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Unless it becomes world money. USD is a promise paper like stocks. Bitcoin is like a gold coin. You can fully own the real thing without trusting someone to sto

Unless it becomes world money. USD is a promise paper like stocks. Bitcoin is like a gold coin. You can fully own the real thing without trusting someone to store it for you.

brador 13y ago
You really think Bitcoin will make it as a usable currency? You know deflationary = hold and never spend, right? Not much use as a currency if there's no flow or will to exchange for goods.
- oleganza 13y ago
  Money is valuable for "reservation demand". The more people want to hold it, the more useful it is to everyone. Only this way it can become a currency. You can't have currency without value and can't have value without holding and having many hands to hold. http://blog.oleganza.com/post/66953255676/transactional-currency-and-store-of-value http://blog.oleganza.com/post/66953255676/transactional-curr... http://blog.oleganza.com/post/43378777734/on-circulation-of-money http://blog.oleganza.com/post/43378777734/on-circulation-of-...
- gnerd 13y ago
  Well for a reserve currency, deflation is positive as a hedge for inflation. China have bought more gold than anyone else in the world for that reason, to mitigate holding foreign reserve currency (which they limited just last month) or debt priced in foreign currency that inflates beyond their control or liking. One would expect this is the role BitCoin would take, just like gold except a lot more convenient to move around. It is a solution to the Triffin Dilemma, which in 2009 the Governor of The Bank of China wrote about. That same year Russia proposed a new international reserve currency backed by precious metals and a currency basket to solve the same problem. In South America there have been proposals for a petro dollar, backed by oil for the same reason. Deflation is good for a reserve currency, in some ways it is fairer than gold because you don't have to rely on the geographical distribution of gold in the ground.
  - dragontamer 13y ago
    Massive deflation is terrible for an economy. When the Wii was making record sales in the USA, Nintendo was reporting record losses. Why? Because the Yen to USD exchange hit 80 to 1, and all of a sudden Nintendo was making 20% less revenues on all US sales. Deflation is BAD BAD BAD for companies who work with your currency.
    - oleganza 13y ago
      So Nintendo was losing money why exactly? Because Japan was not printing money as fast as US? Maybe the problem is in printing money at all? Do you see a symmetry of products vs. money? Both are assets that some people need and some other want to give. If one is in deflation, then another is in inflation to another. Why don't you buy MacBook 2 years from now, when it'll cost the same, but will be more awesome? Because you have non-infinite "time preference": you want certain things today vs. tomorrow. Why people want to hold money? Because it gives them ability to spend it anytime on anything - it's most liquid, most desirable commodity. This is big value in having something in your wallet - freedom to make decisions in face of future uncertainty. If you can freely choose between money which loses in value and money which doesn't, which one every person would put their savings in? Then, everyone spends according to his own time preference - amount of desire to enjoy stuff today vs. tomorrow. http://blog.oleganza.com/post/43378777734/on-circulation-of-money http://blog.oleganza.com/post/43378777734/on-circulation-of-... Here's also a thought experiment on deflationary spiral: http://blog.oleganza.com/post/66215430631/deflationary-spiral http://blog.oleganza.com/post/66215430631/deflationary-spira...
      - dragontamer 13y ago
        > So Nintendo was losing money why exactly? Because Japan was not printing money as fast as US? Maybe the problem is in printing money at all? Because Japan's currency deflated, while the US currency inflated. Printing of money is simply a means to control deflation or inflation. All of the "thought experiments" on deflationary spirals ignore the fact that one happened: the Great Depression of 1930s. And back then, the US Monetary system was pegged to the Gold Standard. We fixed the problem by getting off the Gold Standard. It turns out, basing your country's economy on a deflating commodity was not a good idea.
dragontamer 13y ago
Funny you chose gold as an example, when Gold is down 40% this year. If you care about USD at the end of the day, then Gold has been a _terrible_ store of value this past year. After peaking at $1,800, Gold is currently trading at ~$1250. If BTC follows the route that Gold has followed, we'll see a lot of sad investors.
- oleganza 13y ago
  Gold is dropping probably for its own flaws. It's heavy and expensive to handle, and you have to trust same banks you trust your other money to. Bitcoin has almost all positive qualities of gold and none of the negative ones. Plus some bonus uber-cool features.
  - dragontamer 13y ago
    > Gold is dropping probably for its own flaws. It's heavy and expensive to handle, and you have to trust same banks you trust your other money to The same problems it has had for the last 10000 years. You can't seriously expect these "realizations" to have an effect on Gold prices.
    - oleganza 13y ago
      Today 90% of economy is worldwide, instant, over the internet. Internet did not exist 30 years ago. Gold can't fly through the wire. New digital economy needs reliable digital money. USD and EUR are highly unreliable digital money and we all know it.
      - dragontamer 13y ago
        And as long as BTC decides to change its price by 100% every two weeks, it is a far more unreliable "storage of value" than USD (which is changing its value by approximately 3% a _year_). Don't mistake the forest for the trees. When BTC learns to be less volatile, THEN we can start talking about replacing USD or EUR. Until then, understand one thing. People want STABILITY in their currencies, at least if they are going to spend it.

Unless it becomes world money. USD is a promise paper like stocks. Bitcoin is like a gold coin. You can fully own the real thing without trusting someone to store it for you.

brador 13y ago

You really think Bitcoin will make it as a usable currency? You know deflationary = hold and never spend, right? Not much use as a currency if there's no flow or will to exchange for goods.

oleganza 13y ago
Money is valuable for "reservation demand". The more people want to hold it, the more useful it is to everyone. Only this way it can become a currency. You can't have currency without value and can't have value without holding and having many hands to hold. http://blog.oleganza.com/post/66953255676/transactional-currency-and-store-of-value http://blog.oleganza.com/post/66953255676/transactional-curr... http://blog.oleganza.com/post/43378777734/on-circulation-of-money http://blog.oleganza.com/post/43378777734/on-circulation-of-...
gnerd 13y ago
Well for a reserve currency, deflation is positive as a hedge for inflation. China have bought more gold than anyone else in the world for that reason, to mitigate holding foreign reserve currency (which they limited just last month) or debt priced in foreign currency that inflates beyond their control or liking. One would expect this is the role BitCoin would take, just like gold except a lot more convenient to move around. It is a solution to the Triffin Dilemma, which in 2009 the Governor of The Bank of China wrote about. That same year Russia proposed a new international reserve currency backed by precious metals and a currency basket to solve the same problem. In South America there have been proposals for a petro dollar, backed by oil for the same reason. Deflation is good for a reserve currency, in some ways it is fairer than gold because you don't have to rely on the geographical distribution of gold in the ground.
- dragontamer 13y ago
  Massive deflation is terrible for an economy. When the Wii was making record sales in the USA, Nintendo was reporting record losses. Why? Because the Yen to USD exchange hit 80 to 1, and all of a sudden Nintendo was making 20% less revenues on all US sales. Deflation is BAD BAD BAD for companies who work with your currency.
  - oleganza 13y ago
    So Nintendo was losing money why exactly? Because Japan was not printing money as fast as US? Maybe the problem is in printing money at all? Do you see a symmetry of products vs. money? Both are assets that some people need and some other want to give. If one is in deflation, then another is in inflation to another. Why don't you buy MacBook 2 years from now, when it'll cost the same, but will be more awesome? Because you have non-infinite "time preference": you want certain things today vs. tomorrow. Why people want to hold money? Because it gives them ability to spend it anytime on anything - it's most liquid, most desirable commodity. This is big value in having something in your wallet - freedom to make decisions in face of future uncertainty. If you can freely choose between money which loses in value and money which doesn't, which one every person would put their savings in? Then, everyone spends according to his own time preference - amount of desire to enjoy stuff today vs. tomorrow. http://blog.oleganza.com/post/43378777734/on-circulation-of-money http://blog.oleganza.com/post/43378777734/on-circulation-of-... Here's also a thought experiment on deflationary spiral: http://blog.oleganza.com/post/66215430631/deflationary-spiral http://blog.oleganza.com/post/66215430631/deflationary-spira...
    - dragontamer 13y ago
      > So Nintendo was losing money why exactly? Because Japan was not printing money as fast as US? Maybe the problem is in printing money at all? Because Japan's currency deflated, while the US currency inflated. Printing of money is simply a means to control deflation or inflation. All of the "thought experiments" on deflationary spirals ignore the fact that one happened: the Great Depression of 1930s. And back then, the US Monetary system was pegged to the Gold Standard. We fixed the problem by getting off the Gold Standard. It turns out, basing your country's economy on a deflating commodity was not a good idea.

dragontamer 13y ago

Funny you chose gold as an example, when Gold is down 40% this year. If you care about USD at the end of the day, then Gold has been a _terrible_ store of value this past year. After peaking at $1,800, Gold is currently trading at ~$1250. If BTC follows the route that Gold has followed, we'll see a lot of sad investors.

oleganza 13y ago
Gold is dropping probably for its own flaws. It's heavy and expensive to handle, and you have to trust same banks you trust your other money to. Bitcoin has almost all positive qualities of gold and none of the negative ones. Plus some bonus uber-cool features.
- dragontamer 13y ago
  > Gold is dropping probably for its own flaws. It's heavy and expensive to handle, and you have to trust same banks you trust your other money to The same problems it has had for the last 10000 years. You can't seriously expect these "realizations" to have an effect on Gold prices.
  - oleganza 13y ago
    Today 90% of economy is worldwide, instant, over the internet. Internet did not exist 30 years ago. Gold can't fly through the wire. New digital economy needs reliable digital money. USD and EUR are highly unreliable digital money and we all know it.
    - dragontamer 13y ago
      And as long as BTC decides to change its price by 100% every two weeks, it is a far more unreliable "storage of value" than USD (which is changing its value by approximately 3% a _year_). Don't mistake the forest for the trees. When BTC learns to be less volatile, THEN we can start talking about replacing USD or EUR. Until then, understand one thing. People want STABILITY in their currencies, at least if they are going to spend it.