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Thanks for posting here and on Quora. As someone with an economics background, it's nice to hear a sane explanation based on fundamental theory. I'm just surpr

Thanks for posting here and on Quora. As someone with an economics background, it's nice to hear a sane explanation based on fundamental theory. I'm just surprised people aren't considering Bitcoins from a supply-demand standpoint. Why purchase Bitcoins in the long run unless you're laundering money or hiding from the government?

thorax 15y ago
> Why purchase Bitcoins in the long run unless you're laundering money or hiding from the government? That's kind of odd to say-- couldn't you say the same thing about doing cash-only transactions? There's also the hope that you can "hide" from corporations/bad-people and make transactions that don't require you to provide information that can be used for identity theft, marketing, etc. Just typing in a unique 1-time deposit number has a lot of appeal for stream-lining transactions and making people feel more comfortable performing electronic purchases. I'd love people to get addicted to that kind of high-privacy transaction and push more innovation for traditional currencies/startups to help with that. In the modern world, every purchase of anything not bought at a yard sale is a privacy and identity concern-- I'm eager to see alternatives that find new ways to avoid that.
- achompas 15y ago
  That's kind of odd to say-- couldn't you say the same thing about doing cash-only transactions? Yeah, I added that modifier after thinking some more. People are really interested in bitcoins as a "private" currency, and cash would accomplish the same thing. Large cash transactions raise flags, though. Still, bitcoins are a bad alternative to popular currency for a number of reasons Adam mentions. An e-currency without a finite supply would be an interesting exercise.
  - hazlitt 15y ago
    Money supply need not be infinite. Prices will adjust as demand for the unit arises. Essentially, you are doing the same as "creating" more units, without eroding peoples real savings. The entire system could thrive on one bitcoin.
    - achompas 15y ago
      Money supply needs to be a flow, instead of a stock, so that it can adapt efficiently to supply and demand and change with population and economic output. The entire system could thrive on one bitcoin. No, it couldn't. One bitcoin could not sustain a currency market, and a one-bitcoin market would value that bitcoin at highly variable prices.
      - derefr 15y ago
        But you can have half of a bitcoin. In fact, they're divisible to 8 decimal places—so, in reality, when you have "1 bitcoin", you actually have ~10 million atomic units of tradable currency. It just comes "pre-redenominated," because it currently lacks value, and may be redenominated downward (making the unit "bitcents" or somesuch) as the exchange rate increases.
      - WReckus 15y ago
        1 Bitcoin can be divided into .00000001-sized pieces and traded separately. You couldn't run out if you wanted.
nkassis 15y ago
I second the comment about the explanation. It was the best explanation of Bitcoins I've seen (even if it's trying to show that's it's flawed.)
rudiger 15y ago
To answer your question, it would be nice to be able to buy and sell things online without a central authority like PayPal.
topynate 15y ago
Tyler Cowen argued this quite lucidly at http://marginalrevolution.com/marginalrevolution/2011/04/jerry-brito-defends-bitcoin.html http://marginalrevolution.com/marginalrevolution/2011/04/jer... .
DennisP 15y ago
Some people think wikileaks is a good idea. Paypal and other processors have blocked donations to wikileaks, even though it's legal to donate to them. Some people like to play poker online. The same entities have been prohibited by the government from processing transfers to poker sites. From a startup perspective, the "terms of service" for Paypal, Amazon payments, and others are full of applications you can't use them for, even though many of them are legal. On top of that, Paypal is notorious for locking accounts if they decide they don't like you. Currency used to be neutral. Now it's not. So people have invented a new one that is.
goebbels 15y ago
What economic theory accounts for a currency that can be divided infinitely?
adrianmsmith 15y ago
It's extremely difficult and expensive to transfer money from one country to another. I live in Europe and you can transfer EUR money from one country to another for free; that's progress. But from the UK (in the EU but doesn't use the EUR currency) my bank only allows me to transfer £5k (US$8k) per day to other European countries, and each time I do it they charge me £25 for the privilege (US$40). I had a tax bill recently in Austria (where I live) due to assets held in the UK, I owed £20k. (I have no problem with having to pay the tax.) That took 4 long phone calls over consecutive (business) days to transfer that money, and cost me £100 in total. Imagine if my assets in the UK, and thus my tax owed in Austria, had been 10x as large, or 100x as large. I have no interest in dealing drugs or hiding income from the taxman. But using banks make things incredibly difficult, and charge huge fees for their trouble. It's time banks got "disrupted".
- daemin 15y ago
  I would think that those limits would be mandated by government and only implemented by the banks. There are various limits about trasnferring in excess of $10,000 of cash across national boundaries, and also to/from cash.
  - SatvikBeri 15y ago
    AFAIK the limits are imposed by government, but the fees are totally up to banks.
richardw 15y ago
Frankly, because other currencies are devaluing so Bitcoin is acting as a store of wealth. Over the next 50 years, USD isn't going up unless there is a short-term panic. I bought $30 of Bitcoin just a month or so ago. Obviously they've done very well so far and I'll just leave them indefinitely to see where it goes. Yup, that increases deflation. Nice, for a change!

thorax 15y ago

> Why purchase Bitcoins in the long run unless you're laundering money or hiding from the government? That's kind of odd to say-- couldn't you say the same thing about doing cash-only transactions? There's also the hope that you can "hide" from corporations/bad-people and make transactions that don't require you to provide information that can be used for identity theft, marketing, etc. Just typing in a unique 1-time deposit number has a lot of appeal for stream-lining transactions and making people feel more comfortable performing electronic purchases. I'd love people to get addicted to that kind of high-privacy transaction and push more innovation for traditional currencies/startups to help with that. In the modern world, every purchase of anything not bought at a yard sale is a privacy and identity concern-- I'm eager to see alternatives that find new ways to avoid that.

achompas 15y ago
That's kind of odd to say-- couldn't you say the same thing about doing cash-only transactions? Yeah, I added that modifier after thinking some more. People are really interested in bitcoins as a "private" currency, and cash would accomplish the same thing. Large cash transactions raise flags, though. Still, bitcoins are a bad alternative to popular currency for a number of reasons Adam mentions. An e-currency without a finite supply would be an interesting exercise.
- hazlitt 15y ago
  Money supply need not be infinite. Prices will adjust as demand for the unit arises. Essentially, you are doing the same as "creating" more units, without eroding peoples real savings. The entire system could thrive on one bitcoin.
  - achompas 15y ago
    Money supply needs to be a flow, instead of a stock, so that it can adapt efficiently to supply and demand and change with population and economic output. The entire system could thrive on one bitcoin. No, it couldn't. One bitcoin could not sustain a currency market, and a one-bitcoin market would value that bitcoin at highly variable prices.
    - derefr 15y ago
      But you can have half of a bitcoin. In fact, they're divisible to 8 decimal places—so, in reality, when you have "1 bitcoin", you actually have ~10 million atomic units of tradable currency. It just comes "pre-redenominated," because it currently lacks value, and may be redenominated downward (making the unit "bitcents" or somesuch) as the exchange rate increases.
    - WReckus 15y ago
      1 Bitcoin can be divided into .00000001-sized pieces and traded separately. You couldn't run out if you wanted.

nkassis 15y ago

I second the comment about the explanation. It was the best explanation of Bitcoins I've seen (even if it's trying to show that's it's flawed.)

rudiger 15y ago

To answer your question, it would be nice to be able to buy and sell things online without a central authority like PayPal.

topynate 15y ago

Tyler Cowen argued this quite lucidly at http://marginalrevolution.com/marginalrevolution/2011/04/jerry-brito-defends-bitcoin.html http://marginalrevolution.com/marginalrevolution/2011/04/jer... .

DennisP 15y ago

Some people think wikileaks is a good idea. Paypal and other processors have blocked donations to wikileaks, even though it's legal to donate to them. Some people like to play poker online. The same entities have been prohibited by the government from processing transfers to poker sites. From a startup perspective, the "terms of service" for Paypal, Amazon payments, and others are full of applications you can't use them for, even though many of them are legal. On top of that, Paypal is notorious for locking accounts if they decide they don't like you. Currency used to be neutral. Now it's not. So people have invented a new one that is.

goebbels 15y ago

What economic theory accounts for a currency that can be divided infinitely?

adrianmsmith 15y ago

It's extremely difficult and expensive to transfer money from one country to another. I live in Europe and you can transfer EUR money from one country to another for free; that's progress. But from the UK (in the EU but doesn't use the EUR currency) my bank only allows me to transfer £5k (US$8k) per day to other European countries, and each time I do it they charge me £25 for the privilege (US$40). I had a tax bill recently in Austria (where I live) due to assets held in the UK, I owed £20k. (I have no problem with having to pay the tax.) That took 4 long phone calls over consecutive (business) days to transfer that money, and cost me £100 in total. Imagine if my assets in the UK, and thus my tax owed in Austria, had been 10x as large, or 100x as large. I have no interest in dealing drugs or hiding income from the taxman. But using banks make things incredibly difficult, and charge huge fees for their trouble. It's time banks got "disrupted".

daemin 15y ago
I would think that those limits would be mandated by government and only implemented by the banks. There are various limits about trasnferring in excess of $10,000 of cash across national boundaries, and also to/from cash.
- SatvikBeri 15y ago
  AFAIK the limits are imposed by government, but the fees are totally up to banks.

richardw 15y ago

Frankly, because other currencies are devaluing so Bitcoin is acting as a store of wealth. Over the next 50 years, USD isn't going up unless there is a short-term panic. I bought $30 of Bitcoin just a month or so ago. Obviously they've done very well so far and I'll just leave them indefinitely to see where it goes. Yup, that increases deflation. Nice, for a change!