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Maybe I'm missing the point of bitcoin. I read through the Bitcoin FAQ and it sounds an aweful lot like they're trying to create a system where I can exchange m

Maybe I'm missing the point of bitcoin. I read through the Bitcoin FAQ and it sounds an aweful lot like they're trying to create a system where I can exchange my dollars for bitcoins and use them in transactions. Am I wrong to be confused? Am I supposed to buy in to bitcoins with confidence, given the wild swings the currency is experiencing? I'm not trying to take some random dig at bitcoin. My statement about their volatility is based in fact. I want to be educated on the matter. I find the idea fascinating, but it seems that providing stability should be a goal near the top of the list. Am I wrong about that?

ScottBurson 15y ago
Providing stability? I don't know how you can begin to do that for an asset whose fundamental value no one knows, not even remotely. My recommendation: set up an order on Mt. Gox for some amount you'd be willing to pay, like $12 or $13, and leave it there. The way things are going, odds are the price will come back down to that range sooner or later. Of course, I could be wrong. On the other hand, it could drop even further than that; the $12 or $13 number is just based on the recent history.
- hugh3 15y ago
  I don't know how you can begin to do that for an asset whose fundamental value no one knows, not even remotely. Actually the fundamental value is well known. It's zero.
  - weavejester 15y ago
    Only if you see no value to being able to transfer wealth electronically without the need for a centralized broker.
    - hugh3 15y ago
      We're not talking about the value of the idea, we're talking about the value of an individual bitcoin: http://en.wikipedia.org/wiki/Intrinsic_value_%28finance%29 http://en.wikipedia.org/wiki/Intrinsic_value_%28finance%29 which is zero -- an owned bitcoin can't produce any income, nor keep you warm at night, nor feed you nor be hammered into jewellery.
      - weavejester 15y ago
        I have a hard time believing the intrinsic value of anything is zero. A bitcoin is list of signed transactions that is encoded within a chain of blocks verified by a proof of work. A list of transactions is only considered a valid bitcoin if it is accepted by the largest existing block chain. So a bitcoin must follow certain rules if it is to be considered to be valid, and this means it has certain intrinsic properties. For instance: if you have the private key that signed the last transaction for the bitcoin, you can extend the bitcoin with a new transaction, and that bitcoin will still be considered valid. So I'd argue that being able to cryptographically transfer a bitcoin is an intrinsic property of the bitcoin, and therefore something that gives a bitcoin intrinsic value (assuming you think this property is useful).
        hugh3 15y ago
        I have a hard time believing the intrinsic value of anything is zero. Well shit man, I have some random bytes I'd like to sell you. How much are you willing to pay for 'em? So I'd argue that being able to cryptographically transfer a bitcoin is an intrinsic property of the bitcoin, and therefore something that gives a bitcoin intrinsic value (assuming you think this property is useful). Like I've said before (and nobody has yet taken me up on this offer), I'm selling Bitcoin Prime. This has the following properties: 1. Every string of bits that is a bitcoin is also a bitcoin prime 2. All bitcoins prime currently in existence are owned by me. Does my huge stock of bitcoins prime have any intrinsic value? I think not. But if anyone disagrees them I'm more than willing to part with my entire collection for a hundred US dollars. (I reserve the right to invent bitcoin double-prime as soon as our transaction is completed...) My point: even if a bitcoin is a string with some unique properties you don't actually own that string of bits in any useful sense, you only own it by convention with other bitcoin users. Bitcoin is just one of an infinite number of possible equivalent systems, and just happens to be the only one in which there's any real money floating around at the moment.
        weavejester 15y ago
        You may have a point with the random bytes. That is as close to worthless as makes no difference. But regarding your "Bitcoin Prime": your system isn't backed by proof of work. My point is that bitcoins are not just a set of random bytes, or even a chain of signed transactions. They are also secured by a proof of work chain, and without this they are not bitcoins, by definition. So even though you can come up with a set of bitcoin primes, one for each bitcoin, there's no proof of work backing your system. You can't reuse the proof of work that backs bitcoins without knowing all of the private keys, so you'd have to start from scratch.
wmf 15y ago
I think the FAQ (and all the other "Bitcoin is a better Paypal" stuff) was written before the bubble started. At this point speculation has pretty much destroyed most of the interest in using Bitcoin as a payment system.
- bradleyland 15y ago
  Then what does it become? That's an even bigger risk than volatility, isn't it? That the whole thing will just devolve to a giant market gambling pool?
jonnathanson 15y ago
You're not wrong to be confused. How anyone could transact for goods and services in such an extremely volatile currency is a mystery to me (assuming it remains as volatile as it has been). Especially on the supply side. Let's say I'm running a coffee shop that takes orders in USD and in BTC. Let's say I want to sell a cup of coffee for $3 or 1 BTC. Or is it $3 or .0001 BTC? Or is it $3 or 1000 BTC? How do I, as a simple seller of goods and services in exchange for BTC, know how to price my items when they can be acquired via other currencies for relatively fixed prices, and huge arbitrage opportunities constantly exist?
- wmf 15y ago
  A suggested "solution" is to post prices in USD but perform the transaction in BTC (based on the latest exchange rate) under the hood. This shifts the problem to the buyer, who doesn't know how much will be taken out of their wallet.
  - bergie 15y ago
    They had that system in Russia when the rouble was fluctuating more. All prices were posted in "comparative units", which were basically USD. You'd then pay using the day's exchange rate.
    - thebooktocome 15y ago
      And in Brazil.
- weavejester 15y ago
  You could price the cost in USD, and use bitcoins only as a means of transferring wealth. People would pay an amount of bitcoins calculated dynamically from the market rate, and then you'd convert the bitcoins you receive into dollars as soon as the transaction was confirmed. I suspect that we'll begin to see web services that handle this sort of conversion automatically. Give them a Dwolla account, and they'll provide you with a Bitcoin address that will automatically dump the equivalent market rate of dollars to your Dwolla account.

ScottBurson 15y ago

Providing stability? I don't know how you can begin to do that for an asset whose fundamental value no one knows, not even remotely. My recommendation: set up an order on Mt. Gox for some amount you'd be willing to pay, like $12 or $13, and leave it there. The way things are going, odds are the price will come back down to that range sooner or later. Of course, I could be wrong. On the other hand, it could drop even further than that; the $12 or $13 number is just based on the recent history.

hugh3 15y ago
I don't know how you can begin to do that for an asset whose fundamental value no one knows, not even remotely. Actually the fundamental value is well known. It's zero.
- weavejester 15y ago
  Only if you see no value to being able to transfer wealth electronically without the need for a centralized broker.
  - hugh3 15y ago
    We're not talking about the value of the idea, we're talking about the value of an individual bitcoin: http://en.wikipedia.org/wiki/Intrinsic_value_%28finance%29 http://en.wikipedia.org/wiki/Intrinsic_value_%28finance%29 which is zero -- an owned bitcoin can't produce any income, nor keep you warm at night, nor feed you nor be hammered into jewellery.
    - weavejester 15y ago
      I have a hard time believing the intrinsic value of anything is zero. A bitcoin is list of signed transactions that is encoded within a chain of blocks verified by a proof of work. A list of transactions is only considered a valid bitcoin if it is accepted by the largest existing block chain. So a bitcoin must follow certain rules if it is to be considered to be valid, and this means it has certain intrinsic properties. For instance: if you have the private key that signed the last transaction for the bitcoin, you can extend the bitcoin with a new transaction, and that bitcoin will still be considered valid. So I'd argue that being able to cryptographically transfer a bitcoin is an intrinsic property of the bitcoin, and therefore something that gives a bitcoin intrinsic value (assuming you think this property is useful).
      - hugh3 15y ago
        I have a hard time believing the intrinsic value of anything is zero. Well shit man, I have some random bytes I'd like to sell you. How much are you willing to pay for 'em? So I'd argue that being able to cryptographically transfer a bitcoin is an intrinsic property of the bitcoin, and therefore something that gives a bitcoin intrinsic value (assuming you think this property is useful). Like I've said before (and nobody has yet taken me up on this offer), I'm selling Bitcoin Prime. This has the following properties: 1. Every string of bits that is a bitcoin is also a bitcoin prime 2. All bitcoins prime currently in existence are owned by me. Does my huge stock of bitcoins prime have any intrinsic value? I think not. But if anyone disagrees them I'm more than willing to part with my entire collection for a hundred US dollars. (I reserve the right to invent bitcoin double-prime as soon as our transaction is completed...) My point: even if a bitcoin is a string with some unique properties you don't actually own that string of bits in any useful sense, you only own it by convention with other bitcoin users. Bitcoin is just one of an infinite number of possible equivalent systems, and just happens to be the only one in which there's any real money floating around at the moment.
        weavejester 15y ago
        You may have a point with the random bytes. That is as close to worthless as makes no difference. But regarding your "Bitcoin Prime": your system isn't backed by proof of work. My point is that bitcoins are not just a set of random bytes, or even a chain of signed transactions. They are also secured by a proof of work chain, and without this they are not bitcoins, by definition. So even though you can come up with a set of bitcoin primes, one for each bitcoin, there's no proof of work backing your system. You can't reuse the proof of work that backs bitcoins without knowing all of the private keys, so you'd have to start from scratch.

wmf 15y ago

I think the FAQ (and all the other "Bitcoin is a better Paypal" stuff) was written before the bubble started. At this point speculation has pretty much destroyed most of the interest in using Bitcoin as a payment system.

bradleyland 15y ago
Then what does it become? That's an even bigger risk than volatility, isn't it? That the whole thing will just devolve to a giant market gambling pool?

jonnathanson 15y ago

You're not wrong to be confused. How anyone could transact for goods and services in such an extremely volatile currency is a mystery to me (assuming it remains as volatile as it has been). Especially on the supply side. Let's say I'm running a coffee shop that takes orders in USD and in BTC. Let's say I want to sell a cup of coffee for $3 or 1 BTC. Or is it $3 or .0001 BTC? Or is it $3 or 1000 BTC? How do I, as a simple seller of goods and services in exchange for BTC, know how to price my items when they can be acquired via other currencies for relatively fixed prices, and huge arbitrage opportunities constantly exist?

wmf 15y ago
A suggested "solution" is to post prices in USD but perform the transaction in BTC (based on the latest exchange rate) under the hood. This shifts the problem to the buyer, who doesn't know how much will be taken out of their wallet.
- bergie 15y ago
  They had that system in Russia when the rouble was fluctuating more. All prices were posted in "comparative units", which were basically USD. You'd then pay using the day's exchange rate.
  - thebooktocome 15y ago
    And in Brazil.
weavejester 15y ago
You could price the cost in USD, and use bitcoins only as a means of transferring wealth. People would pay an amount of bitcoins calculated dynamically from the market rate, and then you'd convert the bitcoins you receive into dollars as soon as the transaction was confirmed. I suspect that we'll begin to see web services that handle this sort of conversion automatically. Give them a Dwolla account, and they'll provide you with a Bitcoin address that will automatically dump the equivalent market rate of dollars to your Dwolla account.