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Good question! Yes you have a reason to spend. While it is true that bad money drives out good, in this case we are not comparing equivalent monies. The reason

Good question! Yes you have a reason to spend. While it is true that bad money drives out good, in this case we are not comparing equivalent monies. The reason is that in order to buy drugs safely online you MUST spend bitcoin. So even if you are just converting temporarily to make the transaction happen, we don't get the liquidity freezes that most hard currencies had during scrip floods. For example, Joe wants drugs, he takes $1000 to Frank for a bitcoin. Joe sends the bitcoin to Charlie's address for some cocaine. Charlie sells the bitcoin for $1000 in order to buy some cocaine from his importer. Its status as sole-use currency for certain transactions provides liquidity to the market.

Brakenshire 13y ago
That hardly seems like a full currency, just a short-term transfer medium, with a very dubious role as a long-term store of value.
- PeterisP 13y ago
  If X works great as the short-term transfer medium, then it keeps/raises in value, and becomes good also as a long-term store of value. If X starts to fail as the transfer medium, then the value collapses as well. No matter if X is dollars, gold coins, bitcoin, cowrie shells or whatever - in practice the transactional usage is so much larger than 'store of value' that it dominates value/pricing.
  - Brakenshire 13y ago
    > If X works great as the short-term transfer medium, then it keeps/raises in value, and becomes good also as a long-term store of value. This seems very simplistic. Is there evidence that the value of a currency is directly related to transactional volume? It's obviously not the case that that is the sole factor. Even if that were true, your point is contradictory. As you say, 'If X starts to fail as the transfer medium, then the value collapses as well', and there's nothing that guarantees Bitcoin will become a serious transactional currency, or if it does, won't be supplanted by something else. Under no circumstances is this a place where you'd want to store substantial savings that weren't set aside for speculation.
    - PeterisP 13y ago
      1) please read ".. and becomes good also as a long-term store of value." as ".. and becomes good also as a long-term store of value while it lasts as a great short-term transfer medium". 2) I don't recall anything about a relation to pure transactional volume, but there is definitely very direct relation between the liquidity and ease of transactions and currency value; any significant changes in liquidity have a quick and lasting effect on value.
  - rsynnott 13y ago
    > If X works great as the short-term transfer medium, then it keeps/raises in value Why? Currently, if you're using bitcoin as a token of exchange, the safest approach is to get rid of it as soon as you receive it (particularly if you're in a low-margin business, though few currently selling things for bit coins are in low-margin businesses).

Brakenshire 13y ago

That hardly seems like a full currency, just a short-term transfer medium, with a very dubious role as a long-term store of value.

PeterisP 13y ago
If X works great as the short-term transfer medium, then it keeps/raises in value, and becomes good also as a long-term store of value. If X starts to fail as the transfer medium, then the value collapses as well. No matter if X is dollars, gold coins, bitcoin, cowrie shells or whatever - in practice the transactional usage is so much larger than 'store of value' that it dominates value/pricing.
- Brakenshire 13y ago
  > If X works great as the short-term transfer medium, then it keeps/raises in value, and becomes good also as a long-term store of value. This seems very simplistic. Is there evidence that the value of a currency is directly related to transactional volume? It's obviously not the case that that is the sole factor. Even if that were true, your point is contradictory. As you say, 'If X starts to fail as the transfer medium, then the value collapses as well', and there's nothing that guarantees Bitcoin will become a serious transactional currency, or if it does, won't be supplanted by something else. Under no circumstances is this a place where you'd want to store substantial savings that weren't set aside for speculation.
  - PeterisP 13y ago
    1) please read ".. and becomes good also as a long-term store of value." as ".. and becomes good also as a long-term store of value while it lasts as a great short-term transfer medium". 2) I don't recall anything about a relation to pure transactional volume, but there is definitely very direct relation between the liquidity and ease of transactions and currency value; any significant changes in liquidity have a quick and lasting effect on value.
- rsynnott 13y ago
  > If X works great as the short-term transfer medium, then it keeps/raises in value Why? Currently, if you're using bitcoin as a token of exchange, the safest approach is to get rid of it as soon as you receive it (particularly if you're in a low-margin business, though few currently selling things for bit coins are in low-margin businesses).