Bitcoins: The Future of Currency?

[Yip]

Foxpup, with how defensive you seem to get towards any criticisms of bitcoins, one would get the idea that you are a stakeholder.

[Kobuk]

I always thought the future of currency would be the "credit". You hear that term used so frequently in science fiction.   I.e. - Paying 4 credits for a monorail ride.

[Foxpup]

Foxpup, with how defensive you seem to get towards any criticisms of bitcoins, one would get the idea that you are a stakeholder.

I'm not afraid to put my money where my mouth is. I've been riding the Bitcoin bull since December 2011.

[Mylo]

I always thought the future of currency would be the "credit". You hear that term used so frequently in science fiction.   I.e. - Paying 4 credits for a monorail ride.

"Republic credits?  Republic credits are no good out here.  I need something more real."

Foxpup, with how defensive you seem to get towards any criticisms of bitcoins, one would get the idea that you are a stakeholder.

I'm not afraid to put my money where my mouth is. I've been riding the Bitcoin bull since December 2011.

That's great.  You can add that to this thread now, considering it is quite dead.   


I kind of wonder though, especially given how much value Bitcoins lost today, how many people are in it for the profit and how many people are in it for the concept (and both of course).  If most are just in it for profit, it's actually pretty sad.  Those who are in it for profit will profit, yes, but eventually bubbles like Bitcoin (which yes, it is a bubble...just look at the charts) pop.  Some people will profit, some will lose a lot of money.  A lot of people will read about the people who lose a lot of money and will then will be weary about joining in on Bitcoin.  Eventually it will all stabilize once Bitcoins are actually used, but right now it just seems like it has been perverted into an exploitative profit game, like penny stocks.  That's not really a "currency."  And from what little I've seen, it just seems as volatile as the stock market without some way to control its value.  But these are just initial observations...I'm still open to the idea of course and am waiting to see how it plays out in the future.

[Foxpup]

Those who are in it for profit will profit, yes, but eventually bubbles like Bitcoin (which yes, it is a bubble...just look at the charts) pop.

You can't tell if something is a bubble by just looking at charts. Wild swings are par for the course in small markets, and it doesn't mean anything. To determine whether something is a bubble, you have to look at the fundamentals.

Eventually it will all stabilize once Bitcoins are actually used, but right now it just seems like it has been perverted into an exploitative profit game, like penny stocks.  That's not really a "currency."  And from what little I've seen, it just seems as volatile as the stock market without some way to control its value.

All small markets are perverted into exploitative profit games. Which is good, because the only way to win these games is to buy low and sell high, which acts to stabilise the value. The more capital speculators invest, the more stable the market becomes.

[Yip]

I'm not afraid to put my money where my mouth is. I've been riding the Bitcoin bull since December 2011.

That's no excuse for overstating your case as you've been doing.

[Foxpup]

I'm not afraid to put my money where my mouth is. I've been riding the Bitcoin bull since December 2011.

That's no excuse for overstating your case as you've been doing.

I'm not overstating anything. I'm not just saying Bitcoin's awesome because I've invested in it; rather, I've invested in it because I think it's awesome.

[Yip]

Yes, you are overstating things.

Bitcoin is not declared by any government (yet) to be legal tender.  However, a Bitcoin has no intrinsic value (I can use gold to make a piece of jewelry, but I have no direct use of a Bitcoin).

Maybe you don't have a direct use of an international payment network that allows you to instantly and securely send any amount of money anywhere in the world at any time, any day of the week, for only a few cents in transaction fees. But I do. There's your intrinsic value.

Here you use equivocation; Redyoshi was clearly referencing -a- bitcoin (as in a singular object), and you instead reply talking about the payment network.  It's like if someone where talking about a coin and you took it to mean the banking industry. It's absurd, it's bordering on dishonesty, and it is most certainly overstating your case.

I don't question that Bitcoin has value for the reasons you listed.  Having said that, it has value for those reasons *only* if there are people to send Bitcoins to who also recognize Bitcoins as currency.

So? Telephones only have value if there are other people who also have telephones. Pretty worthless, right?

While you do need two of them for the telephone to perform its intended function, once you have two of them they function regardless of whether anyone else outside of that accepts them or not. Bitcoins on the other hand, only have value from the larger populous being willing to treat it like it has value.   

Sorry, but as a base metal, gold is pretty useless. It's soft, weak, doesn't make useful alloys, and is a worse conductor of electricity than copper. It's only used in a few industries, and then only in minute quantities. Virtually all of its value comes from its usefulness as money: it's scarce, fungible, divisible, and difficult to counterfeit. Just as gold's properties make it useful as money (and not much else), Bitcoin's properties also make it useful as money (and not much else).

Aloneness already addressed this, but aside for that there is the simple fact that Gold is shiny and doesn't tarnish and thus is good for ornamentation regardless of whether or not it have monetary value. In fact, redyoshi even pointed this out before in an post earlier than this one, (the one included in what I quoted above). I honestly don't see how you could be so naive as to not see this, and the only other possibility is that you are overstating things to try to make bitcoins sounds better.

It used to be the case that the US dollar was backed by gold (you could exchange USD for gold at a fixed rate).  That is no longer the case.  The worth of money in use today *is* based on people's trust in it, in essence.  Bitcoin isn't actually different from what's done now in that respect.

Yes, it is. It's very different. Bitcoins are being produced at a known and limited rate, and there will never be more than 21 million of them, and nothing can ever change that. Dollars, on the other hand, are being printed as fast as Ben Bernanke wants, with no limits, and nobody knows whether this rate will increase or decrease over time.

Emphasis mine. Policies can be changed and technical limitations can be overcome, so to claim that "nothing can ever change that" is completely ridiculous. This is clearly overstating your position.

Yes, you are excited about this new thing. You might even be right about them being the future of currency. I can't say. However, exaggerating your claims and overstating things in the way you've been doing does NOT strengthen your case. It only makes you look like an unreasonable jerk.

[Foxpup]

Here you use equivocation; Redyoshi was clearly referencing -a- bitcoin (as in a singular object), and you instead reply talking about the payment network.  It's like if someone where talking about a coin and you took it to mean the banking industry. It's absurd, it's bordering on dishonesty, and it is most certainly overstating your case.

You couldn't have picked a worse example. A coin (of any fiat currency) has value entirely because of the banking industry. With Bitcoin (or any other electronic currency), this even more the case as the currency and the payment system are the same thing. A bitcoin simply does not exist as a singular object. Bitcoins exist purely as entries in a ledger. Each entry is a transaction in which one party transfers some number of bitcoins to another. That's simple enough; all electronic currencies work that way. And as with all electronic currencies, the currency exists purely because the payment network exists (and vice versa). It is not possible to consider the two separately.

While you do need two of them for the telephone to perform its intended function, once you have two of them they function regardless of whether anyone else outside of that accepts them or not. Bitcoins on the other hand, only have value from the larger populous being willing to treat it like it has value.   

Nope, as with telephones, you still only need two people. If a buyer wants to buy something with bitcoins, and a seller wants to sell something for bitcoins, they can put a price on it and make a trade. Certainly there is more value in having more than two people involved, but the same is true of telephones.

Aloneness already addressed this, but aside for that there is the simple fact that Gold is shiny and doesn't tarnish and thus is good for ornamentation regardless of whether or not it have monetary value.

Stainless steel is shiny and doesn't tarnish, so why not make jewellery out of stainless steel? In case it isn't obvious, it's because jewellery is a luxury good, and people would rather buy gold jewellery over stainless steel jewellery for no other reason than that gold is considered more valuable than stainless steel. And it's considered more valuable because over 70% of the gold that's not used in jewellery is used as money. If not for gold's usefulness as money, not only would it worth far less than what it's worth now, but nobody would make jewellery out of it.

Policies can be changed and technical limitations can be overcome, so to claim that "nothing can ever change that" is completely ridiculous. This is clearly overstating your position.

It is neither a policy nor a technical limitation. It's a network protocol rule. It cannot be changed without becoming incompatible with every other implementation on the planet, which will work about as well as a TCP/IP stack which tries to open a connection with a FIN packet (that is to say, not at all).

[Kobuk]

Yes, you are excited about this new thing. You might even be right about them being the future of currency. I can't say. However, exaggerating your claims and overstating things in the way you've been doing does NOT strengthen your case. It only makes you look like an unreasonable jerk.

No need for name calling, Vararam. Keep the discussion civil, please.

[Yip]

Yes, you are excited about this new thing. You might even be right about them being the future of currency. I can't say. However, exaggerating your claims and overstating things in the way you've been doing does NOT strengthen your case. It only makes you look like an unreasonable jerk.

No need for name calling, Vararam. Keep the discussion civil, please.

There was no name calling.  I said "makes you look like" I did not say they that he is.

[Yip]

You couldn't have picked a worse example. A coin (of any fiat currency) has value entirely because of the banking industry.

In order to do the laundry I need to put some banking industries into the machine. Good thing I have several banking industries in my pocket. --- There is clearly a difference between the object and the establishment behind the object.

A bitcoin simply does not exist as a singular object.

EXACTLY! And something that doesn't actually exist cannot have intrinsic value.

Nope, as with telephones, you still only need two people. If a buyer wants to buy something with bitcoins, and a seller wants to sell something for bitcoins, they can put a price on it and make a trade.

Wrong. If there is only one buyer and one seller, the seller has no incentive to accept them because they are useless to him. Not to mention the fact that a telephone is a physical object and thus has some intrinsic value of it's own, perhaps as spare parts or as a conversation piece or such.

Stainless steel is shiny and doesn't tarnish, so why not make jewellery out of stainless steel?

People DO make jewelery out of stainless steel.

It is neither a policy nor a technical limitation. It's a network protocol rule.

Um... Having to work within network protocols is a technical limitation. Obviously the network protocols were not made with bitcoins in mind, so they are already doing stuff to allow them work within that space. There is no reason to think that they couldn't come up with ways around the problem that still fall within that space. Heck, I'm not an expert at networking by any means and I can think of ideas of how it could potentially be done. Someone that really knew networking could almost certainly find a way.  The point is, even if it's unlikely to be changed, saying that it simply cannot be changed is ridiculous. You state your position too strongly.

[Foxpup]

You couldn't have picked a worse example. A coin (of any fiat currency) has value entirely because of the banking industry.

In order to do the laundry I need to put some banking industries into the machine. Good thing I have several banking industries in my pocket. --- There is clearly a difference between the object and the establishment behind the object.

Wait, where'd my context go?

A bitcoin simply does not exist as a singular object.

EXACTLY! And something that doesn't actually exist cannot have intrinsic value.

Ah, there it is. If you're going to quote me out of context, you should at least remove all the context. As it is, I'm left wondering why you're responding to a qualified statement as though it were unqualified. I don't even disagree that things that don't exist can't have value, I just don't see how it applies to my out-of-context statement. (And it definitely doesn't apply if you take my statement in context, in which I explained exactly how bitcoins do exist and how they get value.)

Nope, as with telephones, you still only need two people. If a buyer wants to buy something with bitcoins, and a seller wants to sell something for bitcoins, they can put a price on it and make a trade.

Wrong. If there is only one buyer and one seller, the seller has no incentive to accept them because they are useless to him. Not to mention the fact that a telephone is a physical object and thus has some intrinsic value of it's own, perhaps as spare parts or as a conversation piece or such.

Maybe the seller intends to give them back to the same person in exchange for something else at a later date? Or maybe he thinks bitcoins will be more widely accepted in the future, even if nobody else accepts them now? Or maybe he just wants them as a conversation piece.

Stainless steel is shiny and doesn't tarnish, so why not make jewellery out of stainless steel?

People DO make jewelery out of stainless steel.

Okay. I should have specified that gold jewellery is a luxury good. But that doesn't change the fact that gold is more valuable than stainless steel because of its use as money.

It is neither a policy nor a technical limitation. It's a network protocol rule.

Um... Having to work within network protocols is a technical limitation. Obviously the network protocols were not made with bitcoins in mind, so they are already doing stuff to allow them work within that space. There is no reason to think that they couldn't come up with ways around the problem that still fall within that space. Heck, I'm not an expert at networking by any means and I can think of ideas of how it could potentially be done. Someone that really knew networking could almost certainly find a way.  The point is, even if it's unlikely to be changed, saying that it simply cannot be changed is ridiculous. You state your position too strongly.

Bitcoin is the network protocol. Network protocols aren't things that you find "ways around". You can't "find a way" to open a TCP/IP connection with a FIN packet, the server will just ignore you. There's nothing you can do to make it work. Every node of the Bitcoin network validates all data it receives according to the protocol. It will flat out ignore any data that doesn't conform to the rules of the protocol, just like any other network server. If you create Bitcoin software that doesn't follow the rules, it will be incompatible with all other Bitcoin software on the planet. The data it sends will be ignored, it won't work, and it can't ever be made to work.

Bitcoin has been attacked from all directions for over four years. There is over a billion dollars at stake. Exchanges have been hacked. Money has been stolen. Nasty bugs have been uncovered in the software (and quickly fixed). But nobody has ever succeeded in changing the protocol. Of all the things that could potentially happen, this is not one of them.

[Yip]

You couldn't have picked a worse example. A coin (of any fiat currency) has value entirely because of the banking industry.

In order to do the laundry I need to put some banking industries into the machine. Good thing I have several banking industries in my pocket. --- There is clearly a difference between the object and the establishment behind the object.

Wait, where'd my context go?

You want to claim that I'm talking you out of context, but yet you were not addressing the the issue I was originally pointing out.  Redyoshi repeatedly refered to -a- bitcoin not having intrinsic value. -A- bitcoin. Not the bitcoin network. -A- bitcoin. As in the singular object.

It's like if someone where complaining about the penny, and saying how pennies are essentially worth nothing. In fact, pennies are worth less then nothing because they cost more to produce then their monetary value, and they do not effectively do the job currency is meant to do: facilitate trade.

Your reply to redyoshi would be like someone replying to the above with "The banking industry isn't worthless". It totally misses the mark of what was being said. Just as you have totally missed the mark on what redyoshi was saying.

A bitcoin simply does not exist as a singular object.

EXACTLY! And something that doesn't actually exist cannot have intrinsic value.

Ah, there it is. If you're going to quote me out of context, you should at least remove all the context. As it is, I'm left wondering why you're responding to a qualified statement as though it were unqualified. I don't even disagree that things that don't exist can't have value, I just don't see how it applies to my out-of-context statement. (And it definitely doesn't apply if you take my statement in context, in which I explained exactly how bitcoins do exist and how they get value.)

We commonly think of money as singular objects. And the very name "Bitcoins" supports conceptually thinking of them as singular objects. And like I said above, redyoshi was refering to -a- bitcoin. Not to "bitcoins" but to -a- bitcoin. Clearly referencing it as a singular object. Yet they do not exist as singular objects. And therefore, -a- bitcoin, the singular object, has no intrinsic value.

By contrast, a physical coin DOES exist. It does have some measure of intrinsic value even if the banking establishment behind it were to cease to exist. In fact, we have actual examples of this very thing in coins from ancient fallen civilizations. They do not have the monetary value they had within those civilizations but they still retain value in the materials they were made with. Plus they've gained historic value.

Maybe the seller intends to give them back to the same person in exchange for something else at a later date? Or maybe he thinks bitcoins will be more widely accepted in the future, even if nobody else accepts them now? Or maybe he just wants them as a conversation piece.

This is seriously stretching things. Is it really that hard for you to admit when you are wrong?

Okay. I should have specified that gold jewellery is a luxury good. But that doesn't change the fact that gold is more valuable than stainless steel because of its use as money.

Whether or not gold is more valuable than stainless steel is irrelevant. The point is that gold would be useful even if it did not have monetary value.

Bitcoin is the network protocol.

That's even worse. If they made the protocol, then obviously it is within the realm of possibility for them to make a new protocol. Unlikely, maybe. But you'll note that my complaint was not that they would change it, only that could change it, and thus you were overstating your case when you where claiming that NOTHING could ever change it.

Bitcoin has been attacked from all directions for over four years. There is over a billion dollars at stake. Exchanges have been hacked. Money has been stolen. Nasty bugs have been uncovered in the software (and quickly fixed). But nobody has ever succeeded in changing the protocol. Of all the things that could potentially happen, this is not one of them.

Completely and totally irrelevant. Neither of us were talking about people hacking into it. You specifically contrasted it with the chairman of the federal reserve choosing to have more money printed. Thus what we are discussing here is the establishment behind the money deciding to make more of it. Whether people can make counterfeits is a completely different topic.


Besides, if we go back to redyoshi's comment you were replying to, he said:

It used to be the case that the US dollar was backed by gold (you could exchange USD for gold at a fixed rate).  That is no longer the case.  The worth of money in use today *is* based on people's trust in it, in essence.  Bitcoin isn't actually different from what's done now in that respect.

Notice those last three words? "in that respect". Redyoshi was pointing out one aspect where the US dollar and bitcoins are the same. He was not saying that the two are completely the same, only that bitcoins and the US dollar share the similarity of not being backed by anything of substance, and instead the value coming from people's trust in it. So even if you were right on this "they can never change it" nonsense, (which I maintain that you are overstating things with that), you still were attempting to cloud the discussion on what you perceived was an attack on your precious bitcoins.

If they are really that great, then there is no need to get defensive about it.

[Foxpup]

Vararam, I've already explained why the concept of a bitcoin is inseparable from the concept of the Bitcoin network, and why that is where the intrinsic value of bitcoins (as a whole) comes from. I've also explained how bitcoins don't exist outside the context of the Bitcoin network. Outside that context, they don't exist and have no intrinsic value. I do not know why you are trying to compare them to physical coins, as I've already explained how electronic currencies are different. It's not a valid comparison and I won't be addressing it.

This is seriously stretching things. Is it really that hard for you to admit when you are wrong?

How is it stretching things? That scenario actually happened. In 2009, nobody accepted bitcoins. Today, thousands of people do. At some point in between, exactly two people did. I do not know who these people were or what their motives were, nor do I care. All I know is that while everyone else was engaged in theoretical debates about whether bitcoins have intrinsic value or whether they satisfy the regression theorem or whether disinflation will lead to a deflationary spiral and whatever else economists whine about, they were actually willing to make a trade using this newfangled Internet money. The fact is, it happened, all right? How or why is irrelevant at this stage.

Whether or not gold is more valuable than stainless steel is irrelevant. The point is that gold would be useful even if it did not have monetary value.

I never said is wasn't useful, I said it was less useful, and that the majority of its value is due to its usefulness as money.

That's even worse. If they made the protocol, then obviously it is within the realm of possibility for them to make a new protocol. Unlikely, maybe.

It's not unlikely. It's already happened dozens of times. Though these new protocols weren't created by the same people who created Bitcoin, who obviously stand to lose big time if some new protocol becomes accepted. Most of these new protocols are worthless, none of them are actually improvements in any way, and some are outright scams. Litecoin's basically the only one that has any acceptance at all.

None of these are compatible with Bitcoin, nor can they possibly be confused with Bitcoin.

Completely and totally irrelevant. Neither of us were talking about people hacking into it. You specifically contrasted it with the chairman of the federal reserve choosing to have more money printed. Thus what we are discussing here is the establishment behind the money deciding to make more of it. Whether people can make counterfeits is a completely different topic.

No it isn't. There is no establishment. Nobody can decide to make more of it. Nobody has the right to decide, and more importantly, nobody has the capability to decide. It's hard-coded into the protocol. The protocol is implemented by many different programs developed by different people and being run by many different people all around the world. It can't be changed. Attempting to change it can only result in something that isn't Bitcoin, isn't compatible with Bitcoin, and simply won't work with Bitcoin.

Besides, if we go back to redyoshi's comment you were replying to, he said:

It used to be the case that the US dollar was backed by gold (you could exchange USD for gold at a fixed rate).  That is no longer the case.  The worth of money in use today *is* based on people's trust in it, in essence.  Bitcoin isn't actually different from what's done now in that respect.

Notice those last three words? "in that respect". Redyoshi was pointing out one aspect where the US dollar and bitcoins are the same. He was not saying that the two are completely the same, only that bitcoins and the US dollar share the similarity of not being backed by anything of substance, and instead the value coming from people's trust in it. So even if you were right on this "they can never change it" nonsense, (which I maintain that you are overstating things with that), you still were attempting to cloud the discussion on what you perceived was an attack on your precious bitcoins.

You missed my point completely. I didn't perceive this as an attack on "my precious bitcoins". I was merely explaining why the reasons people put their trust in Bitcoin is radically different to the reasons people put trust in fiat money. People who use Bitcoin are putting their trust in a network of computers running open-source software rather than human politicians and economists. It's a completely different kind of trust, and I thought that needed to be pointed out. That's all.

[Yip]

Vararam, I've already explained why the concept of a bitcoin is inseparable from the concept of the Bitcoin network, and why that is where the intrinsic value of bitcoins (as a whole) comes from. I've also explained how bitcoins don't exist outside the context of the Bitcoin network. Outside that context, they don't exist and have no intrinsic value. I do not know why you are trying to compare them to physical coins, as I've already explained how electronic currencies are different. It's not a valid comparison and I won't be addressing it.

You may see it as an invalid comparison, but others do not. And like I've explained, the name itself encourages people to make that comparison, so much so that it seems blatantly obvious to me that people will make this comparison. So by refusing to address it, to me it comes of as obstinance.

I never said is wasn't useful, I said it was less useful, and that the majority of its value is due to its usefulness as money.

"Sorry, but as a base metal, gold is pretty useless. It's soft, weak, doesn't make useful alloys, and is a worse conductor of electricity than copper. It's only used in a few industries, and then only in minute quantities. Virtually all of its value comes from its usefulness as money: it's scarce, fungible, divisible, and difficult to counterfeit. Just as gold's properties make it useful as money (and not much else), Bitcoin's properties also make it useful as money (and not much else)."

You were not just saying it's less useful, but are clearly stressing just how little value gold has other than as money. And thus overstating your case.

That's even worse. If they made the protocol, then obviously it is within the realm of possibility for them to make a new protocol. Unlikely, maybe.

It's not unlikely. It's already happened dozens of times. ...

*headdesk*
I suppose I should just take this as an admission that you are wrong and move on. We've wasted enough time on this topic.

You missed my point completely. I didn't perceive this as an attack on "my precious bitcoins". I was merely explaining why the reasons people put their trust in Bitcoin is radically different to the reasons people put trust in fiat money. People who use Bitcoin are putting their trust in a network of computers running open-source software rather than human politicians and economists. It's a completely different kind of trust, and I thought that needed to be pointed out. That's all.

Actually no, it's not that different.  It may be different for those in the know, and those that are early adopters, but I guarantee you that if it catches on, the general populous putting their trust in it won't care one bit how it works as long as it lets them make their purchases.

[Yip]

Bitcoins are being produced at a known and limited rate, and there will never be more than 21 million of them, and nothing can ever change that.

Sorry for revisiting this again, but I was thinking about this total as compared to population. There are currently over 7 billion people in the world. Thats well over 300 times your listed maximum number of possible bitcoins.  Heck, even if we limit it to specific developed nations, you still run into problems: There are over 300 million people in the US. Over 600 million in Europe. Even Australia, one of the lesser populated developed nations, has over 22 million.

How can bitcoins possibly hope to be "the future of currency" if it isn't even possible for each person to have one?

[redyoshi49q]

Bitcoins are being produced at a known and limited rate, and there will never be more than 21 million of them, and nothing can ever change that.

Sorry for revisiting this again, but I was thinking about this total as compared to population. There are currently over 7 billion people in the world. Thats well over 300 times your listed maximum number of possible bitcoins.  Heck, even if we limit it to specific developed nations, you still run into problems: There are over 300 million people in the US. Over 600 million in Europe. Even Australia, one of the lesser populated developed nations, has over 22 million.

How can bitcoins possibly hope to be "the future of currency" if it isn't even possible for each person to have one?

From a Bitcoin wiki FAQ:

How divisible are bitcoins?
A bitcoin can be divided down to 8 decimal places. Therefore, 0.00000001 BTC is the smallest amount that can be handled in a transaction. If necessary, the protocol and related software can be modified to handle even smaller amounts.

The fact that it is trivial to divide Bitcoins to a very high extent means that Bitcoins would still be useful as a currency even if not everybody would be able to own an entire Bitcoin.  People would just trade for increasingly small fractions of a Bitcoin, and as the FAQ alludes to, the protocol can be expanded if even smaller fractions of a Bitcoin are warranted.  Therefore, there isn't any danger of Bitcoins being unusable as a currency on account of high demand making them too scarce.

[Narei Mooncatt]

I'm not convinced this will revolutionize much. I can maybe see it for people that want to convert their own currency to bitcoins for annonymity reasons, but not as a currency in and of itself in the way we've traditionally or even currently think of currency. I haven't read up much on bitcoins, so I reserve the right to be wrong here. From my understanding, the only ways you can get bitcoins are through trades/purchases, mining, and converting real money. In the real world, to get money, you have to exchange something physical for it. That could mean bartering, but usually means you've provided someone your labor in exchange for a wage. Your labor, from increasing a company's productivity and ability to serve their customers to simply mowing your neighbor's lawn for their convenience, is going to hold a value that others are willing to compensate you for. The harder and more skilled you are in your work, the more valuable your labor is and you then get money based on that. So even though some currencies like the U.S. dollar isn't backed by a tangeable good, there is still a tangeable exchange between the buyer (company) and seller (worker) of labor.

As far as I know, you don't get that from "earning" bit coins. This mining business seems to be either be regulated to how powerful GPU you have to increase the rate of mining for a fixed rate of return, or as I read in one article, the coins are earned randomly and the more people are doing it, the more a coin is worth and the more rare they become. In either case, where is the barter or productivity exchange? Anyone can simply let their computer run and mine these things, yet nothing of actual value is produced. You aren't enabling faster research, helping increase manufacturing processes, or even helping increase the speed of the local drive through. It's just churning for churning's sake from what I have read of it. You are effectively getting something for nothing. Even if you are paid in bitcoins, where is that person or company getting their coins? Certainly you can't mine enough to get much that way. They could get their coins from other transactions of goods, but those still have to be sourced from somewhere. The only viable way would be converting your real money.

At least with converting your current money to bitcoins, you have earned them doing actual work of some sort (ok, maybe you also have some birthday and Christmas money from your parents you want to throw in too ) and is along the lines of other forms of payment. I.E. debit and gift cards that you use either from or buying with your money. I'd rank bitcoins along the lines of other virtual currencies like Second Life's Linden dollars. Yeah, they may have some value within their own ecosystem, but not in the real world where I can go to my local bank and get my hands on cold hard cash.

can you even actually buy anything with bitcoins?

Yes on certain websites.

For reference, here's an incomplete list.

In the article I read, there's now also a bar/restaurant in NYC that accepts bitcoins as actual payment, and is heavily invested in by the president of bitcoins. At the time of writing a few days ago, I think it was the only known physical place you can use them at the retail level.

[Aloneness]

"Republic credits?  Republic credits are no good out here.  I need something more real."

Wow ... I just realized how bad he looks ... I've not watched starwars in forever XD just shows you how far tech has come XDDD

[Foxpup]

As far as I know, you don't get that from "earning" bit coins. This mining business seems to be either be regulated to how powerful GPU you have to increase the rate of mining for a fixed rate of return, or as I read in one article, the coins are earned randomly and the more people are doing it, the more a coin is worth and the more rare they become. In either case, where is the barter or productivity exchange? Anyone can simply let their computer run and mine these things, yet nothing of actual value is produced. You aren't enabling faster research, helping increase manufacturing processes, or even helping increase the speed of the local drive through. It's just churning for churning's sake from what I have read of it. You are effectively getting something for nothing.

Mining is the business of selling your computing power for the purpose of securing the distributed ledger of Bitcoin transactions. Regular electronic currencies have a centralised ledger of transactions, which can only be modified by the currency issuer's central bank or clearing house. But since Bitcoin doesn't have a central bank or clearing house, and the ledger is available to be modified by anyone, some system is required to prevent fraudulent modifications. It does this using cryptographic "proof-of-work". Without getting too technical about it, the idea is that a certain amount of computational "work" goes in to appending new transactions to the ledger, and it is impossible to remove or modify previous entries in the ledger without completely redoing that work (not only the work associated with the entries you want to modify, but also all the work that was done on entries following them, as well). This work is what miners are doing. Although doing the work requires a large amount of computational effort, validating the work requires very little, and is done by all computers on the network. This keeps everybody honest.

Miners are rewarded for their effort in two ways: newly issued coins (the number of which decreases every four years, until eventually there are no more new coins to be issued), and transaction fees (which will be the main incentive once most coins have been issued).

[Narei Mooncatt]

So miners do work by keeping track of the virtual cash and are rewarded with some of the cash they are tracking? Sounds fairly recursive to me. Value still has to be added to the system somehow, which can only be by converting real money, which they would have to take some off the top to make a profit and pay miners with.

Sounds more and more like a glorified gift card company to me. Not that there's anything wrong with that, but it's hardly worthy of bring called a currency IMHO.

[redyoshi49q]

So miners do work by keeping track of the virtual cash and are rewarded with some of the cash they are tracking? Sounds fairly recursive to me. Value still has to be added to the system somehow, which can only be by converting real money, which they would have to take some off the top to make a profit and pay miners with.

Sounds more and more like a glorified gift card company to me. Not that there's anything wrong with that, but it's hardly worthy of bring called a currency IMHO.

A defining aspect of currency is consensus that the item in question is appropriate for settling debts.  Some currencies are based on items of intrinsic value, and others are based on tokens which a trusted entity will exchange for such items.  These currencies have, at minimum, value as the commodity they are based on (assuming trust in the issuing entity in the latter case), and they generally have further value in the sense that their use as a currency facilitates trade.

However, not all currency has value that's tied to a consumable good.  Rai stones are a historic (and interesting) example of currency where the transferal of "ownership" of massive stones was a mechanism for settling debts.  For a more real world example, many common forms of modern currency are considered to have value in trade because some government declares this to be the case.  In these cases, the currency itself has little to no value as a consumable good or utility outside of being used for trade.  However, since there is still a consensus that the currency is appropriate for settling debts, the currency holds a value for that purpose in spite of its lack of an intrinsic value.  I repeat for emphasis: consensus gives currency (especially fiat currency) its value.

Though no government has yet endorsed Bitcoin as its currency, Bitcoin's mechanics as a currency are similar to those of a fiat money due to its lack of explicit equivalency to goods of intrinsic value.  A group of individuals, both consumers and businesses, agree that Bitcoins are useful for and are an appropriate choice for tokenizing value, and these individuals engage in sales involving Bitcoins.  The use of Bitcoins in this way then helps to strengthen Bitcoin's legitimacy and value as a currency.  In fact, this use of Bitcoin is sufficient to meet the definition of a currency.


Whether Bitcoin is a viable currency is a different question.  Though Bitcoin has several factors that make it desirable as a medium of exchange, the utility of Bitcoins as a currency depends on the existence of a population who accept Bitcoins as having value.  It seems that for at least the immediate future, a wide variety of business that accept Bitcoin will continue to exist.  Having said that, unless/until jobs with wages paid in Bitcoins become reasonably obtainable, it will be necessary for Bitcoin economies in the real world to depend on the exchange between Bitcoins and other currencies to function for everyday purposes.  I say this because as of right now, consumers who wish to pay in Bitcoins but do not hold jobs that pay in Bitcoins will have to use the currency they're paid in to buy Bitcoins first (Bitcoin mining is an arguable exception, but I assume that maintaining a Bitcoin mining operation large enough to pay out enough Bitcoins to sustain someone after expenses would be a job in of itself).  In contrast, a person employed by or running a successful business dealing in Bitcoins can use those Bitcoins to pay for goods and services provided by other Bitcoin businesses with no need to deal with external currencies on those transactions at all, but they will need to sell some of their Bitcoins for money in other currencies if they're unable to find business who accept Bitcoin for all of their needs.

In short, the utility and value of Bitcoins (like that of other fiat money) comes from their widespread use itself, and to the extent that their use isn't widespread, their capacity for utility is inhibited.  Aside from what I've described above, investment through other currencies doesn't seem as integral to the value of Bitcoin as adoption rates.

[Yip]

From a Bitcoin wiki FAQ:

How divisible are bitcoins?
A bitcoin can be divided down to 8 decimal places. Therefore, 0.00000001 BTC is the smallest amount that can be handled in a transaction. If necessary, the protocol and related software can be modified to handle even smaller amounts.

The fact that it is trivial to divide Bitcoins to a very high extent means that Bitcoins would still be useful as a currency even if not everybody would be able to own an entire Bitcoin.  People would just trade for increasingly small fractions of a Bitcoin, and as the FAQ alludes to, the protocol can be expanded if even smaller fractions of a Bitcoin are warranted.  Therefore, there isn't any danger of Bitcoins being unusable as a currency on account of high demand making them too scarce.

Hmm... So that means the claim that "there can never be more than 21 million of them" is essentially a red herring.

And the protocol could be modified if needed....  yep.