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The only thing Bitcoin poses a threat to is the t-shirt vendors and hosting providers who are accepting it as payment. Until the Bitcoin PR campaign graduates f

by Duff 15y ago

The only thing Bitcoin poses a threat to is the t-shirt vendors and hosting providers who are accepting it as payment. Until the Bitcoin PR campaign graduates from hacker news, it's at best an academic discussion At worst, BitCoin at this point is a scam where people who got involved with it early who are sitting on lots of BitCoin need to keep up a level of interest to cash out BitCoin for coin, as the curious poke around with it.

pemulis 15y ago
The only thing Bitcoin poses a threat to is the t-shirt vendors and hosting providers who are accepting it as payment. This. The volatility that makes bitcoins so attractive to speculators makes them a nightmare for merchants. Bitcoins have - on multiple occasions - dropped or risen by 25%+ in the course of a few minutes. If you accept bitcoins as payment, when should you cash them out? There's a chance that they dramatically rose or dropped in value during the short time it took you to process the transaction. You could peg your price in bitcoins to the amount of USD they're worth at a particular time at the Mt. Gox exchange, but that is even more dangerous. The Mt. Gox exchange has shown itself to be incredibly vulnerable to market manipulation by anyone with more than ten thousand dollars (which is a miniscule amount of money, all things considered). Someone could cause the price of bitcoins to crash for just a few minutes and quickly buy thousands of dollars worth of goods from your store at firesale prices. (Edit: See two posts down for the inverse version of this scam, which I think would be even more effective.) What honest bitcoin speculators don't realize is that until the volatility problems in the exchange are worked out, no big merchants are going to want to accept bitcoins. When the speculative value of bitcoins goes up, the practical value of bitcoins goes down.
- weavejester 15y ago
  The volatility that makes bitcoins so attractive to speculators makes them a nightmare for merchants. Well, not necessarily. You set the cost of your products to a price in dollars multiplied by the current Mt. Gox exchange rate. You could then immediately exchange your Bitcoins for dollars upon receipt of payment. Mt. Gox has an API for getting the current buy rate, and for placing a sell order, so this wouldn't be hard to automate. The only problem with this is that getting dollars out of Mt. Gox involves messing about with Liberty Reserve.
  - deleted 15y ago
    [deleted]
  - jerguismi 15y ago
    This. As a merchant, there is no risk accepting bitcoins - you can automate automatical sell order on mtgox everytime someone makes a purchase. So you can do riskless short-term business with bitcoins currently even if you don't believe in it long-term. In the eurozone getting money out from mtgox is even pretty cheap + fully automated, as are deposits. yay.
  - pemulis 15y ago
    As of a day ago you can get dollars out of Mt. Gox using Dwolla, which has been excellent in my experience and only charges 25 cents per transaction. I withdrew money today and it was in my Dwolla account in less than an hour. As far as using the API goes, there are still a few problems. My understanding from the #bitcoin-otc IRC channel is that there is a 30-second delay on trades on the Mt. Gox exchange. This contributes to weirdly huge sub-minute swings in the exchange rate. Two nights ago, there was a point where the rate went from $5 up to $6 and then back down to $5 within the space of a few seconds. This means that in the time it takes for the merchant to process the transaction, upload the bitcoins to the Mt. Gox exchange, and put in a sell order for the highest buy rate, the price may have changed dramatically. Another problem is that the gap between the highest bid and the lowest asking price is often very large. There is no 'market rate' as of yet. So depending on when the merchant places a sell order, they may be getting a bad rate. And it opens up another way for someone to manipulate the market to rip off the merchant. The highest buy order is usually placed by a bot that takes the highest non-bot buy order and increases it by something like .0001 bitcoins. The bots update their bids every minute or so. Since there are only a small number of traders in the exchange, a single large trader or group of medium-size traders could manipulate the market by placing a series of strategically high buy orders. This will drive up the overall rate, as the bots respond to the change in price by increasing their bids. (Edit: There are also bots programmed to make bids at somewhat less than the highest buy order, which would contribute to the illusion of a legitimate upward movement in the price, as all of those bots chase after the highest price.) Within just a few minutes, they can increase the highest bid by a significant amount (say $1 USD), and then place a bitcoin order for real goods and services with the merchant, knowing that they use an automatic system to exchange bitcoins for USD at the inflated market price. But during the time it takes the merchant to get their bitcoins into Mt. Gox's system and sell them, the price will have dropped back down as the fraudsters stop making inflated buy orders.
- deleted 15y ago
  [deleted]
daoudc 15y ago
At worst, BitCoin at this point is a scam where people who got involved with it early who are sitting on lots of BitCoin need to keep up a level of interest to cash out BitCoin for coin, as the curious poke around with it. Like any currency without intrinsic value (like paper money) it only has value when people believe it has value.
- Duff 15y ago
  Intrinsic value is alot more complex than it seems. Many people attributed the skyrocketing price of silver as testimony to the declining value of the currency, etc. That's partially true, but the events of the last few weeks have established that about 25% of silver's valuation was linked to the ability to buy it on margin. Tighten the margin, and speculative demand vaporizes. The difference between, say BitCoin and the Euro is that there isn't a mature market to establish the value of BitCoin. What there is a small amount of demand and a small number of people who control lots of BitCoin.

by Duff 15y ago

pemulis 15y ago

The only thing Bitcoin poses a threat to is the t-shirt vendors and hosting providers who are accepting it as payment. This. The volatility that makes bitcoins so attractive to speculators makes them a nightmare for merchants. Bitcoins have - on multiple occasions - dropped or risen by 25%+ in the course of a few minutes. If you accept bitcoins as payment, when should you cash them out? There's a chance that they dramatically rose or dropped in value during the short time it took you to process the transaction. You could peg your price in bitcoins to the amount of USD they're worth at a particular time at the Mt. Gox exchange, but that is even more dangerous. The Mt. Gox exchange has shown itself to be incredibly vulnerable to market manipulation by anyone with more than ten thousand dollars (which is a miniscule amount of money, all things considered). Someone could cause the price of bitcoins to crash for just a few minutes and quickly buy thousands of dollars worth of goods from your store at firesale prices. (Edit: See two posts down for the inverse version of this scam, which I think would be even more effective.) What honest bitcoin speculators don't realize is that until the volatility problems in the exchange are worked out, no big merchants are going to want to accept bitcoins. When the speculative value of bitcoins goes up, the practical value of bitcoins goes down.

weavejester 15y ago
The volatility that makes bitcoins so attractive to speculators makes them a nightmare for merchants. Well, not necessarily. You set the cost of your products to a price in dollars multiplied by the current Mt. Gox exchange rate. You could then immediately exchange your Bitcoins for dollars upon receipt of payment. Mt. Gox has an API for getting the current buy rate, and for placing a sell order, so this wouldn't be hard to automate. The only problem with this is that getting dollars out of Mt. Gox involves messing about with Liberty Reserve.
- deleted 15y ago
  [deleted]
- jerguismi 15y ago
  This. As a merchant, there is no risk accepting bitcoins - you can automate automatical sell order on mtgox everytime someone makes a purchase. So you can do riskless short-term business with bitcoins currently even if you don't believe in it long-term. In the eurozone getting money out from mtgox is even pretty cheap + fully automated, as are deposits. yay.
- pemulis 15y ago
  As of a day ago you can get dollars out of Mt. Gox using Dwolla, which has been excellent in my experience and only charges 25 cents per transaction. I withdrew money today and it was in my Dwolla account in less than an hour. As far as using the API goes, there are still a few problems. My understanding from the #bitcoin-otc IRC channel is that there is a 30-second delay on trades on the Mt. Gox exchange. This contributes to weirdly huge sub-minute swings in the exchange rate. Two nights ago, there was a point where the rate went from $5 up to $6 and then back down to $5 within the space of a few seconds. This means that in the time it takes for the merchant to process the transaction, upload the bitcoins to the Mt. Gox exchange, and put in a sell order for the highest buy rate, the price may have changed dramatically. Another problem is that the gap between the highest bid and the lowest asking price is often very large. There is no 'market rate' as of yet. So depending on when the merchant places a sell order, they may be getting a bad rate. And it opens up another way for someone to manipulate the market to rip off the merchant. The highest buy order is usually placed by a bot that takes the highest non-bot buy order and increases it by something like .0001 bitcoins. The bots update their bids every minute or so. Since there are only a small number of traders in the exchange, a single large trader or group of medium-size traders could manipulate the market by placing a series of strategically high buy orders. This will drive up the overall rate, as the bots respond to the change in price by increasing their bids. (Edit: There are also bots programmed to make bids at somewhat less than the highest buy order, which would contribute to the illusion of a legitimate upward movement in the price, as all of those bots chase after the highest price.) Within just a few minutes, they can increase the highest bid by a significant amount (say $1 USD), and then place a bitcoin order for real goods and services with the merchant, knowing that they use an automatic system to exchange bitcoins for USD at the inflated market price. But during the time it takes the merchant to get their bitcoins into Mt. Gox's system and sell them, the price will have dropped back down as the fraudsters stop making inflated buy orders.
deleted 15y ago
[deleted]

daoudc 15y ago

At worst, BitCoin at this point is a scam where people who got involved with it early who are sitting on lots of BitCoin need to keep up a level of interest to cash out BitCoin for coin, as the curious poke around with it. Like any currency without intrinsic value (like paper money) it only has value when people believe it has value.

Duff 15y ago
Intrinsic value is alot more complex than it seems. Many people attributed the skyrocketing price of silver as testimony to the declining value of the currency, etc. That's partially true, but the events of the last few weeks have established that about 25% of silver's valuation was linked to the ability to buy it on margin. Tighten the margin, and speculative demand vaporizes. The difference between, say BitCoin and the Euro is that there isn't a mature market to establish the value of BitCoin. What there is a small amount of demand and a small number of people who control lots of BitCoin.