7 ms·

Is Bitcoin actually a medium of exchange? It seems to be functioning more as an investment to be hoarded rather than spent.

virmundi 9y ago
I wonder if part of this is due to dust. My understanding is that at these prices you don't really want to split a coin for a $.25. As a result it's poor for micro payments and daily macro payments alike.
- nostrademons 9y ago
  Dogecoin was created explicitly to have a low value suitable for micropayments & tipping. It hasn't really worked out much better for Dogecoin...interest in it seems to have waned a long time ago. My bet is that it hasn't caught on as a medium of exchange simply because that's not really a major pain point. Cryptocurrency's competition as payment isn't $USD; it's Visa, Mastercard, Discover, Stripe, Square, and other payment processors. People bitch about these companies, but they usually bitch about them from a concentration-of-power-and-fees standpoint (which Bitcoin doesn't actually solve, once you consider the costs of the commercial Bitcoin exchanges), not a convenience one. When it comes to convenience, whipping out a wallet-sized piece of plastic or your cell phone is a lot better than waiting 12 minutes for a transaction to settle on the blockchain.
  - nnfy 9y ago
    I think dogecoin failed to go anywhere at least partly because it was a literal memecoin. Certainly made it hard for me to take it seriously as a semi-layman at the time.
    - stanleydrew 9y ago
      Interestingly that would seem to further the author's point a bit. You didn't think dogecoin was legitimate because it was named after a meme. So that made you less likely to trust the code/governance?
      - zdkl 9y ago
        > […] it was named after a meme. > So that made you less likely to trust the code/governance? Well... yeah! What's your point? That projects deserve trust based on their branding? I'm not convinced until there's peer approval, especially not if it's piggybacking on something "trendy". I do agree though it's a shame it got subverted from the ultra low value p2p tipping platform it was becoming. Feels like it's just litecoin left as credible alternative in that area.
  - wavefunction 9y ago
    Dogecoin is for fun. Much block-chain. Wow. It died off because _some people_ tried to turn it into a real thing for micro transactions, etc.
- pmuk 9y ago
  And there are huge energy costs in performing a transaction... 197 KWh @ $0.10 per KWh = nearly $20 of electricity for 1 transaction.
lojack 9y ago
Sure, some people treat it as an investment that can be hoarded, but that doesn't change the fact that it can be exchanged. Your narrow definition of medium of exchange sort of excludes any deflationary currency that someone may hold on to as an investment. It could even be expanded to include inflationary currency in a country where hyperinflation is occurring. People will hold on to USD or some other currency as an investment because it'll be worth significantly more tomorrow than whatever currency the supermarket down the street accepts.
- Finnucane 9y ago
  By that logic any tradable thing can be a 'medium of exchange'. Sure, people will hold a stable currency when their own is sinking, but deliberately designing a currency for deflation is stupid.
  - zdkl 9y ago
    Well in a sense it's quite freudian: you gotta feel the (unrealised value of the) bitcoin leaving you for it to be universally recognised as "having value"
  - lojack 9y ago
    I understand your point, but I'm not sure I agree that being deflationary or being primarily used as an investment precludes it from being used as a medium of exchange. I do think there are some aspects of bitcoin that limit its use as a medium of exchange (transaction times, current lack of stability), but I don't think its the deflationary part.
- 2muchcoffeeman 9y ago
  It could even be expanded to include inflationary currency in a country where hyperinflation is occurring. People will hold on to USD or some other currency as an investment because it'll be worth significantly more tomorrow than whatever currency the supermarket down the street accepts. This doesn't really feel the same. You might use USD to store value because you know that it's value isn't going to fluctuate like crazy from month to month or year to year. So if you can afford to feed yourself today, you can still feed yourself tomorrow. You're still spending your money. No one I know with Bitcoin spends it, with the exception of a novelty purchase of beer. And why would you, in 4 years the value of bitcoin increased over 10 fold. You'd be stupid to ever spend it while this trend continues.
aviv 9y ago
Right, the same people telling you it's going to $100K are the ones saying this is a digital currency that should be spent. Well, I sure ain't about to spend $100K to buy 2 MacBook Pros.
- AgentME 9y ago
  Even if you think Bitcoin is going to $highNumber, then using Bitcoin to make purchases isn't any more painful than using dollars: the dollars could have been spent on purchasing more bitcoin instead of the other purchase.
  - wahern 9y ago
    https://en.wikipedia.org/wiki/Endowment_effect https://en.wikipedia.org/wiki/Endowment_effect
- elif 9y ago
  Those two positions are obviously congruent. In the scenario where you believe bitcoin will be worth $100,000 and you have $7,000 or 2BTC, you decide to buy a computer for $3,500. If the remainder of your value is in dollars, you will have $3,500 in value. If the remainder of your value is in bitcoin, you will have $100,000. The depreciating asset you've invested in here is the macbook, not bitcoins. I have a 1.4 bitcoin T-shirt. I don't regret it one bit.
  - dmichulke 9y ago
    > I have a 1.4 bitcoin T-shirt. Is that you? http://i.dailymail.co.uk/i/pix/2013/01/04/article-2257209-16C051F1000005DC-920_634x822.jpg http://i.dailymail.co.uk/i/pix/2013/01/04/article-2257209-16...
- baddox 9y ago
  Those two groups may have overlap, but they’re not identical groups.
- rblatz 9y ago
  And that’s why the fed ensures we have a mildly inflationary currency. If it deflated spending would drop, cutting the velocity of money, and cutting out economic growth.
just_one_time_ 9y ago
I use it almost everyday to buy stuff. Today I bought a Sonos speaker, some baby food and a chair. Also I hoard it. Why did you think that?
ballenf 9y ago
So, it's gold? I don't know if I've ever seen someone buy a Starbucks with a Kruggerand. Gold is hoarded and traded much like bitcoin, from what I've seen.
- jdietrich 9y ago
  The device you're using to read this comment couldn't function without gold. It's an incredibly useful element. Investment and speculation might have inflated the value of gold, but industrial demand sets a price floor.
  - stinkypete 9y ago
    Si is also incredibly useful but requires industrial processing to turn into something useful from an industrial standpoint. Au is indeed useful, but not so much as nearly indicated by its current pricing. There's a _long_ history of human predilection for gold-as-a-magical-substance versus gold-as-an-industrially-useful-element.
- dredmorbius 9y ago
  Gold has rarely been used in retail transactions. Generally that's been limited to silver, copper, bronze, or even iron coins, or other materials. Not exclusively, but for the large part. If you look at historical English prices, prior to the 19th century, the penny was 1/240 a pound, and the farthing ("four-thing" -- one fourth a penny) was 1/960 a pound. Call it 1/1000th. A labourer's wage might be 20 pound/yr. It's more useful to think of the farthing as roughly equivalent, at least in work-time, to a dollar, and 20 pound as $20,000. A pound, then, was a lot of money. And even it was (in English currency) silver. Gold were guineas: 1 pound 10 shilling.
irln 9y ago
A medium of exchange is usually an asset that can be exchanged for any other asset. It's not that bitcoin can't be a medium of exchange, it just isn't one yet.
pmuk 9y ago
It's not very useful as a medium of exchange right now since it requires 197 KWh of energy to confirm a single transaction! https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption
mcguire 9y ago
Is it true that the number of Bitcoins in existence is limited?

virmundi 9y ago

I wonder if part of this is due to dust. My understanding is that at these prices you don't really want to split a coin for a $.25. As a result it's poor for micro payments and daily macro payments alike.

nostrademons 9y ago
Dogecoin was created explicitly to have a low value suitable for micropayments & tipping. It hasn't really worked out much better for Dogecoin...interest in it seems to have waned a long time ago. My bet is that it hasn't caught on as a medium of exchange simply because that's not really a major pain point. Cryptocurrency's competition as payment isn't $USD; it's Visa, Mastercard, Discover, Stripe, Square, and other payment processors. People bitch about these companies, but they usually bitch about them from a concentration-of-power-and-fees standpoint (which Bitcoin doesn't actually solve, once you consider the costs of the commercial Bitcoin exchanges), not a convenience one. When it comes to convenience, whipping out a wallet-sized piece of plastic or your cell phone is a lot better than waiting 12 minutes for a transaction to settle on the blockchain.
- nnfy 9y ago
  I think dogecoin failed to go anywhere at least partly because it was a literal memecoin. Certainly made it hard for me to take it seriously as a semi-layman at the time.
  - stanleydrew 9y ago
    Interestingly that would seem to further the author's point a bit. You didn't think dogecoin was legitimate because it was named after a meme. So that made you less likely to trust the code/governance?
    - zdkl 9y ago
      > […] it was named after a meme. > So that made you less likely to trust the code/governance? Well... yeah! What's your point? That projects deserve trust based on their branding? I'm not convinced until there's peer approval, especially not if it's piggybacking on something "trendy". I do agree though it's a shame it got subverted from the ultra low value p2p tipping platform it was becoming. Feels like it's just litecoin left as credible alternative in that area.
- wavefunction 9y ago
  Dogecoin is for fun. Much block-chain. Wow. It died off because _some people_ tried to turn it into a real thing for micro transactions, etc.
pmuk 9y ago
And there are huge energy costs in performing a transaction... 197 KWh @ $0.10 per KWh = nearly $20 of electricity for 1 transaction.

lojack 9y ago

Sure, some people treat it as an investment that can be hoarded, but that doesn't change the fact that it can be exchanged. Your narrow definition of medium of exchange sort of excludes any deflationary currency that someone may hold on to as an investment. It could even be expanded to include inflationary currency in a country where hyperinflation is occurring. People will hold on to USD or some other currency as an investment because it'll be worth significantly more tomorrow than whatever currency the supermarket down the street accepts.

Finnucane 9y ago
By that logic any tradable thing can be a 'medium of exchange'. Sure, people will hold a stable currency when their own is sinking, but deliberately designing a currency for deflation is stupid.
- zdkl 9y ago
  Well in a sense it's quite freudian: you gotta feel the (unrealised value of the) bitcoin leaving you for it to be universally recognised as "having value"
- lojack 9y ago
  I understand your point, but I'm not sure I agree that being deflationary or being primarily used as an investment precludes it from being used as a medium of exchange. I do think there are some aspects of bitcoin that limit its use as a medium of exchange (transaction times, current lack of stability), but I don't think its the deflationary part.
2muchcoffeeman 9y ago
It could even be expanded to include inflationary currency in a country where hyperinflation is occurring. People will hold on to USD or some other currency as an investment because it'll be worth significantly more tomorrow than whatever currency the supermarket down the street accepts. This doesn't really feel the same. You might use USD to store value because you know that it's value isn't going to fluctuate like crazy from month to month or year to year. So if you can afford to feed yourself today, you can still feed yourself tomorrow. You're still spending your money. No one I know with Bitcoin spends it, with the exception of a novelty purchase of beer. And why would you, in 4 years the value of bitcoin increased over 10 fold. You'd be stupid to ever spend it while this trend continues.

aviv 9y ago

Right, the same people telling you it's going to $100K are the ones saying this is a digital currency that should be spent. Well, I sure ain't about to spend $100K to buy 2 MacBook Pros.

AgentME 9y ago
Even if you think Bitcoin is going to $highNumber, then using Bitcoin to make purchases isn't any more painful than using dollars: the dollars could have been spent on purchasing more bitcoin instead of the other purchase.
- wahern 9y ago
  https://en.wikipedia.org/wiki/Endowment_effect https://en.wikipedia.org/wiki/Endowment_effect
elif 9y ago
Those two positions are obviously congruent. In the scenario where you believe bitcoin will be worth $100,000 and you have $7,000 or 2BTC, you decide to buy a computer for $3,500. If the remainder of your value is in dollars, you will have $3,500 in value. If the remainder of your value is in bitcoin, you will have $100,000. The depreciating asset you've invested in here is the macbook, not bitcoins. I have a 1.4 bitcoin T-shirt. I don't regret it one bit.
- dmichulke 9y ago
  > I have a 1.4 bitcoin T-shirt. Is that you? http://i.dailymail.co.uk/i/pix/2013/01/04/article-2257209-16C051F1000005DC-920_634x822.jpg http://i.dailymail.co.uk/i/pix/2013/01/04/article-2257209-16...
baddox 9y ago
Those two groups may have overlap, but they’re not identical groups.
rblatz 9y ago
And that’s why the fed ensures we have a mildly inflationary currency. If it deflated spending would drop, cutting the velocity of money, and cutting out economic growth.

just_one_time_ 9y ago

I use it almost everyday to buy stuff. Today I bought a Sonos speaker, some baby food and a chair. Also I hoard it. Why did you think that?

ballenf 9y ago

So, it's gold? I don't know if I've ever seen someone buy a Starbucks with a Kruggerand. Gold is hoarded and traded much like bitcoin, from what I've seen.

jdietrich 9y ago
The device you're using to read this comment couldn't function without gold. It's an incredibly useful element. Investment and speculation might have inflated the value of gold, but industrial demand sets a price floor.
- stinkypete 9y ago
  Si is also incredibly useful but requires industrial processing to turn into something useful from an industrial standpoint. Au is indeed useful, but not so much as nearly indicated by its current pricing. There's a _long_ history of human predilection for gold-as-a-magical-substance versus gold-as-an-industrially-useful-element.
dredmorbius 9y ago
Gold has rarely been used in retail transactions. Generally that's been limited to silver, copper, bronze, or even iron coins, or other materials. Not exclusively, but for the large part. If you look at historical English prices, prior to the 19th century, the penny was 1/240 a pound, and the farthing ("four-thing" -- one fourth a penny) was 1/960 a pound. Call it 1/1000th. A labourer's wage might be 20 pound/yr. It's more useful to think of the farthing as roughly equivalent, at least in work-time, to a dollar, and 20 pound as $20,000. A pound, then, was a lot of money. And even it was (in English currency) silver. Gold were guineas: 1 pound 10 shilling.

irln 9y ago

A medium of exchange is usually an asset that can be exchanged for any other asset. It's not that bitcoin can't be a medium of exchange, it just isn't one yet.

pmuk 9y ago

It's not very useful as a medium of exchange right now since it requires 197 KWh of energy to confirm a single transaction! https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption

mcguire 9y ago

Is it true that the number of Bitcoins in existence is limited?