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The article makes a valid point. Everyone can not possibly sell all of their Bitcoin, and if they tried, it would be defined as a crash. I would be lying if I s

The article makes a valid point. Everyone can not possibly sell all of their Bitcoin, and if they tried, it would be defined as a crash. I would be lying if I said I wasn’t worried about this. But I think it’s wrong to think of Bitcoin as a commodity, or that it needs some killer application. I really think Bitcoin is best thought of as a currency. Fiat currencies work because as a whole, we agree on its value. Usually, it’s backed by a country’s government, which represents the country’s populace. It’s value is inherently determined by the size of their economy. Right now, Bitcoin isn’t backed by a government at all, but it’s still backed by people. Those people obviously feel that Bitcoin is worth what it is today. Of course, that can change, just like any currency. But eventually, Bitcoin will reach a value high enough that more and more people will start accepting it alongside fiat. I mean, go to any border town along the Canada-U.S. border, and they all accept USD and CAD. Clearly, they do that because it’s advantageous to attract customers. That could eventually happen with Bitcoin. Then we’ll stop worrying about Bitcoin’s valuation so much, insofar as we stop worrying about the values of fiat currencies. It matters, but not that much. When that will happen, and at what value, I have no idea. But until then, I’m hodling.

ska 9y ago
Fiat currencies work because as a whole, we agree on its value. This is fuzzy thinking, as it doesn't even make sense to talk about the value of a currency - only it's price. Mixing up concepts like this is what makes a lot of bitcoin and related conversations very muddled. When you start off your thought with a category error, as you have here, it's hard to get anywhere useful.
- koonsolo 9y ago
  You got me confused now. The price of $1 is $1, no? But the value is that I need 1 or 100 to buy a bread.
  - ska 9y ago
    $1usd == $1usd is a tautology, not a price. how much you need to buy a loaf of bread is purchasing power. The price of a $1USD is always relative to another currency, you can't price it in isolation. None of these things are valuations.
dhosek 9y ago
The problem with bitcoin as a currency is that it's inherently a deflationary currency which provides a disincentive to use it as a currency at all. If your BTC will buy more tomorrow than today, why spend now? Thus it turns into a speculative vehicle and not a currency and prone to a big crash.
- jnordwick 9y ago
  That doesn't make sense. Of you used btc for a purchase you can always buy more. The choice isn't "do i spend bitcoin or not", the choice is "do i buy this item or not and what else could i have bought". Why spend a thousand dollars on an item when that thousand dollars could be worth more tomorrow by buying btc with it. Its the same choice. The currency you use is irrelevant.
  - jonex 9y ago
    The difference is in trust. if you don't trust the stability of BTC, you don't want to put all your money into it. It just means that BTC would not make a good currency to replace other currencies, even if people would trust it.
Ajedi32 9y ago
> But eventually, Bitcoin will reach a value high enough that more and more people will start accepting it alongside fiat I think you've got the causality there a bit backwards. The exchange price of bitcoin is mostly irrelevant to a business deciding whether to accept it as a currency or not. What businesses care about is stability, transaction fees, customer convenience, and the difficulty of implementing and maintaining the payment system. They couldn't care less what the _current_ exchange rate is. Whereas on the other hand I suspect Bitcoin speculators care very much about mainstream acceptance of Bitcoin, and therefore wider adoption by businesses is indeed likely to drive the price up.
neilwilson 9y ago
A currency is something somebody somewhere pays enforceable taxes in. That's what helps give a currency wide acceptance - there is always somebody out there that needs it. Bitcoin is worth only its intrinsic value - which is essentially the value of the electricity used to create it.
lawlessone 9y ago
How do you run an economy on a deflationary currency? If someone want's to start a business there is next to no point in me lending them bitcoin in the hopes of getting it back with interest. My bitcoin would increase in value regardless. >Bitcoin will reach a value high enough that more and more people will start accepting it alongside fiat. It has value now yet it isn't being accepted by many places. If amazon adopts it i'll change my view here. For now it's just a commodity to me.
omio 9y ago
I think bitcoin and others are way beyond being a currency or commodity. We should think of it as an entirely new kind of asset that needs new definitions and theories. People are trying to fit this new tech in their old definitions or theories and it's not working.
acjohnson55 9y ago
But when a transaction costs $5, it's tough to buy into that.

ska 9y ago

Fiat currencies work because as a whole, we agree on its value. This is fuzzy thinking, as it doesn't even make sense to talk about the value of a currency - only it's price. Mixing up concepts like this is what makes a lot of bitcoin and related conversations very muddled. When you start off your thought with a category error, as you have here, it's hard to get anywhere useful.

koonsolo 9y ago
You got me confused now. The price of $1 is $1, no? But the value is that I need 1 or 100 to buy a bread.
- ska 9y ago
  $1usd == $1usd is a tautology, not a price. how much you need to buy a loaf of bread is purchasing power. The price of a $1USD is always relative to another currency, you can't price it in isolation. None of these things are valuations.

dhosek 9y ago

The problem with bitcoin as a currency is that it's inherently a deflationary currency which provides a disincentive to use it as a currency at all. If your BTC will buy more tomorrow than today, why spend now? Thus it turns into a speculative vehicle and not a currency and prone to a big crash.

jnordwick 9y ago
That doesn't make sense. Of you used btc for a purchase you can always buy more. The choice isn't "do i spend bitcoin or not", the choice is "do i buy this item or not and what else could i have bought". Why spend a thousand dollars on an item when that thousand dollars could be worth more tomorrow by buying btc with it. Its the same choice. The currency you use is irrelevant.
- jonex 9y ago
  The difference is in trust. if you don't trust the stability of BTC, you don't want to put all your money into it. It just means that BTC would not make a good currency to replace other currencies, even if people would trust it.

Ajedi32 9y ago

> But eventually, Bitcoin will reach a value high enough that more and more people will start accepting it alongside fiat I think you've got the causality there a bit backwards. The exchange price of bitcoin is mostly irrelevant to a business deciding whether to accept it as a currency or not. What businesses care about is stability, transaction fees, customer convenience, and the difficulty of implementing and maintaining the payment system. They couldn't care less what the _current_ exchange rate is. Whereas on the other hand I suspect Bitcoin speculators care very much about mainstream acceptance of Bitcoin, and therefore wider adoption by businesses is indeed likely to drive the price up.

neilwilson 9y ago

A currency is something somebody somewhere pays enforceable taxes in. That's what helps give a currency wide acceptance - there is always somebody out there that needs it. Bitcoin is worth only its intrinsic value - which is essentially the value of the electricity used to create it.

lawlessone 9y ago

How do you run an economy on a deflationary currency? If someone want's to start a business there is next to no point in me lending them bitcoin in the hopes of getting it back with interest. My bitcoin would increase in value regardless. >Bitcoin will reach a value high enough that more and more people will start accepting it alongside fiat. It has value now yet it isn't being accepted by many places. If amazon adopts it i'll change my view here. For now it's just a commodity to me.

omio 9y ago

I think bitcoin and others are way beyond being a currency or commodity. We should think of it as an entirely new kind of asset that needs new definitions and theories. People are trying to fit this new tech in their old definitions or theories and it's not working.

acjohnson55 9y ago

But when a transaction costs $5, it's tough to buy into that.