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The Bitcoin Bubble
- joeycfan 16y agoNo bubble. While it will not take over for the dollar, it is proof of concept that it can be done. Meanwhile, if anyone wants to offload some of those worthless BTC, I'll gladly take them off your hands right here. 13r8iKWmsMzfzwjzJ8ezRJP2YRCWfSJ3x8
- kiba 16y agoPeople in the bitcoin community periodically worries about bubbles. The only thing that we can do is figure out cool stuff that you can only do with bitcoin. Other than that, people are encouraged to sell and buy things for bitcoin. A lot of cool stuff is in the pipeline though: 1. A decentralized DNS registration system utilizing bitcoin technology. http://www.bitcoin.org/smf/index.php?topic=6017.0 http://www.bitcoin.org/smf/index.php?topic=6017.0 There's even a 3500 BTC bounty for it: http://www.bitcoin.org/smf/index.php?topic=2072.0 http://www.bitcoin.org/smf/index.php?topic=2072.0 2. GBSE - Global Bitcoin Stock Exchange: Utilize public key cryptography and other tech to create a bitcoin stock market. http://www.bitcoin.org/smf/index.php?topic=5947.0 http://www.bitcoin.org/smf/index.php?topic=5947.0 3. witcoin - a micropayment social media site. http://witcoin.com http://witcoin.com The bitcoin community has thought more about the weakness and strength of the currency, failure modes and solutions to problems more than any critics about bitcoin in the world. It's just that very few bothers writing and publish these knowledge for distribution to the wider public.
- kia 16y agoDoes community have expert economists? I mean the traditional currency markets have been around for quite a while and a lot of really smart people participated in their development. Bitcoin has a small and immature community and there are a lot of things which require certain expertise and experience to judge about correctly.
- kiba 16y agoDoes community have expert economists? I mean the traditional currency markets have been around for quite a while and a lot of really smart people participated in their development. Bitcoin has a small and immature community and there are a lot of things which require certain expertise and experience to judge about correctly. It really depends on what school of economics you followed. If you follow keynesian economic rather than the Austrian, you will have quite different conclusion about the possible failure mode of bitcoin. Is deflation bad for the bitcoin economy? Most bitcoiners will say no because they don't buy the idea of deflationary spiral and Keynesian economics plus their experience within the bitcoin economy informs their opinion.
- pkulak 16y agoBitcoin doesn't have to replace the dollar, it just has to replace Paypal and some credit card business.
- mbreese 16y agoBut Paypal and credit cards are based on the USD, or whatever the local currency is. So, in effect, it does have to beat the dollar. Bitcoin must be advantageous enough so that people will want to use that over the standard local currency (e.g. USD). Because, you're assuming that you'd have to convert USD to Bitcoin and then spend the Bitcoins. If you received Bitcoins, you'd need to then convert them back out as dollars. When you do a credit card transaction, you don't convert the money to a different currency. With Paypal, you have the option to receive money and then spend it without adding funds or incurring transaction fees, but how many people really do that? But, if the system is big enough, you'd be able to limit the USD <-> Bitcoin conversions and transact more of your business in Bitcoins. However, in order for that to happen, it has a lot of currency inertia to overcome.
- pkulak 16y agoIf Amazon took bitcoin, and I could use it to pay people on Craigslist, and maybe some other little things like that, I would probably just keep a bitcoin account around with a useable balance. If it got low I'd fill it with USD, and if I needed some funds out of it I'd take some USD out. But I don't think I'd need to do a USD conversion for every single little transaction. Think about if the NYT decided to charge a half a penny to read an article? There's no way for them to collect that right now (it's too small), but bitcoin would work for that, and I sure wouldn't be converting half a cent USD every time I read an article.
- omouse 16y agoThe article assumes we want to pay taxes and that a significant portion of our tax dollars are spent wisely thus making taxation an advantage of the dollar. Convincing Americans to switch to a currency other than the dollar is roughly as futile as convincing the Internet to switch to a protocol other than TCP/IP, and for the same reasons. Meh, you don't have to convince Americans, just convince other people. Other countries are already working around the US dollar. Wasn't there a recent deal announced between Russia, China, Brazil and India for them to accept their own currencies as an alternative to US dollars for debts, loans, etc.?
- rottendevice 16y agoThe US Dollar can be used to buy anything. Bitcoin can be used on like, a few dozen websites that support it. Why the heck would you not use the dollar?
- weavejester 16y agoThere are far more restrictions on dollars if you want to transfer them electronically, because ultimately you need to route them through large financial institutions.
- aredington 16y agoThe article neglects that people have to pay income taxes on however many dollars of income you make. If you hypothetically made 100% of your income in bitcoins, and conducted all your financial transactions in bitcoins, then you would have 0 tax liability and wouldn't need dollars to pay taxes.
- gyardley 16y agoIt doesn't matter what currency you make money in - at least in the United States, the government still wants its share.
- jessriedel 16y agoThis is of course wrong. Taxes are based on the fair market value of your compensation, whatever the type, but must be paid in dollars. If your company buys you a house, you still pay taxes on it.
- anigbrowl 16y agoYou pay income taxes on your income, not on the medium of exchange. Why do you think that if merchants recognize BitCoin as currency the IRS won't? If evading taxes were that simple you could just demand to be paid in gold dust or Swiss francs, and everyone in the US would work for foreign companies as a first preference. As it is the IRS is abundantly familiar with substitution schemes, as you can find out if you arrange to have yourself paid entirely in air miles or grocery coupons. Do you want to save money on taxes? Then stop working for other people, start your own company or speculate on the markets, and take up philanthropy. Capital gains tax is a lot lower than income tax and charitable deductions are very generous.
- follower 16y agoI don't think this would be any different to bartering--governments generally tax that too--so you'd still have a tax liability.
- nkassis 16y agoLike the money I made in a foreign country last year, the gov will ask you to convert it to USD and use that to file you taxes. Income is income in whatever denomination it's in.
- mbesto 16y agoTwo out of the three words of the title contain buzz words (CHECK!) Ok but seriously I don't see the "bubble" here. If this is a "bubble" what are the implications of it popping? The value is set by the people who exchange it and not by a governing authority or even, groups of people. As I understand it, that means the value can never be manipulated. Also, don't bubbles imply that there is some sort of governing body that either decreases or increases risk of such an asset? For example in the housing and tech bubble, this would largely be the SEC (among many others). People were wildly spending and loaning money because risk was largely reduced -- a combination of guaranteed government bailouts and "everyone else is doing it!". How is any risk reduced using Bitcoin? If anything isn't Bitcoin a way to prevent bubbles? I see it as real value assessment set democratically by people using the currency. I don't see Bitcoin itself as "irrational exuberance" at all, in fact quite the opposite. It's attempting to solve a real world problem. Indeed the referring article might suggest that the analysts covering Bitcoin are acting irrationally by making claims like "government take heed, there's a new currency in town". But just as the words "Bitcoin" and "Bubble" were used to grab attention to this article, the analysts covering Bitcoin also (here- Jerry Brito) will make irrational and largely speculative claims to bring viewership.
- stonemetal 16y agoThere were bubbles long before government got involved in the market, in fact such bubbles are why the government is involved in the market now. The primary problem with bitcoins as it stands now is that there is no oversight so any sort of price manipulation possible is legal.
- mbesto 16y agoRe: Bubbles - Such as? Let me be more specific. If I shall quote wikipedia - "It could also be described as a trade in products or assets with inflated values" Doesn't Bitcoin set to eliminate inflated values? With no central authority controlling the amount of currency available or loaned at certain rates then valuation becomes absolute, no? Re: Manipulation - I'm not sure I understand how the value of the currency can be manipulated. If the value is directly set by the end user then it's impossible to manipulate.
- cubtastic71 16y agoIt’s a very cute classroom project – but to really be accepted means the government will have it’s hands on the flow, revenue and taxes from said bitcoin just as with the dollar bill. So besides this being anything more than a social experiment – its about as smart as buying POGS if people remember those things...
- rottendevice 16y agoHey man, the value of my Beanie Baby collection can only go up.
- kgo 16y agoFWIW, unlike Pogs or Beanie Babies or Cabbage Patch Kids, does have built-in scarcity. If they do become some crazy fad, the manufacturer can't ramp up production which ultimately only servers to devalue all BitCoins. But yeah, for now I'd basically think of them as something like baseball cards or comic books.
- gojomo 16y agoAnyone know the current ratio... (USD price of cloud computing power to generate 1 BTC) / (USD offering bid for 1 BTC) ...?
- prodigal_erik 16y agoAllegedly, using a GPGPU to mine bitcoins is still modestly profitable, though a CPU is probably too slow for its earnings to cover the power to run it.
- URSpider94 16y agoThe author has given some good reasons why Bitcoin won't become the new global currency, but there's a lot of space between global domination and fizzling out of existence. Consider probably the most well-known alternative currency, the Ithaca Hour (http://www.ithacahours.org/ http://www.ithacahours.org/), which has been going strong for decades now, but has no pretenses of expanding beyond its narrow geographic niche.
- ericHosick 16y agoWould it be possible to have the concept of a Bitcoin with backing done by commodities?
- aubergene 16y agono, that wouldn't make any sense
- rjstatic 16y agoAll of the author's arguments are null when you consider that cash registers, phones, your bank, etc. IS a computer so issues of convenience don't really hold up. I don't think it will be that long until my local cooperative bank enables withdrawals from my BitCoin account on my Visa. When you can store your money in an safe and transparent system like BitCoin or a currency controlled by a shadowy Federal Reserve, which would you pick?
- ChrisArchitect 16y agoisn't this whole make-your-own-currency, digital or not, like that Ithaca HOURs thing?