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>The criticism that merchants will not accept Bitcoin due to its volatility is also incorrect. Bitcoin can be used entirely as a payment system; merchants do no

>The criticism that merchants will not accept Bitcoin due to its volatility is also incorrect. Bitcoin can be used entirely as a payment system; merchants do not need to hold any Bitcoin currency or be exposed to Bitcoin volatility at any time. Any consumer or merchant can trade in and out of Bitcoin and other currencies any time they want. I don't understand this. Someone is taking the risk right now. Currently it's the exchanges and merchants directly, because they rely on the exchanges. With high volatility merchants wouldn't be getting about the same amount in 1 hour turnover time right now. Everything in the process should be synced according to current exchange rates. Obviously technology makes this possible, but the technical implementation effort would be huge for widespread adoption. BTC as it stands now seems to be somewhat stabilizing, but anything is still possible until it becomes more widespread and trusted. Kind of paradoxical.

eatitraw 13y ago
> I don't understand this. Someone is taking the risk right now. Correct. > Currently it's the exchanges and merchants directly, because they rely on the exchanges. Incorrect. There is the solution: https://bitpay.com/ https://bitpay.com/ , which automatically does conversion for a small fee. Buyers pay in bitcoin, but sellers receives fiat money(e.g. USD). The risk is taken by bitpay, sellers always receive fixed amount in fiat money, and buyers have the window of 15 minutes to make BTC payment.
- tptacek 13y ago
  "Fiat money" is as I've seen it used a political message, used most often to assumptively introduce the idea that government-backed currency is suspect. But fiat currencies are simply currencies that aren't backed by collateral. To the extent that you believe it's a currency and not a tradable instrument that happens to have interesting barter and liquidity characteristics (right now), Bitcoin is a fiat currency as well.
  - eatitraw 13y ago
    Well, in my comment I simply wanted to distinguish between state-run currencies and bitcoin. > But fiat currencies are simply currencies that aren't backed by collateral I've checked wikipedia, and one of the definitions for the term "fiat money" is "state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.". Bitcoin clearly doesn't fall under this definition. So your statement is not quite true.
    - deleted 13y ago
      [deleted]
    - gnaritas 13y ago
      Because one definition doesn't fit doesn't preclude the other from fitting. Bitcoin fits the third definition on your wikipedia page, so it is fiat currency.
  - dragonwriter 13y ago
    > But fiat currencies are simply currencies that aren't backed by collateral. That's the looser definition, the narrower one (from which the name comes) is that that it is currency not backed by collateral but backed by a government's designation of it (by fiat) as legal tender. Given the absence of significant non-representative non-government-issued currencies prior to modern cryptocurrencies, the looser definition was essentially equivalent to the narrower and naming definition, so there was really no real reason to concern oneself with the difference. Now, though, especially in the context of discussions of cryptocurrencies, its probably better to stick with the narrow definition of fiat to avoid confusion and adopt a different term when something like the broader definition is necessary.
    - jellicle 13y ago
      So what's the term for something shadier than fiat currency, something not backed by collateral NOR by government dictate? It should convey all the scorn directed at "fiat currency", but moreso.
      - wmf 13y ago
        Cryptocurrency.
        dllthomas 13y ago
        Also, "scrip"
        gojomo 13y ago
        I expect government-issued cryptocurrencies soon, so a more specific, wispy-sounding term may be needed for jellicle's purpose. Coop currency? Improv currency?
      - guscost 13y ago
        What do you say to the idea that Bitcoin is backed by established laws of math and economics?
  - mcherm 13y ago
    Within the Bitcoin community, there is a strong need for a term that means "normal money, the kind that gets printed by governments, as opposed to gold, Bitcoins, stock certificates, commodities, and other fungible stores of value". The community has been using the term "fiat currency" for that. It is, effectively, a new meaning of the word (although VERY closely tied to the older meaning). Unless you have a better term (and can persuade others to use it) you may need to accept this new meaning for "fiat currency" in order to effectively communicate with others.
    - gnaritas 13y ago
      Bam, someone who understand the point of words; to communicate.
  - npongratz 13y ago
    > But fiat currencies are simply currencies that aren't backed by collateral. Apparently the definition is open to interpretation, at least if the wikipedia article[0] can be believed: Fiat money has been defined variously as: * any money declared by a government to be legal tender. * state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard. * money without intrinsic value. [0] https://en.wikipedia.org/wiki/Fiat_money https://en.wikipedia.org/wiki/Fiat_money
    - haakon 13y ago
      Every HN thread on Bitcoin is 30-50% debate over what "fiat money" means. Every single time.
      - gnaritas 13y ago
        That's what happens when people hijack words that mean one thing and then use it to mean another; there's a transition period where confusion rules and people argue about definitions. Bitcoin is a fiat currency by the standard meaning of the word, but Bitcoin'ers don't use it that way, it's their fault for creating a new meaning in their community for the word. Fiat doesn't mean government backed, now it does to them, soon someone will add a new definition in a dictionary somewhere and the debate will rage for decades.
  - gojomo 13y ago
    'Fiat money' in derivation and use means something more and somewhat different than simply 'unbacked by other collateral'. For example, the word 'fiat' alludes to a decree – as in a legislative or military 'fiat' – that the money is valuable and should (or must) be used. It so happens that the biggest implementation change between plain 'money' (which for a while implied collateral backing) to modern 'fiat money' was the removal of official asset backing, leaving only the government decrees that such money was 'legal tender'. And the theory of why this works relies on the traditional role of government, to enforce behaviors or collect taxes. (Academics discussing 'fiat money' use the term simply as a contrastive category, without the political-implications-of-suspicion you've seen elsewhere.) But Bitcoin doesn't map easily into the 'fiat money' categorization, either way. No legal authority bootstrapped Bitcoin into money by decree, nor requires its use. Bitcoin is not redeemable by some issuer for some other backing asset... but by Bitcoin's design there is no issuer who could even contemplate such a policy. And also by design, Bitcoin's limited-supply and counterfeit-resistance make it potentially self-backing, in a manner similar to gold. Gold was the traditional backing for non-fiat monies... and even though gold could circulate as currency, gold was not itself backed by other collateral. The reductionist definition of 'fiat money' as "simply currency that isn't backed by collateral" would make not just Bitcoin but also circulating gold a 'fiat money' – a fairly useless categorization at odds with historical meaning. So is Bitcoin a 'fiat money'? I could buy the answer 'no' – Bitcoin doesn't affirmatively fit the old category or usage. I could even buy the answer 'mu' – it's so different that it neither fits nor not-fits the old category, so the question is meaningless or irresolvable. But the answer 'yes' requires both an oversimplification of the 'fiat money' term, and premature conclusions about whether Bitcoin will achieve its design goals.
    - timr 13y ago
      "'Fiat money' in derivation and use means something more and somewhat different than simply 'unbacked by other collateral'." No, it really doesn't. The "non-governmental money" meaning is the colloquial use that has evolved in the various goldbug/btc nutter forums (I cringe every time I see people flinging around the phrase "convert to fiat" as if it meant something), but "fiat money" means exactly what tpatcek says it does: a money that is not backed by a commodity. "For example, the word 'fiat' alludes to a decree – as in a legislative or military 'fiat' – that the money is valuable and should (or must) be used." The word "fiat" is not a military allusion. It is Latin. It means "let it be done", or "it shall be". It is widely used in academic literature (not just economics) to denote any situation that arises by decree. The use is quite old, and it is understood that the entity making the decree does not have to be special or powerful. This is a case where some people read some economics literature and misunderstood the academic jargon, then started to abuse it.
- scott_s 13y ago
  How "automatically"? Seconds? Minutes? Hours? In other words, how much time passes between the customer paying X bitcoins, and those are converted into Y USD?
  - Nashhhh 13y ago
    Instantly. Zero exchange risk for the merchant (Bitpay considers their hedging strategies as part of their core-competence-- they don't always convert to USD/Euro/GBP [1], they sometimes stay long bitcoin). All payments for the day are aggregated (in USD/Euro/GBP [1]) and sent to the merchant (as long as it's more than $20, I believe. So it's much quicker than credit cards (and don't forget money from credit cards can be automatically pulled from the merchant account up to 120 later, whereas these ones are irreversible.) [1]Note: This is why it's easier to say "fiat" when referring to national currencies. :)

eatitraw 13y ago

> I don't understand this. Someone is taking the risk right now. Correct. > Currently it's the exchanges and merchants directly, because they rely on the exchanges. Incorrect. There is the solution: https://bitpay.com/ https://bitpay.com/ , which automatically does conversion for a small fee. Buyers pay in bitcoin, but sellers receives fiat money(e.g. USD). The risk is taken by bitpay, sellers always receive fixed amount in fiat money, and buyers have the window of 15 minutes to make BTC payment.

tptacek 13y ago
"Fiat money" is as I've seen it used a political message, used most often to assumptively introduce the idea that government-backed currency is suspect. But fiat currencies are simply currencies that aren't backed by collateral. To the extent that you believe it's a currency and not a tradable instrument that happens to have interesting barter and liquidity characteristics (right now), Bitcoin is a fiat currency as well.
- eatitraw 13y ago
  Well, in my comment I simply wanted to distinguish between state-run currencies and bitcoin. > But fiat currencies are simply currencies that aren't backed by collateral I've checked wikipedia, and one of the definitions for the term "fiat money" is "state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.". Bitcoin clearly doesn't fall under this definition. So your statement is not quite true.
  - deleted 13y ago
    [deleted]
  - gnaritas 13y ago
    Because one definition doesn't fit doesn't preclude the other from fitting. Bitcoin fits the third definition on your wikipedia page, so it is fiat currency.
- dragonwriter 13y ago
  > But fiat currencies are simply currencies that aren't backed by collateral. That's the looser definition, the narrower one (from which the name comes) is that that it is currency not backed by collateral but backed by a government's designation of it (by fiat) as legal tender. Given the absence of significant non-representative non-government-issued currencies prior to modern cryptocurrencies, the looser definition was essentially equivalent to the narrower and naming definition, so there was really no real reason to concern oneself with the difference. Now, though, especially in the context of discussions of cryptocurrencies, its probably better to stick with the narrow definition of fiat to avoid confusion and adopt a different term when something like the broader definition is necessary.
  - jellicle 13y ago
    So what's the term for something shadier than fiat currency, something not backed by collateral NOR by government dictate? It should convey all the scorn directed at "fiat currency", but moreso.
    - wmf 13y ago
      Cryptocurrency.
      - dllthomas 13y ago
        Also, "scrip"
      - gojomo 13y ago
        I expect government-issued cryptocurrencies soon, so a more specific, wispy-sounding term may be needed for jellicle's purpose. Coop currency? Improv currency?
    - guscost 13y ago
      What do you say to the idea that Bitcoin is backed by established laws of math and economics?
- mcherm 13y ago
  Within the Bitcoin community, there is a strong need for a term that means "normal money, the kind that gets printed by governments, as opposed to gold, Bitcoins, stock certificates, commodities, and other fungible stores of value". The community has been using the term "fiat currency" for that. It is, effectively, a new meaning of the word (although VERY closely tied to the older meaning). Unless you have a better term (and can persuade others to use it) you may need to accept this new meaning for "fiat currency" in order to effectively communicate with others.
  - gnaritas 13y ago
    Bam, someone who understand the point of words; to communicate.
- npongratz 13y ago
  > But fiat currencies are simply currencies that aren't backed by collateral. Apparently the definition is open to interpretation, at least if the wikipedia article[0] can be believed: Fiat money has been defined variously as: * any money declared by a government to be legal tender. * state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard. * money without intrinsic value. [0] https://en.wikipedia.org/wiki/Fiat_money https://en.wikipedia.org/wiki/Fiat_money
  - haakon 13y ago
    Every HN thread on Bitcoin is 30-50% debate over what "fiat money" means. Every single time.
    - gnaritas 13y ago
      That's what happens when people hijack words that mean one thing and then use it to mean another; there's a transition period where confusion rules and people argue about definitions. Bitcoin is a fiat currency by the standard meaning of the word, but Bitcoin'ers don't use it that way, it's their fault for creating a new meaning in their community for the word. Fiat doesn't mean government backed, now it does to them, soon someone will add a new definition in a dictionary somewhere and the debate will rage for decades.
- gojomo 13y ago
  'Fiat money' in derivation and use means something more and somewhat different than simply 'unbacked by other collateral'. For example, the word 'fiat' alludes to a decree – as in a legislative or military 'fiat' – that the money is valuable and should (or must) be used. It so happens that the biggest implementation change between plain 'money' (which for a while implied collateral backing) to modern 'fiat money' was the removal of official asset backing, leaving only the government decrees that such money was 'legal tender'. And the theory of why this works relies on the traditional role of government, to enforce behaviors or collect taxes. (Academics discussing 'fiat money' use the term simply as a contrastive category, without the political-implications-of-suspicion you've seen elsewhere.) But Bitcoin doesn't map easily into the 'fiat money' categorization, either way. No legal authority bootstrapped Bitcoin into money by decree, nor requires its use. Bitcoin is not redeemable by some issuer for some other backing asset... but by Bitcoin's design there is no issuer who could even contemplate such a policy. And also by design, Bitcoin's limited-supply and counterfeit-resistance make it potentially self-backing, in a manner similar to gold. Gold was the traditional backing for non-fiat monies... and even though gold could circulate as currency, gold was not itself backed by other collateral. The reductionist definition of 'fiat money' as "simply currency that isn't backed by collateral" would make not just Bitcoin but also circulating gold a 'fiat money' – a fairly useless categorization at odds with historical meaning. So is Bitcoin a 'fiat money'? I could buy the answer 'no' – Bitcoin doesn't affirmatively fit the old category or usage. I could even buy the answer 'mu' – it's so different that it neither fits nor not-fits the old category, so the question is meaningless or irresolvable. But the answer 'yes' requires both an oversimplification of the 'fiat money' term, and premature conclusions about whether Bitcoin will achieve its design goals.
  - timr 13y ago
    "'Fiat money' in derivation and use means something more and somewhat different than simply 'unbacked by other collateral'." No, it really doesn't. The "non-governmental money" meaning is the colloquial use that has evolved in the various goldbug/btc nutter forums (I cringe every time I see people flinging around the phrase "convert to fiat" as if it meant something), but "fiat money" means exactly what tpatcek says it does: a money that is not backed by a commodity. "For example, the word 'fiat' alludes to a decree – as in a legislative or military 'fiat' – that the money is valuable and should (or must) be used." The word "fiat" is not a military allusion. It is Latin. It means "let it be done", or "it shall be". It is widely used in academic literature (not just economics) to denote any situation that arises by decree. The use is quite old, and it is understood that the entity making the decree does not have to be special or powerful. This is a case where some people read some economics literature and misunderstood the academic jargon, then started to abuse it.
scott_s 13y ago
How "automatically"? Seconds? Minutes? Hours? In other words, how much time passes between the customer paying X bitcoins, and those are converted into Y USD?
- Nashhhh 13y ago
  Instantly. Zero exchange risk for the merchant (Bitpay considers their hedging strategies as part of their core-competence-- they don't always convert to USD/Euro/GBP [1], they sometimes stay long bitcoin). All payments for the day are aggregated (in USD/Euro/GBP [1]) and sent to the merchant (as long as it's more than $20, I believe. So it's much quicker than credit cards (and don't forget money from credit cards can be automatically pulled from the merchant account up to 120 later, whereas these ones are irreversible.) [1]Note: This is why it's easier to say "fiat" when referring to national currencies. :)