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Do you realise that for something to be money or currency (e.g. medium of exchange), it must have value? How do people know what is the value of 1 BTC or 1 doll

Do you realise that for something to be money or currency (e.g. medium of exchange), it must have value? How do people know what is the value of 1 BTC or 1 dollar or 1 ounce of gold? They look at how much other people are willing to pay to hold it. Why would people hold gold, dollars or bitcoins? Not only in speculation that they will be worth more tomorrow. But also because they are more marketable than groceries and no one know exactly what you want to buy tomorrow. So we want to hold some cash for the short-term and long-term future - we never know what exactly we'd want to buy. For transactions the exact value does not matter, only matters how liquid this value is. And liquidity is measured by number of people willing to buy that assets at that price. In case of Bitcoin, the more people want to hold it, the higher the price will be (because they need to buy them from someone and outbid others). Now, imagine Bitcoin and Freicoin. Freicoin loses value ("demurrage") over time. So people would be motivated to hold bitcoin instead. So Bitcoin will gain bigger liquidity and higher value. People will see that Bitcoin is more sellable on the market and thus is wider accepted. So they can rely on Bitcoin's price when doing transactions. While Freicoin remains less liquid and thus less suitable for exchanges. The currency is the most marketable, most valuable asset. And to make it so it must be the cheapest to store and transport, hardest to produce and impossible to counterfeit.

atmosx 13y ago
Currencies are not chosen by the population. They are forced upon them via specific organizations. The USD Gov allows to you to pay taxes in USD, not in BTC. Even if BTC get taxed you still will have to pay your taxes in USD. If and when the US gov will start accepting taxes in BTC all this reasoning might have a solid ground. Until then, it's a utopia. ps. The above, will never going to happen though. It's insane/stupid/unthinkable for a state to give such power to unknown people (%98 of BTC are located in 2% of portfolios) instead of controlling it's own currency by a central authority (FED, ECB, ...).
- oleganza 13y ago
  Shamir's paper is bullshit (RSA and SSSS are cool, though). 98% of bitcoins belong to exchanges or web wallets that manage money for their users. This distribution says nothing about actual users and there is no way to find this out. Yes, technically there are big "owners" of a lot of coins, but that's temporary delegates, not primary investors. Also, by scanning HTML printout of blockchain from block explorer they only demonstrated their incompetence in this matter - blockchain is always readily available for analysis in bitcoind. Unfortunately, the state is cutting the tree they are sitting on. Their massively inflated money supply is going to hit them hard when China and other foreign nations will refuse to accept USD as a reserve currency and all that printed nonsense will hit US economy and destroy it by hyperinflation. Or, USG will put up massive capital controls to avoid that thus closing the country in an iron curtain. Considering that externalised inflation destroyed a lot of production inside the country, isolating people from global market will also destroy what remains of the economy. In no theory it is sustainable in the long run to print shitload of money and not have its value massively dropped at some point of time. Each day it doesn't happen only makes the inevitable hit harder. Once people all over the world start tasting Bitcoin and moving savings off fiat currencies, they will naturally hyper inflate - people will be trying to get rid of them quickly. This has nothing to do with orders of the state: it'll happen legally or illegally. And policemen will be among those people who try to save what's left of their savings. Also: did you notice what Obama said when he asked Congress to raise debt ceiling? He said he wouldn't be able to mail the social security cheques. In other words, he admitted that there's absolutely no money that was extracted from people is available in form of cash or real investments. That he must have to issue new debt to pay that debt. Isn't it a good enough proof that the whole monetary system is going to collapse any time Link: http://www.dailymotion.com/video/x14y4cx_obama-tells-americans-if-congress-does-not-raise-debt-ceiling-the-u-s-will-be-deadbeats_news http://www.dailymotion.com/video/x14y4cx_obama-tells-america...
  - atmosx 13y ago
    I don't think Shamir's paper is BS. I think it shows how early adopters have a huge advantage over other players, exactly like a Ponzi scheme. As for the fact that they can't force you to buy from them it's totally irrelevant. They (or he) can drive the market back to 0.5USD : 1BTC in less than 24 hours should they choose to do so, and there's nothing stopping them. The fact the you don't know who this player is, makes things a lot worst compared to FIAT controlled by the state. The monetary system is a total mess, but that's because of abuse from those in power, than by design. BitCoin is a good thing to have, but it will never replace the USD and it wasn't suppose to IMHO. It's properties attracted only the illegal market and various low level speculators so far. The fact that BTC went up instead of down after SK bust shoes clearly that the general consent has little to do with its price. BTC became famous because of SK. Now will be used even less as a currency. Instead it became even more expensive.

atmosx 13y ago

Currencies are not chosen by the population. They are forced upon them via specific organizations. The USD Gov allows to you to pay taxes in USD, not in BTC. Even if BTC get taxed you still will have to pay your taxes in USD. If and when the US gov will start accepting taxes in BTC all this reasoning might have a solid ground. Until then, it's a utopia. ps. The above, will never going to happen though. It's insane/stupid/unthinkable for a state to give such power to unknown people (%98 of BTC are located in 2% of portfolios) instead of controlling it's own currency by a central authority (FED, ECB, ...).

oleganza 13y ago
Shamir's paper is bullshit (RSA and SSSS are cool, though). 98% of bitcoins belong to exchanges or web wallets that manage money for their users. This distribution says nothing about actual users and there is no way to find this out. Yes, technically there are big "owners" of a lot of coins, but that's temporary delegates, not primary investors. Also, by scanning HTML printout of blockchain from block explorer they only demonstrated their incompetence in this matter - blockchain is always readily available for analysis in bitcoind. Unfortunately, the state is cutting the tree they are sitting on. Their massively inflated money supply is going to hit them hard when China and other foreign nations will refuse to accept USD as a reserve currency and all that printed nonsense will hit US economy and destroy it by hyperinflation. Or, USG will put up massive capital controls to avoid that thus closing the country in an iron curtain. Considering that externalised inflation destroyed a lot of production inside the country, isolating people from global market will also destroy what remains of the economy. In no theory it is sustainable in the long run to print shitload of money and not have its value massively dropped at some point of time. Each day it doesn't happen only makes the inevitable hit harder. Once people all over the world start tasting Bitcoin and moving savings off fiat currencies, they will naturally hyper inflate - people will be trying to get rid of them quickly. This has nothing to do with orders of the state: it'll happen legally or illegally. And policemen will be among those people who try to save what's left of their savings. Also: did you notice what Obama said when he asked Congress to raise debt ceiling? He said he wouldn't be able to mail the social security cheques. In other words, he admitted that there's absolutely no money that was extracted from people is available in form of cash or real investments. That he must have to issue new debt to pay that debt. Isn't it a good enough proof that the whole monetary system is going to collapse any time Link: http://www.dailymotion.com/video/x14y4cx_obama-tells-americans-if-congress-does-not-raise-debt-ceiling-the-u-s-will-be-deadbeats_news http://www.dailymotion.com/video/x14y4cx_obama-tells-america...
- atmosx 13y ago
  I don't think Shamir's paper is BS. I think it shows how early adopters have a huge advantage over other players, exactly like a Ponzi scheme. As for the fact that they can't force you to buy from them it's totally irrelevant. They (or he) can drive the market back to 0.5USD : 1BTC in less than 24 hours should they choose to do so, and there's nothing stopping them. The fact the you don't know who this player is, makes things a lot worst compared to FIAT controlled by the state. The monetary system is a total mess, but that's because of abuse from those in power, than by design. BitCoin is a good thing to have, but it will never replace the USD and it wasn't suppose to IMHO. It's properties attracted only the illegal market and various low level speculators so far. The fact that BTC went up instead of down after SK bust shoes clearly that the general consent has little to do with its price. BTC became famous because of SK. Now will be used even less as a currency. Instead it became even more expensive.