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Serious question: If one is engaged in entirely legal activities - no money laundering, no drugs, no illegal weapons, no tax evasion, no slipping around intern

Serious question: If one is engaged in entirely legal activities - no money laundering, no drugs, no illegal weapons, no tax evasion, no slipping around international monetary controls - why would one want to use Bitcoin? With the volatility of Bitcoin's price, transfer costs of traditional payment methods (1-3%) are totally dwarfed by the risk of holding Bitcoins for even a short period of time. Maybe there is some opportunity for arbitrage in currency conversion rates, because of the low daily trading volume? But that doesn't seem like a likely profitable investment when you can lose 4% of your value at 3am because of a cascading margin call on a single exchange. Other than currency speculation and the ease of evading the law, why would anyone want to exchange a reasonably stable national currency for bitcoin?

ewoodrich 12y ago
I'd imagine the greatest benefit would be as a low friction P2P payment option. It's still hard to just send a fixed amount of money to someone with traditional payment systems, and if both parties have and use BTC, it would be pretty convenient.
- dangerlibrary 12y ago
  > a fixed amount of money That's still tricky with bitcoin, though, no? You can certainly send a fixed amount of BTC, but that value is probably going to get pegged to a national currency when you want to spend it.
  - ewoodrich 12y ago
    True, which is part of the reason I've held off on buying any (price volatility still concerns me). In theory though, it is a superior payment transfer method between individuals, compared with the current system. But it has a lot of drawbacks right now, as well.
- tzs 12y ago
  > It's still hard to just send a fixed amount of money to someone with traditional payment systems [...] How about Venmo? That looks pretty easy.
natrius 12y ago
Holding bitcoins isn't required to spend money using the Bitcoin network. Services can let you purchase bitcoins when you're making a payment and send them instantly. (They need your credit card as a backup payment method in case the ACH fails.) Sellers quote a Bitcoin price that is stable for 15 minutes. There is no price fluctuation during a purchase. It's effectively paying with your bank account over the Bitcoin network, and paying much lower fees as a result. This is why paying with Bitcoin will be common within a year.
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- coryking 12y ago
  What you describe is basically: Fiat -> Credit Card/ACH -> Bitcoin -> Fiat -> ACH (on supplier). You are basically adding at least two extra steps in a transaction vs. what exists now. How is this better than what exists now?
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  - natrius 12y ago
    ACH is slow, so taking out the Bitcoin steps isn't possible today. Bitcoin wasn't required for this flow. PayPal had all the pieces, but they didn't put them together the right way.
- ssharp 12y ago
  So it's an API for ACH? That could be a bonus for merchants, giving them a standardized way of processing low-fee payments, but what's the appeal for consumers? Merchants pay the credit card fees because offering the credit card option ultimately results in more revenue than not offering the credit card option. The adoption needs to happen more so on the consumer-side than the merchant-side. Merchants can offer the service, but that doesn't mean people will utilize in. I get 1.5% back on all my credit card purchases, so I'm incentivized to put as much of my spending on my credit card as I can. I also get additional consumer and fraud protections on my credit card that are either not as good or completely missing from doing ACH transfers on my bank account. I think BitCoin needs far more appealing consumer use-cases than it currently has to really hit widespread adoptions.
dmix 12y ago
If we don't take a US-centric view of it where everything not within their financial system is illegal, what about countries such as Argentina? Bitcoin is global. As a digital ecommerce infrastructure there is a lot of value. For example, even in Canada and it was very difficult accepting foreign credit cards until Stripe came around. The merchant/CC industry moved so slowly it took decades longer than it should have to get adequate APIs. BTC doesn't have these limitations, especially for underdeveloped countries. Vendors in the middle of Africa do not need a bank account and credit card merchant account to sell products online. Plus they can distribute the earnings to their family members working across the country with their mobile phone, without their family needing accounts. Most Americans seem to be drawn to the decentralized nature but there are opportunities in other countries to escape corrupt or non-existent banks, or use it as an alternative to their countries even more unstable currencies.
- atmosx 12y ago
  > If we don't take a US-centric view of it where everything not within their financial system is illegal, what about countries such as Argentina? Bitcoin is global. As a digital ecommerce infrastructure there is a lot of value. If it were that valuable, we'd know by now. BTC is a failed currency, but a successful asset. Escaping corrupt and non-existent bank to go after an uncontrolled currency is equally risky and way more stupid.
  - jerguismi 12y ago
    > If it were that valuable, we'd know by now. BTC is a failed currency, but a successful asset. How long do you usually think infrastructure around protocol such as bitcoin takes time to develop? I personally think we're still early in the game. > Escaping corrupt and non-existent bank to go after an uncontrolled currency is equally risky and way more stupid. What is your proposal then? I think holding ARS at least is not very wise move, but many still seem to do it. Physical USD cash is widely used in the streets, but bitcoin or something like it could be much more accessible alternative in the long term.
    - 12y ago
jerguismi 12y ago
Speculation is legal and in my opinion very valid reason to use bitcoin. I'm in for mostly speculation and savings reason, as are many of the people who are into bitcoin and I know of. To date it has worked very well for me. Of course everyone has always said that I should not do this, but I'm very glad I did, and did not listen to my girlfriend, accountant and tax advisor. I also use bitcoins, mostly because it is very frictionless. I actually have always small amount of unencrypted bitcoins in both my phone and computer for small day-to-day online purchases, tipping and clearing debts between friends. Also the sovereignity appeals to me. I've never experienced any banking problems myself, but I've heard of many. Just the idea that solely me decides how my money moves appeals to me, and there is very limited possibility for anyone to touch my bitcoins.
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fredbrown 12y ago
A serious question in return: What's wrong with speculation and evading government interference?
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- atmosx 12y ago
  Depends, do you believe in 'democracy'? If not, then nothing is wrong with that. If you do, then there's a whole lot of things that can go wrong. ps. The argument that we don't have democracy today in the western world, holds true to an extend but it is as close to democracy as we can get.
  - innguest 12y ago
    But "crony capitalism" is a much more accurate way to describe the US right now than "Democracy", so why do you choose this over that? I think it's a very weak argument to say "this is the closest we can currently get to X, therefore it can be said we have X". What we have now, as I said above, can be said to be closer to other things than it is closer to democracy. We should then pick the thing we're closest to, out of all the things we're close to. And that is not democracy.
    - atmosx 12y ago
      Bitcoin != Democracy. BTC could allow an anonymous party to control a currency, given enough % of that currency in circulation. Compare that to the current system. You may not like it, but currently the central banker (who creates policies for the good of his country) is appointed by the governments (ECB/FED). The later sounds extremely more democratic to me. Now BTC is owned mostly by techies and small, adventurous investors. Once countries and investment bankers step in, hell will break loose. You don't want to seriously depend on something that you don't have a clue who controls.
      - innguest 12y ago
martindale 12y ago
The case is much clearer outside of the US, where the drawbacks of centralized currencies are more visible. For example, Argentina's rate of inflation was 30% in January alone.
- atmosx 12y ago
  I don't believe you people! Say Goldman Sachs decides to enter BTC. What % of BTC in circulation do you think the biggest investment bank can buy? Let's settle for a 5%. Then Agentina decides to dump the USD and go with BTC. Suddenly GS wants to make the 5% share jump to 6% without spending money, because that's what they do! The broker starts dumping (selling) massive amounts of BTC to the market. Everyone goes crazy and starts selling too, because the price is diving. At the same time and without notice GS starts buying, while everyone else is selling/dumping. Now the Argentian government is way poorer, because they used BTC to buy services when BTC was trading for 450 USD but now they have to sell, and because of GS, BTC is trading to 150 USD. Having to rely in a foreign currency as the USD/EUR, essentially gives you the ability to get many more short-term loans, because it adds value to your 'products' but gives away control. You can't control your currency anymore so you can't make policy decisions based on your needs. See Greece for example. If Greece didn't had the EUR, it could never have gone in that debt. Additionally if it has the Drachma (old GR currency) it would have been able to devalue and boost exports. Now Greece depends on Brussels and the only thing it can do is cut expenses which leads in vicious cycle of poverty. What you're describing, though is even worst. Having to rely on a currency that is controlled by whom has the biggest %, in a totally anonymous scope, is madness in the purest form and a recipe for disaster. Worst than anything you've ever seen because it will be instant and without notice. Imagine what would have happened to the UK in 1992 (Black Wednesday), is the Bank of England wasn't able to exit the ERM. GBP would have ultimately fail in one week time.
jnbiche 12y ago
Because a lot of us dream of a decentralized, digital world currency enabling frictionless global trade, and we are willing to sacrifice exposure to volatility to achieve that goal. And a lot of us have very specific attitudes toward the role of government in peaceful, non-exploitative trade, and see Bitcoin as a possible solution to what we see as constant governmental overreach. In short, we're idealists. We've been at the forefront of many revolutionary technologies (Internet, 3d printing, etc.).
guelo 12y ago
Most bitcoin services end up charging more than 1-3% anyway.
IkmoIkmo 12y ago
> why would anyone want to exchange a reasonable stable national currency for bitcoin? Name me 10 currencies you'd be comfortable holding. It'll probably be very difficult. Fact is, billions use currencies with high inflation rates and with relatively short lifespans. And it's not just places like Zimbabwe that have many problems besides insane inflation the past decade. It's also relatively developed countries like Argentina that suffer from insane inflation. It's also small stable countries with a nice standard of living ($27k GDP PPP) with an educated population like Cyprus where many lost their savings as bank deposits were frozen or seized. And that's just protection from governmental malfeasance that hundreds of millions have to be aware of. But it's also the fact that billions are unbanked. We at HN know more than anyone that providing a physical service (like mail delivery) is 1 million times more expensive than a digital service (like e-mail). Same for banking, for vaults, for ATMs, for services like lending, payments, remittance or money transfer. A digital version can be much cheaper, as well as more accessible. (for a bank you often need proof of identity, residence and employment. Good luck when you have no birth certificate, when you live in a slum, when you have an off-the-record job like selling fruit on the corner of the street). Digital banking can bring cheap financial services to hundreds of millions who don't have it, yet have (intermittent) access to networks as simple as SMS or radio, which can plug in to gateways to the bitcoin network. Next up is us, the wealthy who enjoy relatively nice financial services. Bitcoin can save 1-3% in fees on any transaction. Imagine that there's a 1-3% tax on everything, not value added, everything, every transaction, whether B2C or B2B, and you have a way to remove that. That's very significant. Entire industries run on margins of 1-5%. Amazon's 2013 margin was 0.35%, imagine they could shave off even 0.5%. Now that doesn't mean we all should actually buy and hold bitcoin. As you say, the volatility dwarfs this percentage. But volatility can be exclusive to investors. For example, Bitreserve (founded by the founder of CNET) lets you lock in the price. That means you can buy $100 of bitcoin, and see $100 on your account, as if it was Paypal. And then you can spend that $100 anytime you want, and it'll always be worth that much. On the backend the service then lets investors create a market to lock in that price, where various investors make short or long bets, a derivatives market can take out the volatility for the customer, thereby allowing people to use bitcoin, save costs, yet be shielded from volatility. That means business to business payments, too. Besides that there's lots of other things. Like the fact it can be much more secure. Creditcard fraud is rampant as your password is essentially on the card and you have to share it everytime you pay, it's crazy. Chargeback fraud is an issue. Identity theft is therefore an issue. And you can envision crazy things like a Google driverless car paying, on the fly, to another driverless car infront of it, to move away, so that it can take that lane and go faster, because the one in the back is willing to pay extra for speed, and the one in front is okay with arriving a little later. Those kinds of thing can almost only be built on a global, permissionless protocol layer. So indeed none of us may use bitcoin, it may just be a machine to machine currency, it's too early to tell, it can have an impact in many different ways.
mrb 12y ago
Why use Bitcoin? 1. As a consumer, it's fast and cheap. My dad in France can send money, instantly, to me who live in the US. No waiting days for wire transfers. No trip to a local Western Union branch necessary. No exhorbitant fee (worldwide remittance fees average 9%!) I don't even have to bother exchanging the coins with dollars to spend them, because more and more merchants begin to accept Bitcoin. 2. For consumers in countries who do not have a stable currency (Argentina with 30%+ year-over-year inflation!) - Bitcoin helps them protect the value of their savings. 3. As a merchant, Bitcoin reduces fraud to zero from my viewpoint. When my site receives a Bitcoin payment from some first-time customer from a foreign country, I can still ship the goods or services to him without worrying it is a fraudulent purchase that will be charged back, because Bitcoin payments are irreversible unlike credit cards. 4. As a merchant, I make more profits. CC payment processing companies typically charge approximately $2 on the purchase of a $100 item. My industry has thin profit margins: the item might have cost me $95 from my distributor, so I make only $3 profit per sale. However typical Bitcoin payment processors like Coinbase or Bitpay only charge 0-1% in fees. So I make $4-5 dollars of profit per sale. This is 33-66% higher profits per sale!
- atmosx 12y ago
  1. It's a not a real-world scenario. Especially the part where you don't spend USD becuase more merchants begin to accept BTC, like if you're going to buy bread with BTC. You're not and if you do, you're 1 in 100.000.000.000. 2. Yes, that might work but it's extremely risky and complicated. When if you need to cash out quickly? What if BTC prices goes back to 150 USD because a large BTC holder (an investment bank) decided to dump the price? 3. Yes, that's true. But you have to do some kind of leverage for your prices automatically adjust btc-to-usd (or eur), otherwise BTC volatility might kill your business. But this is true, it's safer and quicker than credit cards + no other parties involved/documentation/transaction costs. 4. Yes but a volatile currency that has no central bank behind it, is not gold-backed and has no country who will support it, any economist knows that can go from 1000 to 0 in less then 3 hours. If you're sleeping in the meantime you might end up loosing way more than your pre-calculated predictable CC costs.
  - infogulch 12y ago
atmosx 12y ago
The serious answer is that he would never do that EXCEPT if the advantages offered by BTC would overshadow the disadvantages. For example if I need to send money to China within an hour without prior notice, BTC would be extremely handy. However, I don't know or can think of any such because turning BTC into local currency is both hard and expensive.
Hermel 12y ago
Sooner or later, a trusted financial institution will start to issue USD and EUR as colored coins on the Bitcoin network (or another cryptocurrency). From that point on, the volatility risk will be gone, but the benefits of a freely transferrable currency will remain. With the benefits being: fast (with traditional currencies, settlement takes two days), easy to integrate, and open source. In particular, the latter point can offer a huge strategic advantage. Linux is successful because companies like IBM do not want to depend on Microsoft. Bitcoin can be successfuly for the same reason - namely because big corporations prefer depending on an open standard over depending on a competitor's payment system.
- atmosx 12y ago
  The only reason a big corporation would want to depend on a currency without central bank banking (e.g. controlled somehow) is if it owns the largest chunk of that currency, so it can play the role of the central banker as it see fit. When other corporations realize what is happening they will dump the currency in no time and the currency will lose value. The Linux is not controlled by anyone. Any company can build upon it, modify it and do what it needs to do. The comparison between Linux/BTC is extremely flawed!
  - Hermel 12y ago
    This is not about Bitcoin the currency, it is about Bitcoin the payment system. The currencies used would be the traditional ones (e.g. USD coins), but the payment system would be Bitcoin. Thus, your argument does not apply.
- wcoenen 12y ago
  I don't think that colored coins will have much success. There is a reason that bitcoin was designed without a fixed exchange rate to any other asset or currency. An issuer of colored coins would be centralized. It would be a weak spot that needs to be trusted and that can be controlled. The benefits of bitcoin would soon be lost.
sebicas 12y ago
If you would live in Argentina, like me, and your currency loss 95% value in less than 10 years, you will understand why.
- StavrosK 12y ago
  Is Bitcoin being used there? Even among friends or something?
alkimie2 12y ago
Ask yourself, do you know someone with relatives or business activities overseas? Then ask them about their experiences about doing international financial transactions of any kind. It is expensive, time consuming, and generally painful. Consider buying something on Alibaba using bitcoin. I'd suggest that bitcoin adoption which is beholden to no particular country, opens up opportunities as a consumer, and more options for finding the right supplier overseas for business. I've lived in the U.S., Asia and the Middle East, and to me bitcoin answers, or potentially answers, my needs. And much as I have mixed feelings about paypal, I use it often for ebay and other vendors for convenience. Assuming their fees are not too high, I would not mind using them as an intermediary into traditional bank accounts.
awt 12y ago
Alodial rights to your wealth. There isn't really another great reason.
ryangittins 12y ago
Before anything else, Bitcoin is a way of transferring value anywhere cheaply, quickly, and without chargebacks, counterfeiting, or relying on a line of credit. If the exchange price stabilizes to the point where things can be priced only in Bitcoin, that's just a bonus. People get too hung up on the idea of using Bitcoin in exactly the same manner as they do dollars. It may happen at some point, but for now it is used as a means of transferring value. If we consider only this use case, the advantages are abundantly clear. Then, we can start debating and speculating on Bitcoin's merit as a full currency.
doctorfoo 12y ago
- Political reasons, supporting a (electronic) currency that has minimal restrictions. (e.g. I don't need anyone's permission to install a Bitcoin app; whereas I'd need to jump through some hoops to get a bank account). - Absolute control of my own money. My bitcoin payments will never be frozen, unlike my debit card + paypal have been. - Ease of use; it is simply easier to pay via bitcoin (once you have the bitcoins) versus credit card. (I can click a link, my bitcoin client pops up preloaded with the amount, I click "pay". Only other thing that comes close is PayPal). - Anonymity of purchases and donations. I can (and have) donated money to random people on internet forums without them needing to even know my (real name containing) email address (such as would be the case with PayPal). I've gifted online strangers with Pizza! - Don't have to give vaguely untrusted merchants my card details. The most I'm trusting them with is to deliver the product. - To support the potential future applications. This is programmable money with an API open to any software developer on the face of the earth. - It's just freaking cool. It's like science fiction. It's like having a star wars credit chit. Which can be stored on my computer or phone. Paper wallets are cool too. So are brain wallets. There are of course some downsides to Bitcoin, but I'm sure you can think of those yourself ;)
dalore 12y ago
You could take out the risk by as soon as you accepted a payment in bitcoin took a reverse option for the bitcoin value in USD.

ewoodrich 12y ago

I'd imagine the greatest benefit would be as a low friction P2P payment option. It's still hard to just send a fixed amount of money to someone with traditional payment systems, and if both parties have and use BTC, it would be pretty convenient.

dangerlibrary 12y ago
> a fixed amount of money That's still tricky with bitcoin, though, no? You can certainly send a fixed amount of BTC, but that value is probably going to get pegged to a national currency when you want to spend it.
- ewoodrich 12y ago
  True, which is part of the reason I've held off on buying any (price volatility still concerns me). In theory though, it is a superior payment transfer method between individuals, compared with the current system. But it has a lot of drawbacks right now, as well.
tzs 12y ago
> It's still hard to just send a fixed amount of money to someone with traditional payment systems [...] How about Venmo? That looks pretty easy.

natrius 12y ago

Holding bitcoins isn't required to spend money using the Bitcoin network. Services can let you purchase bitcoins when you're making a payment and send them instantly. (They need your credit card as a backup payment method in case the ACH fails.) Sellers quote a Bitcoin price that is stable for 15 minutes. There is no price fluctuation during a purchase. It's effectively paying with your bank account over the Bitcoin network, and paying much lower fees as a result. This is why paying with Bitcoin will be common within a year.

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coryking 12y ago
What you describe is basically: Fiat -> Credit Card/ACH -> Bitcoin -> Fiat -> ACH (on supplier). You are basically adding at least two extra steps in a transaction vs. what exists now. How is this better than what exists now?
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- natrius 12y ago
  ACH is slow, so taking out the Bitcoin steps isn't possible today. Bitcoin wasn't required for this flow. PayPal had all the pieces, but they didn't put them together the right way.
ssharp 12y ago
So it's an API for ACH? That could be a bonus for merchants, giving them a standardized way of processing low-fee payments, but what's the appeal for consumers? Merchants pay the credit card fees because offering the credit card option ultimately results in more revenue than not offering the credit card option. The adoption needs to happen more so on the consumer-side than the merchant-side. Merchants can offer the service, but that doesn't mean people will utilize in. I get 1.5% back on all my credit card purchases, so I'm incentivized to put as much of my spending on my credit card as I can. I also get additional consumer and fraud protections on my credit card that are either not as good or completely missing from doing ACH transfers on my bank account. I think BitCoin needs far more appealing consumer use-cases than it currently has to really hit widespread adoptions.

dmix 12y ago

If we don't take a US-centric view of it where everything not within their financial system is illegal, what about countries such as Argentina? Bitcoin is global. As a digital ecommerce infrastructure there is a lot of value. For example, even in Canada and it was very difficult accepting foreign credit cards until Stripe came around. The merchant/CC industry moved so slowly it took decades longer than it should have to get adequate APIs. BTC doesn't have these limitations, especially for underdeveloped countries. Vendors in the middle of Africa do not need a bank account and credit card merchant account to sell products online. Plus they can distribute the earnings to their family members working across the country with their mobile phone, without their family needing accounts. Most Americans seem to be drawn to the decentralized nature but there are opportunities in other countries to escape corrupt or non-existent banks, or use it as an alternative to their countries even more unstable currencies.

atmosx 12y ago
> If we don't take a US-centric view of it where everything not within their financial system is illegal, what about countries such as Argentina? Bitcoin is global. As a digital ecommerce infrastructure there is a lot of value. If it were that valuable, we'd know by now. BTC is a failed currency, but a successful asset. Escaping corrupt and non-existent bank to go after an uncontrolled currency is equally risky and way more stupid.
- jerguismi 12y ago
  > If it were that valuable, we'd know by now. BTC is a failed currency, but a successful asset. How long do you usually think infrastructure around protocol such as bitcoin takes time to develop? I personally think we're still early in the game. > Escaping corrupt and non-existent bank to go after an uncontrolled currency is equally risky and way more stupid. What is your proposal then? I think holding ARS at least is not very wise move, but many still seem to do it. Physical USD cash is widely used in the streets, but bitcoin or something like it could be much more accessible alternative in the long term.
  - 12y ago

jerguismi 12y ago

Speculation is legal and in my opinion very valid reason to use bitcoin. I'm in for mostly speculation and savings reason, as are many of the people who are into bitcoin and I know of. To date it has worked very well for me. Of course everyone has always said that I should not do this, but I'm very glad I did, and did not listen to my girlfriend, accountant and tax advisor. I also use bitcoins, mostly because it is very frictionless. I actually have always small amount of unencrypted bitcoins in both my phone and computer for small day-to-day online purchases, tipping and clearing debts between friends. Also the sovereignity appeals to me. I've never experienced any banking problems myself, but I've heard of many. Just the idea that solely me decides how my money moves appeals to me, and there is very limited possibility for anyone to touch my bitcoins.

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fredbrown 12y ago

A serious question in return: What's wrong with speculation and evading government interference?

deleted 12y ago
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atmosx 12y ago
Depends, do you believe in 'democracy'? If not, then nothing is wrong with that. If you do, then there's a whole lot of things that can go wrong. ps. The argument that we don't have democracy today in the western world, holds true to an extend but it is as close to democracy as we can get.
- innguest 12y ago
  But "crony capitalism" is a much more accurate way to describe the US right now than "Democracy", so why do you choose this over that? I think it's a very weak argument to say "this is the closest we can currently get to X, therefore it can be said we have X". What we have now, as I said above, can be said to be closer to other things than it is closer to democracy. We should then pick the thing we're closest to, out of all the things we're close to. And that is not democracy.
  - atmosx 12y ago
    Bitcoin != Democracy. BTC could allow an anonymous party to control a currency, given enough % of that currency in circulation. Compare that to the current system. You may not like it, but currently the central banker (who creates policies for the good of his country) is appointed by the governments (ECB/FED). The later sounds extremely more democratic to me. Now BTC is owned mostly by techies and small, adventurous investors. Once countries and investment bankers step in, hell will break loose. You don't want to seriously depend on something that you don't have a clue who controls.
    - innguest 12y ago

martindale 12y ago

The case is much clearer outside of the US, where the drawbacks of centralized currencies are more visible. For example, Argentina's rate of inflation was 30% in January alone.

atmosx 12y ago
I don't believe you people! Say Goldman Sachs decides to enter BTC. What % of BTC in circulation do you think the biggest investment bank can buy? Let's settle for a 5%. Then Agentina decides to dump the USD and go with BTC. Suddenly GS wants to make the 5% share jump to 6% without spending money, because that's what they do! The broker starts dumping (selling) massive amounts of BTC to the market. Everyone goes crazy and starts selling too, because the price is diving. At the same time and without notice GS starts buying, while everyone else is selling/dumping. Now the Argentian government is way poorer, because they used BTC to buy services when BTC was trading for 450 USD but now they have to sell, and because of GS, BTC is trading to 150 USD. Having to rely in a foreign currency as the USD/EUR, essentially gives you the ability to get many more short-term loans, because it adds value to your 'products' but gives away control. You can't control your currency anymore so you can't make policy decisions based on your needs. See Greece for example. If Greece didn't had the EUR, it could never have gone in that debt. Additionally if it has the Drachma (old GR currency) it would have been able to devalue and boost exports. Now Greece depends on Brussels and the only thing it can do is cut expenses which leads in vicious cycle of poverty. What you're describing, though is even worst. Having to rely on a currency that is controlled by whom has the biggest %, in a totally anonymous scope, is madness in the purest form and a recipe for disaster. Worst than anything you've ever seen because it will be instant and without notice. Imagine what would have happened to the UK in 1992 (Black Wednesday), is the Bank of England wasn't able to exit the ERM. GBP would have ultimately fail in one week time.

jnbiche 12y ago

Because a lot of us dream of a decentralized, digital world currency enabling frictionless global trade, and we are willing to sacrifice exposure to volatility to achieve that goal. And a lot of us have very specific attitudes toward the role of government in peaceful, non-exploitative trade, and see Bitcoin as a possible solution to what we see as constant governmental overreach. In short, we're idealists. We've been at the forefront of many revolutionary technologies (Internet, 3d printing, etc.).

guelo 12y ago

Most bitcoin services end up charging more than 1-3% anyway.

IkmoIkmo 12y ago

> why would anyone want to exchange a reasonable stable national currency for bitcoin? Name me 10 currencies you'd be comfortable holding. It'll probably be very difficult. Fact is, billions use currencies with high inflation rates and with relatively short lifespans. And it's not just places like Zimbabwe that have many problems besides insane inflation the past decade. It's also relatively developed countries like Argentina that suffer from insane inflation. It's also small stable countries with a nice standard of living ($27k GDP PPP) with an educated population like Cyprus where many lost their savings as bank deposits were frozen or seized. And that's just protection from governmental malfeasance that hundreds of millions have to be aware of. But it's also the fact that billions are unbanked. We at HN know more than anyone that providing a physical service (like mail delivery) is 1 million times more expensive than a digital service (like e-mail). Same for banking, for vaults, for ATMs, for services like lending, payments, remittance or money transfer. A digital version can be much cheaper, as well as more accessible. (for a bank you often need proof of identity, residence and employment. Good luck when you have no birth certificate, when you live in a slum, when you have an off-the-record job like selling fruit on the corner of the street). Digital banking can bring cheap financial services to hundreds of millions who don't have it, yet have (intermittent) access to networks as simple as SMS or radio, which can plug in to gateways to the bitcoin network. Next up is us, the wealthy who enjoy relatively nice financial services. Bitcoin can save 1-3% in fees on any transaction. Imagine that there's a 1-3% tax on everything, not value added, everything, every transaction, whether B2C or B2B, and you have a way to remove that. That's very significant. Entire industries run on margins of 1-5%. Amazon's 2013 margin was 0.35%, imagine they could shave off even 0.5%. Now that doesn't mean we all should actually buy and hold bitcoin. As you say, the volatility dwarfs this percentage. But volatility can be exclusive to investors. For example, Bitreserve (founded by the founder of CNET) lets you lock in the price. That means you can buy $100 of bitcoin, and see $100 on your account, as if it was Paypal. And then you can spend that $100 anytime you want, and it'll always be worth that much. On the backend the service then lets investors create a market to lock in that price, where various investors make short or long bets, a derivatives market can take out the volatility for the customer, thereby allowing people to use bitcoin, save costs, yet be shielded from volatility. That means business to business payments, too. Besides that there's lots of other things. Like the fact it can be much more secure. Creditcard fraud is rampant as your password is essentially on the card and you have to share it everytime you pay, it's crazy. Chargeback fraud is an issue. Identity theft is therefore an issue. And you can envision crazy things like a Google driverless car paying, on the fly, to another driverless car infront of it, to move away, so that it can take that lane and go faster, because the one in the back is willing to pay extra for speed, and the one in front is okay with arriving a little later. Those kinds of thing can almost only be built on a global, permissionless protocol layer. So indeed none of us may use bitcoin, it may just be a machine to machine currency, it's too early to tell, it can have an impact in many different ways.

mrb 12y ago

Why use Bitcoin? 1. As a consumer, it's fast and cheap. My dad in France can send money, instantly, to me who live in the US. No waiting days for wire transfers. No trip to a local Western Union branch necessary. No exhorbitant fee (worldwide remittance fees average 9%!) I don't even have to bother exchanging the coins with dollars to spend them, because more and more merchants begin to accept Bitcoin. 2. For consumers in countries who do not have a stable currency (Argentina with 30%+ year-over-year inflation!) - Bitcoin helps them protect the value of their savings. 3. As a merchant, Bitcoin reduces fraud to zero from my viewpoint. When my site receives a Bitcoin payment from some first-time customer from a foreign country, I can still ship the goods or services to him without worrying it is a fraudulent purchase that will be charged back, because Bitcoin payments are irreversible unlike credit cards. 4. As a merchant, I make more profits. CC payment processing companies typically charge approximately $2 on the purchase of a $100 item. My industry has thin profit margins: the item might have cost me $95 from my distributor, so I make only $3 profit per sale. However typical Bitcoin payment processors like Coinbase or Bitpay only charge 0-1% in fees. So I make $4-5 dollars of profit per sale. This is 33-66% higher profits per sale!

atmosx 12y ago
1. It's a not a real-world scenario. Especially the part where you don't spend USD becuase more merchants begin to accept BTC, like if you're going to buy bread with BTC. You're not and if you do, you're 1 in 100.000.000.000. 2. Yes, that might work but it's extremely risky and complicated. When if you need to cash out quickly? What if BTC prices goes back to 150 USD because a large BTC holder (an investment bank) decided to dump the price? 3. Yes, that's true. But you have to do some kind of leverage for your prices automatically adjust btc-to-usd (or eur), otherwise BTC volatility might kill your business. But this is true, it's safer and quicker than credit cards + no other parties involved/documentation/transaction costs. 4. Yes but a volatile currency that has no central bank behind it, is not gold-backed and has no country who will support it, any economist knows that can go from 1000 to 0 in less then 3 hours. If you're sleeping in the meantime you might end up loosing way more than your pre-calculated predictable CC costs.
- infogulch 12y ago

atmosx 12y ago

The serious answer is that he would never do that EXCEPT if the advantages offered by BTC would overshadow the disadvantages. For example if I need to send money to China within an hour without prior notice, BTC would be extremely handy. However, I don't know or can think of any such because turning BTC into local currency is both hard and expensive.

Hermel 12y ago

Sooner or later, a trusted financial institution will start to issue USD and EUR as colored coins on the Bitcoin network (or another cryptocurrency). From that point on, the volatility risk will be gone, but the benefits of a freely transferrable currency will remain. With the benefits being: fast (with traditional currencies, settlement takes two days), easy to integrate, and open source. In particular, the latter point can offer a huge strategic advantage. Linux is successful because companies like IBM do not want to depend on Microsoft. Bitcoin can be successfuly for the same reason - namely because big corporations prefer depending on an open standard over depending on a competitor's payment system.

atmosx 12y ago
The only reason a big corporation would want to depend on a currency without central bank banking (e.g. controlled somehow) is if it owns the largest chunk of that currency, so it can play the role of the central banker as it see fit. When other corporations realize what is happening they will dump the currency in no time and the currency will lose value. The Linux is not controlled by anyone. Any company can build upon it, modify it and do what it needs to do. The comparison between Linux/BTC is extremely flawed!
- Hermel 12y ago
  This is not about Bitcoin the currency, it is about Bitcoin the payment system. The currencies used would be the traditional ones (e.g. USD coins), but the payment system would be Bitcoin. Thus, your argument does not apply.
wcoenen 12y ago
I don't think that colored coins will have much success. There is a reason that bitcoin was designed without a fixed exchange rate to any other asset or currency. An issuer of colored coins would be centralized. It would be a weak spot that needs to be trusted and that can be controlled. The benefits of bitcoin would soon be lost.

sebicas 12y ago

If you would live in Argentina, like me, and your currency loss 95% value in less than 10 years, you will understand why.

StavrosK 12y ago
Is Bitcoin being used there? Even among friends or something?

alkimie2 12y ago

Ask yourself, do you know someone with relatives or business activities overseas? Then ask them about their experiences about doing international financial transactions of any kind. It is expensive, time consuming, and generally painful. Consider buying something on Alibaba using bitcoin. I'd suggest that bitcoin adoption which is beholden to no particular country, opens up opportunities as a consumer, and more options for finding the right supplier overseas for business. I've lived in the U.S., Asia and the Middle East, and to me bitcoin answers, or potentially answers, my needs. And much as I have mixed feelings about paypal, I use it often for ebay and other vendors for convenience. Assuming their fees are not too high, I would not mind using them as an intermediary into traditional bank accounts.

awt 12y ago

Alodial rights to your wealth. There isn't really another great reason.

ryangittins 12y ago

Before anything else, Bitcoin is a way of transferring value anywhere cheaply, quickly, and without chargebacks, counterfeiting, or relying on a line of credit. If the exchange price stabilizes to the point where things can be priced only in Bitcoin, that's just a bonus. People get too hung up on the idea of using Bitcoin in exactly the same manner as they do dollars. It may happen at some point, but for now it is used as a means of transferring value. If we consider only this use case, the advantages are abundantly clear. Then, we can start debating and speculating on Bitcoin's merit as a full currency.

doctorfoo 12y ago

- Political reasons, supporting a (electronic) currency that has minimal restrictions. (e.g. I don't need anyone's permission to install a Bitcoin app; whereas I'd need to jump through some hoops to get a bank account). - Absolute control of my own money. My bitcoin payments will never be frozen, unlike my debit card + paypal have been. - Ease of use; it is simply easier to pay via bitcoin (once you have the bitcoins) versus credit card. (I can click a link, my bitcoin client pops up preloaded with the amount, I click "pay". Only other thing that comes close is PayPal). - Anonymity of purchases and donations. I can (and have) donated money to random people on internet forums without them needing to even know my (real name containing) email address (such as would be the case with PayPal). I've gifted online strangers with Pizza! - Don't have to give vaguely untrusted merchants my card details. The most I'm trusting them with is to deliver the product. - To support the potential future applications. This is programmable money with an API open to any software developer on the face of the earth. - It's just freaking cool. It's like science fiction. It's like having a star wars credit chit. Which can be stored on my computer or phone. Paper wallets are cool too. So are brain wallets. There are of course some downsides to Bitcoin, but I'm sure you can think of those yourself ;)

dalore 12y ago

You could take out the risk by as soon as you accepted a payment in bitcoin took a reverse option for the bitcoin value in USD.