3 ms·

The fundamental flaw is not with bitcoin, but with people. At the beginning of march, I told all of my friends that Bitcoin was worth more than it was selling f

by Kapura 14y ago

The fundamental flaw is not with bitcoin, but with people. At the beginning of march, I told all of my friends that Bitcoin was worth more than it was selling for, for many of the reasons listed in the post. It's essentially inflation proof; supply of bitcoin is not going to outstrip demand. I reasoned, then, that long term, the value is likely to go up. This is great if you're planning on spending any bitcoins as currency on silkroad or any of the numerous other websites that now accept some sort of payment in bitcoin: if you know you're going to want to buy in the future, it makes sense (generally) to buy into them now. This creates a broader base of unique users, giving more validity to the currency. However, people see that the value of something is going up, they think "IT WILL ONLY GO UP" and then buy them with no intent to use them for a 'real' transaction. That's the problem identified in the post. But hey, guess what: Bubbles pop. At some point, the value of bitcoin will drop, and many of these speculators will sell off. This will devalue the currency for the people who wanted to use it for legitimate transactions, but sometimes you bite the bear, and sometimes the bear bites you. The important thing to remember is that this currency is not inherently worthless. The housing bubble was catalysed by complex financial packages that disguised the fact that they were garbage assets. The Dutch tulip craze[1] was about fucking flowers. They were being purchased by people who had no desire to plant and grow the flowers. But Bitcoin is different. As long as people will still accept and trade in bitcoin, Bitcoin will never be as susceptible to collapse as other historical bubbles. Further, with bitcoin, all news is good news. Any press that gets more people interested in bitcoin is good for the bitcoin economy in general. There will, of course, be some speculators who jump on hoping for a big payout. But there will be some people who look and see the inherent value of a decentralised currency and begin to accept bitcoin. A lot of people can peg their bitcoin prices to more stable currencies: 4chan pass sells for $20 usd, but you can pay in bitcoin. I'm under the impression that Silkroad vendors do something similar. This means that, regardless of the current price of bitcoin, it's still useful for its intended goal. [1]http://en.wikipedia.org/wiki/Tulip_mania http://en.wikipedia.org/wiki/Tulip_mania

dragonwriter 14y ago
> The important thing to remember is that this currency is not inherently worthless. Yes, it is. Like all fiat currencies, Bitcoins (as distinct from the physical artifacts in which some of them might be housed) have no inherent value, only the value that results from the fact that some people are currently willing to accept them for other things. > As long as people will still accept and trade in bitcoin, Bitcoin will never be as susceptible to collapse as other historical bubbles. "As long as people accept and trade in X, X will never be as susceptible to collapse as other historic bubbles" is equally true for all possible values of X. The difficulty is predicting when and to what degree people will stop accepting X.
- Zigurd 14y ago
  All cases I know of where a currency collapses, it does so because the supply was inflated. Has a currency ever just collapsed without some dubious supply policy causing the collapse?
  - dragonwriter 14y ago
    > Has a currency ever just collapsed without some dubious supply policy causing the collapse? Private (and what might be called "sub-sovereign" public -- that is, where the entity issuing either isn't sovereign or is notionally sovereign and yet still subordinate to a higher sovereign) currencies have collapsed because of sovereign action making issuance, use, etc. of the particular kind of currency less attractive (including expressly limiting its issuance or use, or prohibiting it outright.) Sovereign currencies have collapsed as currencies (perhaps with individual artifacts retaining value as collectibles) because of the collapse of the issuing sovereign entity. Gold as currency (though it became even more sought after as an investment) effectively fell apart globally largely due to deflations in the the late 19th century and early 20th century resulting from supply limits compared to productivity. I'm not sure if that counts as a yes or a no (each of those causes could be considered "dubious supply policy" issues, just as the limit on the number of BTC can), but it certainly means that hyper-inflationary supply policy isn't the only problem; supply limits are a problem, as well.

by Kapura 14y ago

dragonwriter 14y ago

> The important thing to remember is that this currency is not inherently worthless. Yes, it is. Like all fiat currencies, Bitcoins (as distinct from the physical artifacts in which some of them might be housed) have no inherent value, only the value that results from the fact that some people are currently willing to accept them for other things. > As long as people will still accept and trade in bitcoin, Bitcoin will never be as susceptible to collapse as other historical bubbles. "As long as people accept and trade in X, X will never be as susceptible to collapse as other historic bubbles" is equally true for all possible values of X. The difficulty is predicting when and to what degree people will stop accepting X.

Zigurd 14y ago
All cases I know of where a currency collapses, it does so because the supply was inflated. Has a currency ever just collapsed without some dubious supply policy causing the collapse?
- dragonwriter 14y ago
  > Has a currency ever just collapsed without some dubious supply policy causing the collapse? Private (and what might be called "sub-sovereign" public -- that is, where the entity issuing either isn't sovereign or is notionally sovereign and yet still subordinate to a higher sovereign) currencies have collapsed because of sovereign action making issuance, use, etc. of the particular kind of currency less attractive (including expressly limiting its issuance or use, or prohibiting it outright.) Sovereign currencies have collapsed as currencies (perhaps with individual artifacts retaining value as collectibles) because of the collapse of the issuing sovereign entity. Gold as currency (though it became even more sought after as an investment) effectively fell apart globally largely due to deflations in the the late 19th century and early 20th century resulting from supply limits compared to productivity. I'm not sure if that counts as a yes or a no (each of those causes could be considered "dubious supply policy" issues, just as the limit on the number of BTC can), but it certainly means that hyper-inflationary supply policy isn't the only problem; supply limits are a problem, as well.