zerocoin. There goes my afternoon.

"Experts are clueless" -Steve Jobs

"Steve Jobs is dead" -God

"God Is Dead?" -Black Sabbath

> It may fail as "money" (in a narrow sense) and still succeed as a global platform.

I think that was the author's point.

For example, Paypal, Amazon or the IRS could announce tomorrow they will accept payment in Bitcoins but peg their BTC/USD exchange rate to one.

Speculation would all but stop and Bitcoins would become a transaction platform.

No, because no one would give them bitcoins at 1:1 and they can't magic up their own, they 'd have to buy them at market price and then sell them at a hilarious loss.

eBay, Amazon, and IRS don't need Bitcoins, they can set any exchange rate they want.

If enough goods and service providers followed suit, current speculators would have to take a hilarious loss to buy anything.

they can sure set them, and then no one would use them. do you not understand money?

what are you, the owner of 100btc going to do:

a) buy $100usd worth of goods at ebay directly

b) cash out at a proper exchange for $100,000usd, then buy $100usb worth of goods on ebay and have $99,900usd left over? or cash out ONE btc for $1000usd, buy $100usd of goods and have $900 usd left over AND 99btc?

How do you expect any even remotely rational players do participate in this farce?

In any financial exchange, both parties, the buyer and seller, need to come to agreement on a price.

Given the fact that current BTC to USD exchange volume is fairly small, it wouldn't take that many large global goods and service providers pegging their BTC/USD exchange rate to cause the speculation market to collapse.

Those that recently bought their Bitcoins at $900 would sell below the current high price to realize their gain and avoid a potential loss, then those who bought at $800 would follow suit, and so on.

In very short order, Bitcoins could be trading in single digits.

They couldn't. If you pegged the price to one, there wouldn't be enough units for everyone to buy anything they want. Remember that there are only 12 million of them, and only ~20 million will be ever available. Tying their value to one would mean that the size of whole economy would be only 20 million USD, which is pocket money on a global scale.

what gain?

you are proposing taking for example a $100usb product and selling it for 100btc... which at current market value is the equivalent of over pricing it to $100,000usd. Who would buy that when they could pay $100usd for it instead or convert 1btc and functionally pay 0.1btc for it instead of 100btc. What global goods providers would mark up their wares 1000x and who in their right mind would spend anything on that.

Sure, if BTC was worth > $1usd and you were selling them at 1:1 everyone would leap to do that because now they are GAINING by spending their BTC with you.

But your proposal means they loose 1000%. I don't understand what motivates this switch over.

The buyers and sellers have come to an agreement already. They prefer the price of $1000. Any large retailer attempting to manufacture an artificial peg would only create a good amount of temporary humor.

Retailers aren't going to set prices for their goods that might fluctuate from $1 to $10 to $50 back to $1 within a week or so. It'd make it impossible to run a business.

What they ultimately want is to guarantee they're going to receive the equivalent of $X for every widget they sell, so they'll either have to declare that Y BTC = X USD regardless of market prices, or they'll have to accept whatever Y in BTC is equivalent to X USD on a given exchange on a given day -- which is essentially equivalent to doing business in USD directly, with BTC as just a weird payment mechanism.

Businesses are going to be hesitant to accept BTC for the same reason they don't tend to accept payment in kind -- you need dollars to pay taxes and wages.

Payment processors such as bitpay offer same-day bitcoin-to-fiat conversion and bank deposit with extremely low fees (0.1% - 1%), and are becoming the defacto standard. This is expected during the bootstrapping phase. Later, if bitcoin firmly establishes itself, merchants could choose to not convert directly to fiat.

Merchants would still need to convert to legal tender for payroll, rent, and taxes. Their income and expenses would still be more efficiently denominated in dollars (or the local equivalent). What is the expected draw for businesses to keep their operating funds in BTC as opposed to USD?

Did you read my post? Bitpay converts bitcoin to the fiat currency of your choice. It is hassle free and much cheaper than credit cards.

If BTC is trading higher than $1, everybody would buy the undervalued BTC for $1 and sell at the market rate. If BTC is trading lower than $1, everybody would buy BTC at market rate and sell the overvalued BTC for $1.

Both cases lead to significant losses for whoever is trying to peg BTC to some arbitrary constant value.

That's complete nonsense. It would take virtually every merchant to partake in your fantasyland to have even a slim chance of convincing bitcoin holders to take massive losses. And only one Silk Road to retain bitcoin's viability.

And you apparently forgot that the total number of bitcoins is severely limited (around 20 million).

You don't seem to grasp the basic concept of markets.

Issuing more buy orders cannot cause a drop in price.

In your scenario, you propose that large businesses around the world issue a practically limitless number of buy orders on BTC, supposedly at a low-balled price, supposedly inducing people to fulfill those orders...

You can't affect the price of anything buy flooding the market with an enormous number of low-balling buy orders. You can create a floor, but that puts a lower bound on how far bitcoins can call - it doesn't induce the fall.

Because Internet. Because disruption.

Wait, you can't use logic when it comes to money!

What are you, Satoshi Nakamoto?

They can't magic up their own, but they can issue bitcoin-substitutes, in the same way that banks issue dollar-substitutes in the form of USD credits on your account, redeemable for 1 USD worth of debt owed to the bank.

It's an open question whether such substitutes will trade on par with the real "in-blockchain" thing. Personally, I doubt it.

This makes no sense. If, say the IRS, pegged the exchange at 1 what difference does that make? There are not infinite bitcoins and the IRS certainly wouldn't have all of them. People VALUE bitcoins which is why they pay a lot of USD for them.

People value goods and services. They use currency to denote the value of these goods and services.

If enough goods and service providers pegged their BTC/USD exchange rate to one, the initial BTC speculators would take a bath.

But subsequent Bitcoin users would receive the benefit of Bitcoin transaction technology and the benefit of the US government's fiat currency for monetary policy.

In a sense, it's true that the value of a currency is how much you can get for it. The problem is that you can't just peg it at a value, bitcoins supply is limited.

Imagine if every goods and service provider pegged their unit product at $1,000,000USD. The VALUE of the US dollar would drop immensely. What force could actually make them do that though? Because no one's going to pay a million bucks for a big mac, unless they have 4 billion in the bank at least. Something that can't happen to bitcoin.

Can I get my tax return in BTC at 1:1 please? please?

But we're seeing a layer appear with companies like Bitpay that solves the volatile exchange rate issue.

I tried doing this on MtGox with a buy limit price of 1$. I didn't get any bitcoin :(

I do have a friend with 900btc though: I told him I was in the market for a dollar, and he just gave it to me, no questions asked. I wonder where he got it from?

Also, don't forget that people like to come out on record for/against hot ideas/topics/predictions. In the event they are right, they ride the success all the way to the fame and monetary bank. If they're wrong, such an article is usually forgotten and lost in the sea of bitcoin press.

I'll jump on this and say that the script issue is irrelevant to Bitcoin's success.

In fact, I would argue that the script functionality is a huge flaw in bitcoin, probably the largest flaw. The existence of a scripting language within the transaction log makes it much more difficult to analyze whether I hold bitcoins or not -- my ability to spend bitcoins "held" in my address is contingent on my having additional information at the time that I post the transaction.

Having a generic proof-of-work-chain-based cumulative notary service might be valuable in and of itself. But bitcoin's value as "money" is independent of that functionality, and in the long run, the complexity of that scripting language and the difficulty of answering the question "have I been paid" will become problematic.

Can't one just simply check the nature of the transaction to see if it has any conditionals? It isn't hard to imagine those features being added to blockchain related web services, such as blockchain.info.

Sure - so what do you do if there are conditionals? In the full generality of the language, it will be hard to offer an experience to the "recipient" of the transaction that is not confusing.

"my ability to spend bitcoins "held" in my address is contingent on my having additional information at the time that I post the transaction."

Fortunately software excels at automating tasks like this.

You already need software to scan the entire blockchain to determine address balances, is it really that hard for it to keep track of non-trivial unspent transactions separately?

Yes, software can automate the task of redemption for specific types of transactions. But not being able to answer the question "how many bitcoins are at this address" seems to be very problematic.

Instead, you'll have a ton of publisher clearing house style "you just received a million bitcoins" notifications, once they enable more of the language in the client. It just seems confusing and unnecessary.

It doesn't seem to do any of these things very well. And in any case none of the uses suggest that the value of a bitcoin should increase substantially.

IS this all really that big of a deal? Everything you've described above shouldn't really shatter any sort of economic models, it just increases the velocity at which money is exchanged, and reduces any frictions that might occur during transactions. Nothing that can't be accounted for in existing models.

You could have said the same for PayPal.

Are you saying PayPal has upended monetary economics?

Has bitcoin?

Or a failure, depending on one's perspective.

Edit

rationale:https://news.ycombinator.com/item?id=6810806

Calling it a failure without making a rationalization about why it's a failure could be considered a failure in itself.

https://news.ycombinator.com/item?id=6810806

Well said. You should paste this comment into the NYTimes comment section, it clearly articulates the issues (even for the technologically inept), of which none were discussed in the article.

Befuddles eh?

I'll just leave this here... http://www.befuddled.org/

Amazingly useless!

I think most people only care about its failure in the 'money' sense.

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