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It saddens me that so much focus is being put on the price speculation aspect of Bitcoin. 9 out of 10 articles I see about Bitcoin are about its price. The last

by salient 13y ago

It saddens me that so much focus is being put on the price speculation aspect of Bitcoin. 9 out of 10 articles I see about Bitcoin are about its price. The last Senate hearing on Bitcoin was already quite aggressive about this, and some suggested that maybe Bitcoin should be regulated as a commodity instead. Hopefully this price speculation frenzy of Bitcoin users won't lead to its demise, and to Bitcoin being declared (or at least thought about) as irreparably not a currency.

SkyMarshal 13y ago
Agreed, I feel the same way, though I'm not surprised b/c price fluctuations (and ex-post narrative explaining them) is what the mainstream financial press pays most attention to anyway, no matter the medium.
bonestamp2 13y ago
If retail transactions reach significant volume, I think speculation will be significantly reduced since the value should be more stable like fiat currencies. So, hopefully it's just a short term problem.
lectrick 13y ago
If its use as a medium of exchange continues to spread, it is quite possible that the volatility will go away. Even national fiat currencies have some volatility, but it's vastly subdued due to the sheer amount of people using it as a currency, I believe
- gnaritas 13y ago
  I don't see how the volatility will ever go away when the supply of the currency is fixed; that's a recipe for volatility.
  - Jtsummers 13y ago
    Volatility won't "go away", but it may diminish over time if bitcoin becomes a currency and not a commodity. It will, however, still be a deflationary currency which means the value of an amount of bitcoin should trend upwards. So if this gains traction as a currency and the speculators stop rushing the numbers up higher than what the economy can actually support, BTC might find a stable deflation rate and its volatility should diminish. (I'm actually very skeptical of both deflationary currencies and bitcoin in particular, but this is the bitcoin proponents' theory as I understand it.)
    - gnaritas 13y ago
      To think bitcoin can acquire a stable deflation rate is to assume that the economy stops cycling, that's simply not going to happen. Every boom will cause a massive deflation period, it can't be stable. Speculation is the least of bitcoin's problems. I think a crypto-currency is inevitable, but it'll be one that has a mechanism in it to inflate and deflate to match the demand for currency in the market. During a boom there's a higher demand for currency and the supply must increase if prices are to remain stable, otherwise deflation is going to happen in an amount that matches the boom; that's not stable.
      - lectrick 13y ago
        So you're saying the Fed prints dollars by the millions during booms and destroys them again by the millions during busts? Who cares if prices stay stable or not? The value represented by whatever price is attached to those things won't change
        gnaritas 13y ago
        The government has more than one control over the current money supply, fractional reserve lending allows the money supply to grow and shrink as demand requires while the fed attempts to maintain an overall small inflation rate to avoid the ill effects of deflation. > Who cares if prices stay stable or not? Everyone who understand economics even a little bit. > The value represented by whatever price is attached to those things won't change People aren't paid in value and they don't spend value, they're paid in currency and they spend currency and they all care that prices are stable because their paychecks aren't going to suddenly change.
        lectrick 13y ago
        If it is not useful as a value store except to speculators, then it still has plenty of utility as a value transfer mechanism or a universal FOREX.
        13y ago
  - javert 13y ago
    Once something functions as a mature currency, everything is priced against it, so it is no longer volatile. In contrast, when something functions as a commodity, it is highly volatile. Right now, bitcoin functions as a commodity, but perhaps someday, it will function as a mature currency. As a side note, your comment is bizarre. There is no reason to think a fixed supply would lead to volatility. Quite the opposite. A changing supply leads to volatility. You can still avoid high volatility in that case if the rate of change is well-established and the people controlling the rate of change are trusted (as is the case now with the USD, but perhaps that will not always be so).
    - gnaritas 13y ago
      > Once something functions as a mature currency, everything is priced against it, so it is no longer volatile. The economy isn't nearly so simple. Pricing something in a currency doesn't automatically make the currency stable, a stable currency comes from the currency having enough liquidity to serve as a means of exchange for the wealth it's representing but not too much. Any sudden increase or decrease in that represented wealth will cause demand for the currency to either increase or decrease and a currency fixed in supply cannot increase/decrease supply to match the demand so it must necessarily inflation/deflate in value instead. > As a side note, your comment is bizarre. There is no reason to think a fixed supply would lead to volatility. It's not at all bizarre if you think about it, a fixed currency will always be volatile because the wealth it represents isn't fixed, markets grow and shrink and if the currency can't then a booming market automatically means currency deflation because that fixed amount of currency must now represent a larger amount of wealth creation. With a fixed currency, a boom in productivity and wealth creation will cause massive deflation in the currency. I honestly don't know how anyone thinks a fixed amount of currency can possibly work when the wealth it's standing in for is not fixed. The market cycles up and down continually and the supply of currency, if prices are to be kept stable, must also. You can't have stable prices with a fixed amount of currency, it's not logical. One of them will cycle to match the market's ups and downs. So either prices will be violate or the currency must allow inflation/deflation of the currency supply to keep prices stable.
      - 13y ago
nilkn 13y ago
Bitcoin has a lot of strange features or flaws, depending on viewpoint, that many people seem to blow off. Right now, for instance, the entire network can only support something like 10 transactions per second. That's clearly not going scale. Also, the much-touted microtransactions are unlikely to really make any sense with onchain transactions due to miner fees, which will eventually become commonplace as an incentive to mining as the block rewards become smaller and smaller and the difficulty increases. As a result, offchain providers are becoming more popular, which for many of us seems to defeat the entire point of bitcoin--it reintroduces trusted third parties.
- fsiefken 13y ago
  Currently the average is 1 transaction per second. The transaction per second limit of 7 tps is artifical and will be lifted in the future: https://en.bitcoin.it/wiki/Scalability https://en.bitcoin.it/wiki/Scalability Bitcoin developer Timothy Lee explains more about it here: http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/12/bitcoin-needs-to-scale-by-a-factor-of-1000-to-compete-with-visa-heres-how-to-do-it/ http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/12...
atmosx 13y ago
As a currency it has already failed but as an asset I think it's here to stay.

by salient 13y ago

SkyMarshal 13y ago

Agreed, I feel the same way, though I'm not surprised b/c price fluctuations (and ex-post narrative explaining them) is what the mainstream financial press pays most attention to anyway, no matter the medium.

bonestamp2 13y ago

If retail transactions reach significant volume, I think speculation will be significantly reduced since the value should be more stable like fiat currencies. So, hopefully it's just a short term problem.

lectrick 13y ago

If its use as a medium of exchange continues to spread, it is quite possible that the volatility will go away. Even national fiat currencies have some volatility, but it's vastly subdued due to the sheer amount of people using it as a currency, I believe

gnaritas 13y ago
I don't see how the volatility will ever go away when the supply of the currency is fixed; that's a recipe for volatility.
- Jtsummers 13y ago
  Volatility won't "go away", but it may diminish over time if bitcoin becomes a currency and not a commodity. It will, however, still be a deflationary currency which means the value of an amount of bitcoin should trend upwards. So if this gains traction as a currency and the speculators stop rushing the numbers up higher than what the economy can actually support, BTC might find a stable deflation rate and its volatility should diminish. (I'm actually very skeptical of both deflationary currencies and bitcoin in particular, but this is the bitcoin proponents' theory as I understand it.)
  - gnaritas 13y ago
    To think bitcoin can acquire a stable deflation rate is to assume that the economy stops cycling, that's simply not going to happen. Every boom will cause a massive deflation period, it can't be stable. Speculation is the least of bitcoin's problems. I think a crypto-currency is inevitable, but it'll be one that has a mechanism in it to inflate and deflate to match the demand for currency in the market. During a boom there's a higher demand for currency and the supply must increase if prices are to remain stable, otherwise deflation is going to happen in an amount that matches the boom; that's not stable.
    - lectrick 13y ago
      So you're saying the Fed prints dollars by the millions during booms and destroys them again by the millions during busts? Who cares if prices stay stable or not? The value represented by whatever price is attached to those things won't change
      - gnaritas 13y ago
        The government has more than one control over the current money supply, fractional reserve lending allows the money supply to grow and shrink as demand requires while the fed attempts to maintain an overall small inflation rate to avoid the ill effects of deflation. > Who cares if prices stay stable or not? Everyone who understand economics even a little bit. > The value represented by whatever price is attached to those things won't change People aren't paid in value and they don't spend value, they're paid in currency and they spend currency and they all care that prices are stable because their paychecks aren't going to suddenly change.
        lectrick 13y ago
        If it is not useful as a value store except to speculators, then it still has plenty of utility as a value transfer mechanism or a universal FOREX.
        13y ago
- javert 13y ago
  Once something functions as a mature currency, everything is priced against it, so it is no longer volatile. In contrast, when something functions as a commodity, it is highly volatile. Right now, bitcoin functions as a commodity, but perhaps someday, it will function as a mature currency. As a side note, your comment is bizarre. There is no reason to think a fixed supply would lead to volatility. Quite the opposite. A changing supply leads to volatility. You can still avoid high volatility in that case if the rate of change is well-established and the people controlling the rate of change are trusted (as is the case now with the USD, but perhaps that will not always be so).
  - gnaritas 13y ago
    > Once something functions as a mature currency, everything is priced against it, so it is no longer volatile. The economy isn't nearly so simple. Pricing something in a currency doesn't automatically make the currency stable, a stable currency comes from the currency having enough liquidity to serve as a means of exchange for the wealth it's representing but not too much. Any sudden increase or decrease in that represented wealth will cause demand for the currency to either increase or decrease and a currency fixed in supply cannot increase/decrease supply to match the demand so it must necessarily inflation/deflate in value instead. > As a side note, your comment is bizarre. There is no reason to think a fixed supply would lead to volatility. It's not at all bizarre if you think about it, a fixed currency will always be volatile because the wealth it represents isn't fixed, markets grow and shrink and if the currency can't then a booming market automatically means currency deflation because that fixed amount of currency must now represent a larger amount of wealth creation. With a fixed currency, a boom in productivity and wealth creation will cause massive deflation in the currency. I honestly don't know how anyone thinks a fixed amount of currency can possibly work when the wealth it's standing in for is not fixed. The market cycles up and down continually and the supply of currency, if prices are to be kept stable, must also. You can't have stable prices with a fixed amount of currency, it's not logical. One of them will cycle to match the market's ups and downs. So either prices will be violate or the currency must allow inflation/deflation of the currency supply to keep prices stable.
    - 13y ago

nilkn 13y ago

Bitcoin has a lot of strange features or flaws, depending on viewpoint, that many people seem to blow off. Right now, for instance, the entire network can only support something like 10 transactions per second. That's clearly not going scale. Also, the much-touted microtransactions are unlikely to really make any sense with onchain transactions due to miner fees, which will eventually become commonplace as an incentive to mining as the block rewards become smaller and smaller and the difficulty increases. As a result, offchain providers are becoming more popular, which for many of us seems to defeat the entire point of bitcoin--it reintroduces trusted third parties.

fsiefken 13y ago
Currently the average is 1 transaction per second. The transaction per second limit of 7 tps is artifical and will be lifted in the future: https://en.bitcoin.it/wiki/Scalability https://en.bitcoin.it/wiki/Scalability Bitcoin developer Timothy Lee explains more about it here: http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/12/bitcoin-needs-to-scale-by-a-factor-of-1000-to-compete-with-visa-heres-how-to-do-it/ http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/12...

atmosx 13y ago

As a currency it has already failed but as an asset I think it's here to stay.