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I don't own any Bitcoins, but the concept interests me. (I'm no economist either so these musings are probably entirely wrong or unfounded.) I can't help but
by acabal 14y ago
I don't own any Bitcoins, but the concept interests me. (I'm no economist either so these musings are probably entirely wrong or unfounded.) I can't help but feel like all this hooplah about Bitcoin's "price" on the dollar is missing the point of Bitcoin. People are measuring Bitcoin's worth by how many dollars it costs; is that really the measure of worth of a currency, or simply the measure of worth of a dollar?
It would be much fairer for people to measure Bitcoin's worth by (for example) how many gallons of milk or how many pounds of rice you could buy with it. But since we need to somehow know how much this medium of exchange is worth, and since Bitcoin still has very low adoption, we're using the dollar as a way of assigning worth to these imaginary collections of bits, and that makes it a target of speculation and bubble mentalities. In other words, we should tie its worth to something useful you could actually spend it on, instead of just using as it as a Monopoly-money "investment vehicle".
IMHO Bitcoin will never be able to be taken seriously until the price is pegged to some physical product of real-world value. Until then, it'll just be a USD proxy and thus functionally worthless to anyone but academics, speculators, crypto-nerds, and black marketeers who don't understand that Bitcoins aren't truly anonymous. The system has a chicken-and-egg problem of adoption, and right now given the poor PR it's receiving it looks like it's heading in the wrong direction.
- dragontamer 14y agoOverall, well said. But IMO there's nothing wrong with BTC being "only" a proxy currency. It'd solve a technical problem. (in particular, it'd be a decentralized Paypal). http://blockchain.info/charts/n-transactions http://blockchain.info/charts/n-transactions Anyway, this is the graph I watch actually. Every bitcoin transaction is public, so it is possible to count every single one, as well as it's value. The more transactions there are, the better it's adoption rate. BTC price is missing the point. The real story is how many people are _using_ the damn thing.
- wmf 14y agoThis has come up several times. The buying power of a dollar has changed very little in the last month but the buying power of Bitcoin has increased, no matter how you measure it.
- acabal 14y agoBut you can't really claim that Bitcoin has any buying power, because there's almost nothing you can buy with Bitcoin where the merchant hasn't pegged the Bitcoin price to USD. Bitcoin has, functionally, near zero buying power; in practice people are simply using it as a USD proxy.
- tptacek 14y agoIsn't this circular? Call the value of 1 BTC "x number of dollars", or call it "the amount of corn x number of dollars will buy you". The problem is the same whether you do your accounting in dollars or in sorghum: BTC's value is unstable, wildly so, and it's unstable for predictable reasons.
- acabal 14y agoI guess what I'm trying to say is that if merchants selling products for Bitcoin simply peg its worth to USD (like most merchants today to) then nobody can ever be sure how much you can actually buy with 1BTC. Bitcoin is unstable in part because this habit of using it as a USD proxy creates uncertainty as to the medium's real worth. This in turn encourages speculation which perpetuates the vicious cycle of volatility.
- tptacek 14y agoMerchants today don't peg BTC to USD. The value of BTC in USD floats.
- acabal 14y agoSure they do, look at Coinbase. You can (for example) buy Reddit Gold for $3.99 USD, or the equivalent in Bitcoin, which changes based on some USD-based exchange rate they figure out. Or look at Namecheap, which can refill your account in Bitcoin--but you enter a USD amount before they tell you how much the Bitcoin cost will be. Maybe they don't look at MtGox every day but most merchants without a doubt peg their Bitcoin amounts to some USD exchange rate.
- tptacek 14y agoThe exchange rate on services like Bitpay are a smoothed-out version of the current spot price. Nobody will fix a USD/BTC rate for even a day. In dollar-denominated terms, the price of items for sale in BTC floats throughout the day. I think we're just using the word in two different ways.
- zzleeper 14y agoYour issue is against using the dollar as the numeraire [1]. Fine, pick gallons of milk, oil, etc. and you'll see that the charts of recent days, when expressed in "real" terms and not in nominal/dollar terms, will look THE SAME. At t his stage, dollar inflation and depreciation against other currencies is just measurement error when compared to BTCs fluctuations. The second bit, I didn't entirely got. We can't PEG BTCs price to anything, as its price is market-determined. [1] http://en.wikipedia.org/wiki/Num%C3%A9raire http://en.wikipedia.org/wiki/Num%C3%A9raire