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> The criticism that merchants will not accept Bitcoin > because of its volatility is also incorrect. Bitcoin can be > used entirely as a payment system;

• dmix 13y ago
  1. no, but stability will increase with mass adoption. It's not tied down to one specific geographic market as nation-state currencies. Once it's based on global trade then it requires global instability, which is a higher threshold. USD has a similar global stability because of that vs other currencies. 2. no, how would this would decentrally? You could pay into an insurance policy maybe, that pays out in alternative currencies?
  • kaonashi 13y ago
    > but stability will increase with mass adoption I don't see how this is realistic; the needs for bitcoins will be endogenous to the people using it, whereas the supply increases based on arbitrary constants (until it stops increasing altogether). That says to me that the more people that use it, the more volatile it will become (especially after the supply freezes). When it becomes less volatile, it's merely because the needs coincidentally line up with the supply (i.e. when transaction volume drops -- fewer people 'using' it).
    • wmf 13y ago
      Mass adoption may increase liquidity on the exchanges and thus provide short-term stability. I agree that Bitcoin cannot have any long-term stability.
• thomasmeeks 13y ago
  Basically you just ask for a varying amount of Bitcoin based on the current value and immediately turn the Bitcoin received into US Dollars. Coinbase is a good example of a service that makes this easy. As an example, you want $10 for a widget. At 10AM that might be .001 Bitcoin, at 1PM that might be .0015 Bitcoin. You still get your $10. If there is a Very Bad Event, then that $10 widget might cost 7000 Bitcoin, you are still getting your $10.Or close to it. Generally your big risk is the value of Bitcoin falling through the floor in a matter of minutes and your system (or third party provider) failing to keep up with such a change. To answer your questions. 1. No. Bitcoin's value fluctuates pretty wildly and there's dozens of things that could cause the currency's value to implode. I think the challenges and risks for Bitcoin are different from government-backed currencies, but it is by no means immune to a crisis (has already had a few). 2. No. I'm sure some organizations and individuals would prop up Bitcoin. But there's no central authority with policy-making power acting on behalf of Bitcoin. Generally I think Bitcoin is going to make it. There's a lot of interest in the currency from the financial sector, and a lot of money flowing into companies that deal as service providers for the currency. Basically, enough people have a vested interest in it that it is worth taking seriously. But that's just my guess at the moment.
• pdq 13y ago
  Coinbase (and others) provide merchant services, whereby they accept a small (1% if I recall) fee to convert BTC into USD, at the current spot price. So users can pay for a product in BTC, and the merchant receives USD at the spot price of when the transaction occurred (minus fees). This eliminates BTC price fluctuation from a merchant who does not want to speculate.
• baddox 13y ago
  > I'm having trouble understanding this point of view because it implies that someone, somewhere is always willing to buy in to BTC, no matter the circumstances. Why does it imply that? You could also say that the existence of cash USD implies that someone somewhere is always willing to buy in to USD, no matter the circumstances. Obviously, this won't literally always be the case, and there are always circumstances where people won't accept USD.
• Spooky23 13y ago
  No and no. One of the big reasons that the US moved towards central banking and eventually paper currency is stability. Any finite commodity is subject to rapid swings when supplies are constrained. In recent memory, copper, silver and electricity are all commodities whose price went crazy when either demand got wacky high, or supplies got very limited. In history, the economy was traditionally very vulnerable to economic shock in the fall, because when agriculture dominated the economies small banks were starving for capital as they waited for the harvest (and payment of crop loans). Any hiccup would rapidly cascade through the system and lead to bank runs. With the fiat system, capital is made available to smooth the bumps. Instead of a depression and widespread bank failures in 2008, the central banks flooded the markets with capital and blunted the impact of the crisis and avoided panic.
  • Nashhhh 13y ago
    This is true, but the end of your post implies that recessions have become rarer and less pronounced in a fiat system. They haven't. In other words, sure, central banks "flooded the markets with capital and blunted the impact of the crisis and avoided panic", but what system was in place that allowed the manic colossal 1995-2008 housing bubble to take place? Did it not have anything to do with central banking policies, say, I dunno, incredibly low interest rates for a decade? The interesting part about your post is that it is in response to OP asking if people would be willing to buy BTC at any price (to which you responded no). But you gave the perfect example of mass psychology encouraging people to hoard an asset they believe to be safe: in this case, in 2008, it was the USD. Despite 'printing' (yes, I get it, it's not literally printing) massive amounts of USD, the world ate it up because the USD it the world's reserve currency and they (correctly) assumed that if the US is in trouble, every one else's currencies were in waaaaay worse shape. Thus the insatiable demand for something that was becoming 5x less scarce. Now, if Bitcoin ever reaches that level of belief in its capacity as a store of value (for example, based on the fact that for the first time ever you have a currency/scrip/asset/commodity whose entire supply is predetermined, fixed and immutable politically, could you not conceive that it might to have buyers flock to it? (not asking if it's probable, only if it's possible; I'd agree that at this stage this isn't the case)