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I added a Bitcoin purchase option to Scribophile to test the waters. But I'm interested in a Bitcoin economy, not a USD cash alternative--the situation where a

by acabal 14y ago

I added a Bitcoin purchase option to Scribophile to test the waters. But I'm interested in a Bitcoin economy, not a USD cash alternative--the situation where a Bitcoin has its own value, not a value dependent on a different currency. For that reason, I decided to fix the price of an upgrade to 2 BTC, not peg it to the dollar like most other sites do. Unfortunately it seems like that's just not going to work at this point. I set the price at 2 BTC when the exchange rate was $35--like two weeks ago or so. That meant the BTC membership price was about in line with the USD price. But in a few weeks, the value of a Bitcoin has tripled. Since most people using BTC ultimately want to convert it to dollars, this insane instability makes BTC impossible to use for anyone interested in a pure BTC economy. Too bad.

hilko 14y ago
wouldn't it be possible to link the BTC price to the going rate at MtGox, so that it always translates to around $35?
- cadetzero 14y ago
  Correct, and there are merchant services set up to do exactly this.
  - e1ven 14y ago
    I'm curious if you have any experience working with them, and which you'd recommend?
- acabal 14y ago
  Yeah but that's what I don't want to do--because that makes Bitcoin just a USD proxy, not a currency and economy of its own. I'm interested in BTC as its own economy, but unfortunately the price instability and tendency of most users to exchange for USD in the end makes it impossible to explore that.
  - nawitus 14y ago
    Logically speaking it doesn't make bitcoin a USD proxy, a non-currency or "not-a-economy" as you claimed. Fixing the bitcoin price to another currency is a good solution when the value of 1 bitcoin is changing rapidly, as it would take a lot of work to adjust it daily. Besides, you can fix the price to the average of multiple major currencies (like average of euro, American dollar and the British pound).
  - ef4 14y ago
    Every form of currency suffers this problem in the beginning. There are really only two ways around it: easy convertibility into another currency that people already understand, or direct use-value of the currency commodity itself. It's a question of social inertia. It's too early to expect people to think in BTC.
  - MacsHeadroom 14y ago
    A currency can have an economy fully its own and still have prices pegged to another currency. There is a lot of historic precedent for that. You act like its an abhorant practice. Prices will stabalize as the BTC price approaches something more workable on a global scale, like $21,000,000/BTC
  - fnordfnordfnord 14y ago
    Sorry man, IMO it will be years before BTC can function in the way that you want it to. First you need widespread adoption.
baddox 14y ago
Give it time. I happen to think that bitcoin is still stabilizing. Whether it will stabilize at an even higher price than it is now, or "crash" and stabilize at a much lower price, I think it will eventually stabilize.
- betterunix 14y ago
  "I happen to think that bitcoin is still stabilizing." Considering that this is the largest spike in the history of Bitcoin, I would like to know what makes you think that. "I think it will eventually stabilize." So do I, but that is because I think it will eventually fail (and stabilize at $0/BTC).
  - freehunter 14y ago
    "Still stabilizing" means "has not yet stabilized". As in, it's trying to find a stability point.
- wmf 14y ago
  Since Bitcoin's monetary supply is totally disconnected from economic activity, I wonder how it can ever stabilize (except perhaps by accident).
  - oleganza 14y ago
    Right now a landgrab is going on. People want to hold some btc. At some point in the future, when everyone knows about btc and purchased as much as they want/can, the price will be more stable and grows only as much as new wealth is created by the global economy and new people are born.
    - davidw 14y ago
      > Right now a landgrab is going on. People want to hold some btc. How's that different from tulips? > the price will be more stable and grows only as much as new wealth is created by the global economy and new people are born. Err...how so? Fiat money can do that, but how does bitcoin correlate to much of anything?
stagas 14y ago
What do you expect? It will not stabilize any time soon but the fact that this is happening means there's a new player joining the game and one that needs to be taken pretty damn seriously.
wwwtyro 14y ago
How about an automatically-adjusted price scheme where the price varies according to the demand? You might even automatically optimize profits this way.
- tempestn 14y ago
  That is an extremely cool idea. Why worry about setting the exchange rate yourself when you can let the market do it for you!
  - mrb 14y ago
    Not only that is a cool idea, but that is what some Bitcoin shopping carts (eg. see bitcoinstore.com) and payment processors (eg. Bitpay) already do!
nawitus 14y ago
You need to adjust the price just like you need to ajust prices for any currency. It's just that the value of 1 bitcoin changes faster than other currencies, as it's now being adopted at a quick rate.
- dragontamer 14y ago
  A new domain name has been 10 USD from Namecheap for the last decade. A new domain name in BTC however, has varied between 1 BTC and 0.1 BTC in just the past two months. BTC as a proxy for USD is still useful IMO, it gives us a way to avoid Paypal and other online processors. But for it to be a USD replacement, it needs to first settle down and stabilize.
  - TillE 14y ago
    > it gives us a way to avoid Paypal and other online processors How do you buy and cash out your BTC? You still have to make all those real money transactions, just with the exchange rather than directly with the merchant. Seems a bit pointless to me.
    - dragontamer 14y ago
      Touche. Although, a BTC exchange + BTC merchant together have to only beat out on Paypal's charges. BTC seems to be stable enough that Paypal's 2.9% charge per transaction makes BTC a useful competitor. That said, now you have to trust both the BTC exchange and Merchant. But that is a bit easier if you can put up with the downsides to BTC (no chargebacks, etc. etc.)
      - dobbsbob 14y ago
        It's not just about fees, Paypal has banned half the world from using their services (India, China) and dictates what you're allowed to sell, arbitrarily seizes money for months on end, and can be easily frauded with no protection for merchants. You also don't have to trust any exchange, you can walk to your local coffee shop and trade for cash off the books with anybody from localbitcoins.com
Eliezer 14y ago
As ever: Bitcoin is a lovely medium of exchange, a horrible medium of account and hence a purely bubbled store of value.
- polarix 14y ago
  I believe the proper course of action is to make a calculation, involving: 1. a given velocity of money and thus a derived desirable monetary volume for a given economic condition 2. a projected percentage of that economic activity that makes sense in bitcoin 3. a projected economic condition Even if there is no value in BTC as a medium of account, the quantity of economic transfer it could plausibly come to represent alone has a certain value.
- noloqy 14y ago
  It has the potential to be just as good a medium of account as any conventional currency. The common measure of value of bitcoin will stabilize when it is a more generally accepted medium of exchange.
- jamoes 14y ago
  How low do you think it will crash when the bubble bursts? Do you think it will recover again, like it did last time, or do you this time it will stay low?
  - sodafountan 14y ago
    I believe if/when it does crash there will be an immediate resurgence in the price per BTC, driven by the people who wanted to invest but thought the price was too high. This is why i'm not all that scared investing rather large sums of money into the Bitcoin economy.
napoleoncomplex 14y ago
Out of curiosity, did you see any uptake on that option? A lot of places seem to be adding the BTC option lately, but I haven't managed to find any good sources on how much use there is once the option is provided.
- px1999 14y ago
  For general (ie not Scribophile info)... http://www.reddit.com/r/Bitcoin/comments/19t3uq/hey_rbitcoin_you_asked_for_some_stats/ http://www.reddit.com/r/Bitcoin/comments/19t3uq/hey_rbitcoin... is the best that I could find (admin from Reddit talking about Reddit Gold revenue). It's interesting that the accounting costs more than they bring in (though this is something that could obviously change with increased stability in the BTC/USD rate / increased volume / better processes). Somewhat concerning, considering that they host what seems to be one of the most active/vocal bitcoin communities out there. Also, http://www.reddit.com/r/Bitcoin/comments/1auzjg/factorio_dev_bitcoins_are_great_but_nobody_uses/ http://www.reddit.com/r/Bitcoin/comments/1auzjg/factorio_dev..., though this one may just be a case of not properly targeting for users.
- acabal 14y ago
  Nobody has bit, and for a few reasons I think: 1. The site audience tends to be a little older and not very tech-savvy, so Bitcoin isn't something that many are interested in comprehending. 2. Since the price was fixed at 2BTC a few weeks ago when 1BTC~=35USD, and now 1BTC~=100USD, people will see this is a raw deal. (The USD price for a membership is $65.) It's #2 that's the hard part. I'm not interested in accepting BTC just so I can convert it to USD, but since everyone's so focused on the BTC->USD exchange rate as the measure of value for BTC, and since the rate is so insanely volatile, it's impossible for a merchant to fix a "fair" price without auto-adjusting the BTC price to the USD exchange rate.
  - waterlesscloud 14y ago
    Auto-adjusting to the rate doesn't require you to cash out to USD, though. You can easily both adjust and hold on to the resulting bitcoin.
3am 14y ago
I'm reminded of this: http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/ http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfett...
SkyMarshal 14y ago
One reason debt-backed currencies are relatively stable (vs stocks, commodities, and bitcoin) is that they are pegged to an interest rate, in the case of the dollar the (at least what used to be) the risk-free rate of return. You can even think of them as derivatives of the interest rate, for a loose definition of derivative. This bounds their volatility in a way that bitcoin can't, and makes me wonder if the lack of a similar stabilizing mechanism isn't a long-term flaw in bitcoin's design. The only way I can see bitcoin ever reaching a similar level of stability is for its market cap to reach a level such that it stabilizes under sheer weight and momentum rather than any built-in mechanic, which could require exceeding that of all other currencies combined (making speculation and market manipulation difficult or impossible), no small feat.
- T-hawk 14y ago
  The lack of a stabilizing mechanism is a feature, not a bug. The risk-free rate of return on dollars only exists because the central authority possesses compulsive force of taxation and/or inflationary power, to pay out the return that it guarantees. Bitcoin is of course designed without any central authorities, inflationary power, or compulsive force. Flipping around the question, how could a risk-free rate of return exist in Bitcoin at all? Nobody has the power to create more currency or forcibly acquire some in order to satisfy a promised payout.
cbhl 14y ago
The USD used to be on the Gold Standard -- that is, it used to be a proxy for Gold. Using BTC as a "proxy" currency isn't unhealthy per se -- it's merely a transitionary step until people have adopted BTC more widely.

by acabal 14y ago

hilko 14y ago

wouldn't it be possible to link the BTC price to the going rate at MtGox, so that it always translates to around $35?

cadetzero 14y ago
Correct, and there are merchant services set up to do exactly this.
- e1ven 14y ago
  I'm curious if you have any experience working with them, and which you'd recommend?
acabal 14y ago
Yeah but that's what I don't want to do--because that makes Bitcoin just a USD proxy, not a currency and economy of its own. I'm interested in BTC as its own economy, but unfortunately the price instability and tendency of most users to exchange for USD in the end makes it impossible to explore that.
- nawitus 14y ago
  Logically speaking it doesn't make bitcoin a USD proxy, a non-currency or "not-a-economy" as you claimed. Fixing the bitcoin price to another currency is a good solution when the value of 1 bitcoin is changing rapidly, as it would take a lot of work to adjust it daily. Besides, you can fix the price to the average of multiple major currencies (like average of euro, American dollar and the British pound).
- ef4 14y ago
  Every form of currency suffers this problem in the beginning. There are really only two ways around it: easy convertibility into another currency that people already understand, or direct use-value of the currency commodity itself. It's a question of social inertia. It's too early to expect people to think in BTC.
- MacsHeadroom 14y ago
  A currency can have an economy fully its own and still have prices pegged to another currency. There is a lot of historic precedent for that. You act like its an abhorant practice. Prices will stabalize as the BTC price approaches something more workable on a global scale, like $21,000,000/BTC
- fnordfnordfnord 14y ago
  Sorry man, IMO it will be years before BTC can function in the way that you want it to. First you need widespread adoption.

baddox 14y ago

Give it time. I happen to think that bitcoin is still stabilizing. Whether it will stabilize at an even higher price than it is now, or "crash" and stabilize at a much lower price, I think it will eventually stabilize.

betterunix 14y ago
"I happen to think that bitcoin is still stabilizing." Considering that this is the largest spike in the history of Bitcoin, I would like to know what makes you think that. "I think it will eventually stabilize." So do I, but that is because I think it will eventually fail (and stabilize at $0/BTC).
- freehunter 14y ago
  "Still stabilizing" means "has not yet stabilized". As in, it's trying to find a stability point.
wmf 14y ago
Since Bitcoin's monetary supply is totally disconnected from economic activity, I wonder how it can ever stabilize (except perhaps by accident).
- oleganza 14y ago
  Right now a landgrab is going on. People want to hold some btc. At some point in the future, when everyone knows about btc and purchased as much as they want/can, the price will be more stable and grows only as much as new wealth is created by the global economy and new people are born.
  - davidw 14y ago
    > Right now a landgrab is going on. People want to hold some btc. How's that different from tulips? > the price will be more stable and grows only as much as new wealth is created by the global economy and new people are born. Err...how so? Fiat money can do that, but how does bitcoin correlate to much of anything?

stagas 14y ago

What do you expect? It will not stabilize any time soon but the fact that this is happening means there's a new player joining the game and one that needs to be taken pretty damn seriously.

wwwtyro 14y ago

How about an automatically-adjusted price scheme where the price varies according to the demand? You might even automatically optimize profits this way.

tempestn 14y ago
That is an extremely cool idea. Why worry about setting the exchange rate yourself when you can let the market do it for you!
- mrb 14y ago
  Not only that is a cool idea, but that is what some Bitcoin shopping carts (eg. see bitcoinstore.com) and payment processors (eg. Bitpay) already do!

nawitus 14y ago

You need to adjust the price just like you need to ajust prices for any currency. It's just that the value of 1 bitcoin changes faster than other currencies, as it's now being adopted at a quick rate.

dragontamer 14y ago
A new domain name has been 10 USD from Namecheap for the last decade. A new domain name in BTC however, has varied between 1 BTC and 0.1 BTC in just the past two months. BTC as a proxy for USD is still useful IMO, it gives us a way to avoid Paypal and other online processors. But for it to be a USD replacement, it needs to first settle down and stabilize.
- TillE 14y ago
  > it gives us a way to avoid Paypal and other online processors How do you buy and cash out your BTC? You still have to make all those real money transactions, just with the exchange rather than directly with the merchant. Seems a bit pointless to me.
  - dragontamer 14y ago
    Touche. Although, a BTC exchange + BTC merchant together have to only beat out on Paypal's charges. BTC seems to be stable enough that Paypal's 2.9% charge per transaction makes BTC a useful competitor. That said, now you have to trust both the BTC exchange and Merchant. But that is a bit easier if you can put up with the downsides to BTC (no chargebacks, etc. etc.)
    - dobbsbob 14y ago
      It's not just about fees, Paypal has banned half the world from using their services (India, China) and dictates what you're allowed to sell, arbitrarily seizes money for months on end, and can be easily frauded with no protection for merchants. You also don't have to trust any exchange, you can walk to your local coffee shop and trade for cash off the books with anybody from localbitcoins.com

Eliezer 14y ago

As ever: Bitcoin is a lovely medium of exchange, a horrible medium of account and hence a purely bubbled store of value.

polarix 14y ago
I believe the proper course of action is to make a calculation, involving: 1. a given velocity of money and thus a derived desirable monetary volume for a given economic condition 2. a projected percentage of that economic activity that makes sense in bitcoin 3. a projected economic condition Even if there is no value in BTC as a medium of account, the quantity of economic transfer it could plausibly come to represent alone has a certain value.
noloqy 14y ago
It has the potential to be just as good a medium of account as any conventional currency. The common measure of value of bitcoin will stabilize when it is a more generally accepted medium of exchange.
jamoes 14y ago
How low do you think it will crash when the bubble bursts? Do you think it will recover again, like it did last time, or do you this time it will stay low?
- sodafountan 14y ago
  I believe if/when it does crash there will be an immediate resurgence in the price per BTC, driven by the people who wanted to invest but thought the price was too high. This is why i'm not all that scared investing rather large sums of money into the Bitcoin economy.

napoleoncomplex 14y ago

Out of curiosity, did you see any uptake on that option? A lot of places seem to be adding the BTC option lately, but I haven't managed to find any good sources on how much use there is once the option is provided.

px1999 14y ago
For general (ie not Scribophile info)... http://www.reddit.com/r/Bitcoin/comments/19t3uq/hey_rbitcoin_you_asked_for_some_stats/ http://www.reddit.com/r/Bitcoin/comments/19t3uq/hey_rbitcoin... is the best that I could find (admin from Reddit talking about Reddit Gold revenue). It's interesting that the accounting costs more than they bring in (though this is something that could obviously change with increased stability in the BTC/USD rate / increased volume / better processes). Somewhat concerning, considering that they host what seems to be one of the most active/vocal bitcoin communities out there. Also, http://www.reddit.com/r/Bitcoin/comments/1auzjg/factorio_dev_bitcoins_are_great_but_nobody_uses/ http://www.reddit.com/r/Bitcoin/comments/1auzjg/factorio_dev..., though this one may just be a case of not properly targeting for users.
acabal 14y ago
Nobody has bit, and for a few reasons I think: 1. The site audience tends to be a little older and not very tech-savvy, so Bitcoin isn't something that many are interested in comprehending. 2. Since the price was fixed at 2BTC a few weeks ago when 1BTC~=35USD, and now 1BTC~=100USD, people will see this is a raw deal. (The USD price for a membership is $65.) It's #2 that's the hard part. I'm not interested in accepting BTC just so I can convert it to USD, but since everyone's so focused on the BTC->USD exchange rate as the measure of value for BTC, and since the rate is so insanely volatile, it's impossible for a merchant to fix a "fair" price without auto-adjusting the BTC price to the USD exchange rate.
- waterlesscloud 14y ago
  Auto-adjusting to the rate doesn't require you to cash out to USD, though. You can easily both adjust and hold on to the resulting bitcoin.

3am 14y ago

I'm reminded of this: http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/ http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfett...

SkyMarshal 14y ago

One reason debt-backed currencies are relatively stable (vs stocks, commodities, and bitcoin) is that they are pegged to an interest rate, in the case of the dollar the (at least what used to be) the risk-free rate of return. You can even think of them as derivatives of the interest rate, for a loose definition of derivative. This bounds their volatility in a way that bitcoin can't, and makes me wonder if the lack of a similar stabilizing mechanism isn't a long-term flaw in bitcoin's design. The only way I can see bitcoin ever reaching a similar level of stability is for its market cap to reach a level such that it stabilizes under sheer weight and momentum rather than any built-in mechanic, which could require exceeding that of all other currencies combined (making speculation and market manipulation difficult or impossible), no small feat.

T-hawk 14y ago
The lack of a stabilizing mechanism is a feature, not a bug. The risk-free rate of return on dollars only exists because the central authority possesses compulsive force of taxation and/or inflationary power, to pay out the return that it guarantees. Bitcoin is of course designed without any central authorities, inflationary power, or compulsive force. Flipping around the question, how could a risk-free rate of return exist in Bitcoin at all? Nobody has the power to create more currency or forcibly acquire some in order to satisfy a promised payout.

cbhl 14y ago

The USD used to be on the Gold Standard -- that is, it used to be a proxy for Gold. Using BTC as a "proxy" currency isn't unhealthy per se -- it's merely a transitionary step until people have adopted BTC more widely.