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I still don't understand how people treating bitcoin as an investment rather than a currency is a fundamental flaw in the algorithm.

by lojack 14y ago

fc2 14y ago
He thinks people will suddenly decide they'd rather live under a bridge and keep their bitcoins than buy a house with them.
itsprofitbaron 14y ago
The reason I said that is because, there are two reasons to own Bitcoin - either to derive indirect utility through purchasing goods with Bitcoin in the future (therefore Bitcoins are being treated as if it’s a currency) OR the expectation that Bitcoin will rise in monetary value which means that, Bitcoin is a speculative digital asset – however, it’s not tied to anything in the way a stock or bond is for example. Currently, Bitcoin can be considered elastic (to some extent) although it’s subject to future diminishing elasticity meaning that, in the long run there will be a finite supply of Bitcoins and an inelastic supply. However, a long-run inelastic and fixed supply currency is not useful for a real world economy which is why, Bitcoin is useful as a speculative digital asset rather than a currency.
- richardw 14y ago
  Third use - transfer money easily across borders, for example a migrant worker sending money to family. No red tape, no forex hassles, no worry about future value (unless the value tanks while you're transferring, of course.)
  - dragonwriter 14y ago
    > Third use - transfer money easily across borders, for example a migrant worker sending money to family. No red tape, no forex hassles, no worry about future value (unless the value tanks while you're transferring, of course.) The "no red tape, no forex hassles" are largely because of immaturity in the regulation of "virtual currencies" that exist largely because most states haven't gotten around to addressing them because of scale issues compared to traditional soveriegn currencies. This is already starting change.
    - richardw 14y ago
      The regulations will surely come. However, the ability to hold a private wallet outside of a bank and transfer money to a point anywhere in the world, makes regulations harder to police. Some wallets might be declared and known, others might exist anywhere in the world and be held by anybody. For a law-abiding citizen who trusts their government (the people you don't need to police), all will be (probably) declared. I expect different behaviour from a Russian holding money in a Cypriot bank or someone who pays taxes to a corrupt regime. Still, if someone is looking to preserve wealth, it would seem smarter to wait and see if and where the price stabilises. Or if governments slam the door shut on the currency.

I still don't understand how people treating bitcoin as an investment rather than a currency is a fundamental flaw in the algorithm.

by lojack 14y ago

I still don't understand how people treating bitcoin as an investment rather than a currency is a fundamental flaw in the algorithm.

fc2 14y ago

He thinks people will suddenly decide they'd rather live under a bridge and keep their bitcoins than buy a house with them.

itsprofitbaron 14y ago

The reason I said that is because, there are two reasons to own Bitcoin - either to derive indirect utility through purchasing goods with Bitcoin in the future (therefore Bitcoins are being treated as if it’s a currency) OR the expectation that Bitcoin will rise in monetary value which means that, Bitcoin is a speculative digital asset – however, it’s not tied to anything in the way a stock or bond is for example. Currently, Bitcoin can be considered elastic (to some extent) although it’s subject to future diminishing elasticity meaning that, in the long run there will be a finite supply of Bitcoins and an inelastic supply. However, a long-run inelastic and fixed supply currency is not useful for a real world economy which is why, Bitcoin is useful as a speculative digital asset rather than a currency.

richardw 14y ago
Third use - transfer money easily across borders, for example a migrant worker sending money to family. No red tape, no forex hassles, no worry about future value (unless the value tanks while you're transferring, of course.)
- dragonwriter 14y ago
  > Third use - transfer money easily across borders, for example a migrant worker sending money to family. No red tape, no forex hassles, no worry about future value (unless the value tanks while you're transferring, of course.) The "no red tape, no forex hassles" are largely because of immaturity in the regulation of "virtual currencies" that exist largely because most states haven't gotten around to addressing them because of scale issues compared to traditional soveriegn currencies. This is already starting change.
  - richardw 14y ago
    The regulations will surely come. However, the ability to hold a private wallet outside of a bank and transfer money to a point anywhere in the world, makes regulations harder to police. Some wallets might be declared and known, others might exist anywhere in the world and be held by anybody. For a law-abiding citizen who trusts their government (the people you don't need to police), all will be (probably) declared. I expect different behaviour from a Russian holding money in a Cypriot bank or someone who pays taxes to a corrupt regime. Still, if someone is looking to preserve wealth, it would seem smarter to wait and see if and where the price stabilises. Or if governments slam the door shut on the currency.