If you can read this, either the style sheet didn't load or you have an older browser that doesn't support style sheets. Try clearing your browser cache and refreshing the page.

(Marketwatch)   Bitcoins now back above $120, or the equivalent of three acres of FarmVille   (blogs.marketwatch.com) divider line 60
    More: Followup, Farmville  
•       •       •

1116 clicks; posted to Business » on 22 Apr 2013 at 2:07 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



60 Comments   (+0 »)
   
View Voting Results: Smartest and Funniest

Archived thread

First | « | 1 | 2 | » | Last | Show all
 
2013-04-22 02:14:23 PM
i'd mine but i don't want my mac to start MELTING.  and i'd have to lower the air to 59 degrees
 
2013-04-22 02:15:58 PM
why is "mining" involved anyhow? doesn't this reward people who put their machines to work? how is that a part of this economy?
 
2013-04-22 02:30:56 PM

soakitincider: why is "mining" involved anyhow?


It's an attempt at fairness. Instead of having one central agency that can create currency on a whim, bitcoins are designed to appear randomly across the network of participating users at a controlled rate. A given user's chance of "mining" a block of coins is proportional to the computational power they are providing to the network.
 
2013-04-22 02:33:35 PM

Ivo Shandor: soakitincider: why is "mining" involved anyhow?

It's an attempt at fairness. Instead of having one central agency that can create currency on a whim, bitcoins are designed to appear randomly across the network of participating users at a controlled rate. A given user's chance of "mining" a block of coins is proportional to the computational power they are providing to the network.


And what those computers are working on, are the actual transactions of bitcoins, or something.
 
2013-04-22 02:47:41 PM

Jon iz teh kewl: i'd mine but i don't want my mac to start MELTING.  and i'd have to lower the air to 59 degrees


And even if you get some, where do you sell them to get real money?
 
2013-04-22 03:17:30 PM

abhorrent1: Jon iz teh kewl: i'd mine but i don't want my mac to start MELTING.  and i'd have to lower the air to 59 degrees

And even if you get some, where do you sell them to get real money?


There are lots of online shops that will accept them for 'real' goods:
http://www.bitcointrading.com/forum/spend-bitcoins/online-stores-acc ep ting-bitcoins/
 
2013-04-22 03:51:15 PM

soakitincider: why is "mining" involved anyhow? doesn't this reward people who put their machines to work? how is that a part of this economy?


Where our currency is generated through debt, bit coins are generated through computational horsepower.  Seems like a step in the right direction...
 
2013-04-22 03:54:43 PM

Brontes: soakitincider: why is "mining" involved anyhow? doesn't this reward people who put their machines to work? how is that a part of this economy?

Where our currency is generated through debt, bit coins are generated through computational horsepower.  Seems like a step in the right direction...


My biggest complaint about Bitcoins is the lack of stuff to do with them. I have them, so... what, exactly.

USD, while having some similar concepts of a fiat currency, has the power that the US Federal government mandates the use of USD for itself and all lower governments for accepting of taxes, fees, and payment of vendors. There's no such support for Bitcoins at this time.
 
2013-04-22 03:57:56 PM

abhorrent1: Jon iz teh kewl: i'd mine but i don't want my mac to start MELTING.  and i'd have to lower the air to 59 degrees

And even if you get some, where do you sell them to get real money?


teh interweb?
 
2013-04-22 04:06:06 PM

Summercat: Brontes: soakitincider: why is "mining" involved anyhow? doesn't this reward people who put their machines to work? how is that a part of this economy?

Where our currency is generated through debt, bit coins are generated through computational horsepower.  Seems like a step in the right direction...

My biggest complaint about Bitcoins is the lack of stuff to do with them. I have them, so... what, exactly.

USD, while having some similar concepts of a fiat currency, has the power that the US Federal government mandates the use of USD for itself and all lower governments for accepting of taxes, fees, and payment of vendors. There's no such support for Bitcoins at this time.


No argument there.  But if a new currency were to be pushed or designed (come on Mars colonies!) it shouldn't be tied to debt, but some other resource that scales with society.  What that is I have no idea, but a currency tied to technology is pretty damn cool.
 
2013-04-22 04:25:15 PM
The us dollar is bad because it is so unstable make believe. Gold is good because it is so perfectly stable and real.

Now watch as the people who believe the above defend bitcoins.
 
2013-04-22 04:35:18 PM

Brontes: soakitincider: why is "mining" involved anyhow? doesn't this reward people who put their machines to work? how is that a part of this economy?

Where our currency is generated through debt, bit coins are generated through computational horsepower.  Seems like a step in the right direction...


You apparently have no real idea of what money actually is or how money actually works.
 
2013-04-22 04:37:17 PM

Brontes: But if a new currency were to be pushed or designed (come on Mars colonies!) it shouldn't be tied to debt, but some other resource that scales with society.


Average monthly metric tonnes of human waste output?  Doo doo dollars!
 
2013-04-22 04:59:09 PM

Brontes: Summercat: Brontes: soakitincider: why is "mining" involved anyhow? doesn't this reward people who put their machines to work? how is that a part of this economy?

Where our currency is generated through debt, bit coins are generated through computational horsepower.  Seems like a step in the right direction...

My biggest complaint about Bitcoins is the lack of stuff to do with them. I have them, so... what, exactly.

USD, while having some similar concepts of a fiat currency, has the power that the US Federal government mandates the use of USD for itself and all lower governments for accepting of taxes, fees, and payment of vendors. There's no such support for Bitcoins at this time.

No argument there.  But if a new currency were to be pushed or designed (come on Mars colonies!) it shouldn't be tied to debt, but some other resource that scales with society.  What that is I have no idea, but a currency tied to technology is pretty damn cool.


The way that the USD is generated is based on how the US economy is - which is based upon debt as a way of currency control. For a lot of needs that a government has, it is - in theory, but also often in practice - better to get a loan such as issueing bonds, selling CDs, or the like, and purchase what is needed now, rather than save up for it.

It's not quite money based on debt, but rather the economic power of the United States. What you are saying is an indictment of the modern US economy as it has evolved since the early 1800s, and a concept that has been adopted pretty much worldwide. It is complicated, but simple solutions don't work nearly as well for complex situations.

Also if you advocate going back to a commodity-backed currency I will beat you with tire iron. Doubly so if you advocate a gold standard.

Global Economic Product for 2009 = 10x Value of all the gold ever mined in 2009 prices.
 
2013-04-22 05:13:11 PM
I have .052 bitcoins from when I tried mining and figured out I was losing money from keeping the PC going at max the whole time, I love watching the value go from $3 USD to $10 and over.  If it gets back over $10 I may cash it out and get a beer with the proceeds.
 
2013-04-22 05:18:28 PM

Ivo Shandor: soakitincider: why is "mining" involved anyhow?

It's an attempt at fairness. Instead of having one central agency that can create currency on a whim, bitcoins are designed to appear randomly across the network of participating users at a controlled rate. A given user's chance of "mining" a block of coins is proportional to the computational power they are providing to the network.


So, it's like gold farming with bots in wow, in that what your doing doesn't really have value, but someone will buy it off you anyways?
 
2013-04-22 05:36:22 PM

Antimatter: Ivo Shandor: soakitincider: why is "mining" involved anyhow?

It's an attempt at fairness. Instead of having one central agency that can create currency on a whim, bitcoins are designed to appear randomly across the network of participating users at a controlled rate. A given user's chance of "mining" a block of coins is proportional to the computational power they are providing to the network.

So, it's like gold farming with bots in wow, in that what your doing doesn't really have value, but someone will buy it off you anyways?


Almost worse. Wowgold has a value represented by the time saved by others.

If two types players earn different amounts of money per real life hour OR per in-game hour then it is logical for trade to take place. This is no different than the econ 101 islands trading coconuts and fish. Wowgold's value in this case is fun (such as it is) for the owner.

There IS a value to bitcoins though too: silkroad. If one removed illegal activity there is zero benefit to bitcoins over US dollars
 
2013-04-22 05:37:14 PM
I listened to about half of what pessimistic people had to say about Bitcoin; ignoring the uninformed.

If I had based all of my decisions on what these people said, I would be $2k poorer; to be clear, I have made thousands of dollars profit.

If I had based none of my decisions on what these people said, I would have more money than I have ever seen.

Every investment is risky; be careful who you listen to. I don't recommend anyone invest in anything, but it will rise along a long trend line--and continue to do so long after something much better appears to replace it (which may never happen).

The important things to grasp are: there is nothing like it, it will never go away, relatively few people know about it, and it has so much momentum that competition right now is less than a joke.
 
2013-04-22 05:39:37 PM

Brontes: soakitincider: why is "mining" involved anyhow? doesn't this reward people who put their machines to work? how is that a part of this economy?

Where our currency is generated through debt, bit coins are generated through computational horsepower.  Seems like a step in the right direction...


tl;dr version: no, it's at best just as bad and probably a step backwards

Fiat currencies like US dollars aren't really based on debt. The Fed generates more of them, when it chooses to, by buying government debt. But that doesn't mean the currency is based on debt. Buying debt is just a way to get the money into circulation. They could theoretically buy anything to get the money into circulation, but government debt is the only market big enough that they can do multi-billion dollar transactions and not break it. Currency used to be debt based, sort of, when the gold window was open, because holding $35 meant the US government owed you, at some point of your choosing, an ounce of gold. Now it's based on absolutely nothing except the faith of a seller that they'll be able to pass on that money to another seller who believes the same thing, for nearly the same amount of goods. The whole 'based on debt' thing is a little confused. Whether any of this represents a problem depends on your belief in the stability of the system and what you think of the Fed. If you believe the Fed is unlikely to radically change the rate at which the amount of currency in circulation grows, the system works well. Looking at the M2 money supply, which is basically cash, money in banks and household investments, they've increased money supply significantly since 2007 but not way outside the historical norm.
The problem with bitcoins is that a) they're equally based on nothing. They way they're distributed is different, but ultimately they're worth nothing unless you believe you can sell them to someone else. They have no intrinsic value, so in that way they're as bad as dollars (if you consider fiat currencies 'bad') and b) they have a finite upper limit. There can only ever be 21 million bitcoins in existence. The problem with that is that, if they are used as the currency in a growing economy, they will gain value over time. That's a bad thing because it prompts consumers to hoard them rather than spend or invest. With dollars, they lose value at about 2% a year on average. If you have some, you want to spend them or buy an investment. That's good for the economy. If people are hoarding money, it further drives up its value, slows economic growth and prompts people to invest in cash, which contributes nothing to society, rather than in shares and bonds which fund further economic growth and development. The economy works well only so long as it's in motion, and appreciating currencies slow that motion. A good currency needs to expand at least as fast as the economy underlying it, and ideally slightly faster. That's why almost all central banks have settled on a 2% inflation target. It keeps money depreciating at a steady rate.
So basically bitcoins are just like a fiat currency, except they place control of the money supply under some arbitrary and likely harmful rule rather than the expert control of a central bank. Since a lot of evidence points to central banks being pretty good at what they do in the modern era, that seems like a big step backwards.
 
2013-04-22 05:52:08 PM

brukmann: I listened to about half of what pessimistic people had to say about Bitcoin; ignoring the uninformed.

If I had based all of my decisions on what these people said, I would be $2k poorer; to be clear, I have made thousands of dollars profit.

If I had based none of my decisions on what these people said, I would have more money than I have ever seen.

Every investment is risky; be careful who you listen to. I don't recommend anyone invest in anything, but it will rise along a long trend line--and continue to do so long after something much better appears to replace it (which may never happen).

The important things to grasp are: there is nothing like it, it will never go away, relatively few people know about it, and it has so much momentum that competition right now is less than a joke.


The problem with that is this: bitcoins are, unlike shares or bonds, based on nothing. Traditional investments represent a stake in something real, either ownership of a company with assets or the credit of a company, person or government who will suffer real consequences if they don't honor it. Bitcoins are a fiat currency. Based on that, it's impossible to tell what they're actually worth. Yeah you can buy things with them, but the wildly fluctuating price makes that dicey. Fiat currencies can be stable only if they're all but universally accepted in a large economy, and bitcoins aren't even close. So no, they'll probably never go away and there are no serious competitors. But as you can't really live in a bitcoin economy yet, and probably never will be able to, you'll need to buy dollars with them at some point. And they're so unstable you have no idea what they'll be worth. As for them growing in value along a trendline, that only happens if demand for them continues to grow. If something better comes along, and demand goes down, their value will fall. The supply side of the market might be under control, but you can only guess at the demand side.
None of this is to say no one should buy them, but make no mistake: you're not investing, you're gambling
 
2013-04-22 06:01:44 PM

Summercat: I have them, so... what, exactly.


Illegal drugs, illegal guns, illegal documents, membership with Fat Tony's Legitimate Businessmens' Club, stuff like that.
 
2013-04-22 06:08:21 PM

doglover: Summercat: I have them, so... what, exactly.

Illegal drugs, illegal guns, illegal documents, membership with Fat Tony's Legitimate Businessmens' Club, stuff like that.


So... nothing I need, then, and very little in the way of things I desire.

If I need a high that isn't natural, I've got hard cider. If I wanted a gun, I can go buy one - clean background check here, and getting certed in my states means employment opportunities since I'm a certed security guard (No longer in that field, but still keeping my certs up to date). Not certain what documents I'd want that'd be illegal, and I canceled my contract with 24 Hour Fitness - albiet Fat Tony's Club is less shady than them.

So... basically...

Useless. I mean, Second Life Lindens have more use for more people than Bitcoins.

/Paid for art via SL Lindens, since I can't use Paypal.
 
2013-04-22 06:11:45 PM

Summercat: Paid for art via SL Lindens, since I can't use Paypal.


i49.tinypic.com
 
2013-04-22 06:13:57 PM

doglover: Summercat: Paid for art via SL Lindens, since I can't use Paypal.

[i49.tinypic.com image 256x256]


Hey, it was either that, or pay by snailmail, and the person wanted stuff on SL anyhow.

I end up having to do the same thing, buying giftcards on Amazon and the like.

...because Paypal is a goddamned de-facto monopoly.
 
2013-04-22 06:26:15 PM
How are the retailers who accept BitCoins responding to this? When the currency you accept is fluctuating wildly it must be exhausting to try to keep your prices right. And consumers must not be willing to buy anything either.
 
2013-04-22 06:46:56 PM

Foxxinnia: How are the retailers who accept BitCoins responding to this? When the currency you accept is fluctuating wildly it must be exhausting to try to keep your prices right. And consumers must not be willing to buy anything either.


they set the price in their local currency on Silk Road.
 
2013-04-22 06:55:44 PM

valkore: Brontes: But if a new currency were to be pushed or designed (come on Mars colonies!) it shouldn't be tied to debt, but some other resource that scales with society.

Average monthly metric tonnes of human waste output?  Doo doo dollars!


The market has literally turned to shiat.
 
2013-04-22 06:55:51 PM

Jon iz teh kewl: Foxxinnia: How are the retailers who accept BitCoins responding to this? When the currency you accept is fluctuating wildly it must be exhausting to try to keep your prices right. And consumers must not be willing to buy anything either.

they set the price in their local currency on Silk Road.


and the bitcoin value it sells for actually fluctuates based on that.
 
2013-04-22 08:04:38 PM
Bitcoins: the currency of slaves and kiddie porn.
 
2013-04-22 09:04:42 PM
neon_god:
The problem with that is this: bitcoins are, unlike shares or bonds, based on nothing. Traditional investments represent a stake in something real, either ownership of a company with assets or the credit of a company, person or government who will suffer real consequences if they don't honor it. Bitcoins are a fiat currency. Based on that, it's impossible to tell what they're actually worth. Yeah you can buy things with them, but the wildly fluctuating price makes that dicey. Fiat currencies can be stable only if they're all but universally accepted in a large economy, and bitcoins aren't even close. So no, they'll probably never go away and there are no serious competitors. But as you can't really live in a bitcoin economy yet, and probably never will be able to, you'll need to buy dollars with them at some point. And they're so unstable you have no idea what they'll be worth. As for them growing in value along a trendline, that only happens if demand for them continues to grow. If something better comes along, and demand goes down, their value will fall. The supply side of the market might be under control, but you can only guess at the demand side.
None of this is to ...


Neon,
I would agree with you, as I have investments in stocks and bonds and (currently) nothing in bitcoin (I would have bought it many months ago when I first heard about it, but bitcoins are a real PITA to buy even today, and at that time there was effectively no way to buy them at all).
However, I cannot figure out where the value of my stocks actually comes from.  I have a tiny minority ownership in the company - but so much of the outstanding stock is owned by the company itself that my voting interest means nothing.   If the stock does not pay dividends, as many stocks don't, then I have a tiny ownership of a company that never intends to divest its profits to shareholders. And if a company does not distribute profits to shareholders, then my finance degree tells me that any ownership is actually worthless - it's like owning a milk cow that never produces milk. The only money I can make is by selling to some later fool down the road, if the company grows and the stock value increases. And the company has more capital to grow if it keeps all its profits.
So, I can understand the value of bonds, but I cannot understand the value of non-paying stocks.

In my opinion, bitcoins are a lunatic investment, but a brilliant medium of exchange. The quick verification, low transfer fees, and irreversible transactions can be wonderful to companies that work with not-so-great economies.  Mastercard or Visa will charge a merchant upwards of 1% or 2%, but bitcoin transactions can have much lower costs; and bitcoins offer more savings if the buyer and seller otherwise would use different currencies. Any business that sells online to developing countries rife with credit card fraud can have much more safety dealing in bitcoins than credit card transactions, and they will be able to ship products days earlier. This will be good for both the company and the legitimate honest consumer in the developing country.
 
2013-04-22 09:23:07 PM
Chris45215:

You know what other currency is really good as a medium of exchange and is accepted damn near everywhere in the world? The US dollar.
 
2013-04-22 09:44:39 PM
Exchanging bitcoins for profit is a ludicrous prospect. People who have no concept of real money believe in Bitcoins. If you're one of those people, you're really stupid, but that's cool with me -- get it how you live.
 
2013-04-22 09:49:09 PM

Snarcoleptic_Hoosier: Chris45215:

You know what other currency is really good as a medium of exchange and is accepted damn near everywhere in the world? The US dollar.


Snarcoleptic,
Dollars are hard to spend over the Internet. There are also many parts of the developing world where people just won't accept dollars without charging extra, but will accept the local currency.
I don't think bitcoins are intended to replace hard currency any more than credit cards are; though a system may be developed so that a bitcoin wallet can be used much like a debit card.
But compare bitcoins to dollars. Both can be verified as authentic and legitimate relatively quickly; dollars take seconds and bitcoins take minutes, but checks and and credit cards can take days. They can also be transferred with virtually no fees, just like dollars. And finally, the act of transferring proves that you have the funds for the transaction; again, checks and credit cards require days to do that.
 
2013-04-22 10:10:06 PM
Bitcoin is "backed" by the wishful thinking of internet armchair economists. This actually makes it a stable currency because delusional thinking will never be in short supply.
 
2013-04-22 10:48:33 PM

neon_god: Brontes: soakitincider: why is "mining" involved anyhow? doesn't this reward people who put their machines to work? how is that a part of this economy?

Where our currency is generated through debt, bit coins are generated through computational horsepower.  Seems like a step in the right direction...

tl;dr version: no, it's at best just as bad and probably a step backwards

Fiat currencies like US dollars aren't really based on debt. The Fed generates more of them, when it chooses to, by buying government debt. But that doesn't mean the currency is based on debt. Buying debt is just a way to get the money into circulation. They could theoretically buy anything to get the money into circulation, but government debt is the only market big enough that they can do multi-billion dollar transactions and not break it. Currency used to be debt based, sort of, when the gold window was open, because holding $35 meant the US government owed you, at some point of your choosing, an ounce of gold. Now it's based on absolutely nothing except the faith of a seller that they'll be able to pass on that money to another seller who believes the same thing, for nearly the same amount of goods. The whole 'based on debt' thing is a little confused. Whether any of this represents a problem depends on your belief in the stability of the system and what you think of the Fed. If you believe the Fed is unlikely to radically change the rate at which the amount of currency in circulation grows, the system works well. Looking at the M2 money supply, which is basically cash, money in banks and household investments, they've increased money supply significantly since 2007 but not way outside the historical norm.
The problem with bitcoins is that a) they're equally based on nothing. They way they're distributed is different, but ultimately they're worth nothing unless you believe you can sell them to someone else. They have no intrinsic value, so in that way they're as bad as dollars (if you consid ...


I'm sorry, but I don't understand why the dollar's losing 96% of its purchasing power over the past 100 years is a good thing. Please explain.
 
2013-04-22 10:59:04 PM
valkore: Average monthly metric tonnes of human waste output?  Doo doo dollars!

shiatcoins?

/buttcoin is already taken
 
2013-04-22 11:21:25 PM

phamwaa: I'm sorry, but I don't understand why the dollar's losing 96% of its purchasing power over the past 100 years is a good thing. Please explain.


First, please explain to everyone why this is actually a concern for you, seeing as how you probably weren't even alive 100 years ago to begin with.
 
2013-04-22 11:25:05 PM

phamwaa: I'm sorry, but I don't understand why the dollar's losing 96% of its purchasing power over the past 100 years is a good thing. Please explain.


It's very simple. If you have dollars, it's a bad thing. If you owe dollars, it's a good thing. The key to success is to borrow (or better, print) as many dollars as you can and then convince some other poor schmuck to accept them in exchange for his oil, land, hours of labor, consumer goods, etc. Do more of this each year than you did the last and it's called "growth" and everyone is happy.
 
2013-04-22 11:30:25 PM

Ivo Shandor: soakitincider: why is "mining" involved anyhow?

It's an attempt at fairness. Instead of having one central agency that can create currency on a whim, bitcoins are designed to appear randomly across the network of participating users at a controlled rate. A given user's chance of "mining" a block of coins is proportional to the computational power they are providing to the network.


So a secretive central authority going under a pseudonym controls the rate at which these coins are made and distributes them via lottery (where computing power = money wagered) and this is suppose to be better than a central bank we can at least identify?
 
2013-04-23 12:32:50 AM

Ed Willy: So a secretive central authority going under a pseudonym controls the rate at which these coins are made and distributes them via lottery (where computing power = money wagered) and this is suppose to be better than a central bank we can at least identify?


The supposed benefit of Bitcoin is that there is no central authority. Bitcoins are generated and released into the wild. Anarchy in alleged currency form.  The problem, naturally, is what anarchy inevitably leads to.

Bitcoin evangelists are sitting at a round of poker with a member of the Mafia, Yakuza, Russian Mafia, Zetas, and maybe even an international terrorist organization or two and asking you to join in. I don't think you need to think twice as to who the sucker is at that table.
 
2013-04-23 12:40:23 AM

Jim_Tressel's_O-Face: Ed Willy: So a secretive central authority going under a pseudonym controls the rate at which these coins are made and distributes them via lottery (where computing power = money wagered) and this is suppose to be better than a central bank we can at least identify?

The supposed benefit of Bitcoin is that there is no central authority. Bitcoins are generated and released into the wild. Anarchy in alleged currency form.  The problem, naturally, is what anarchy inevitably leads to.

Bitcoin evangelists are sitting at a round of poker with a member of the Mafia, Yakuza, Russian Mafia, Zetas, and maybe even an international terrorist organization or two and asking you to join in. I don't think you need to think twice as to who the sucker is at that table.


I have to wonder if there aren't dictatorships and criminal/terrorist organizations running computers (or hacked botnets) to generate these coins and launder money through them.
 
2013-04-23 01:07:51 AM

Ed Willy: So a secretive central authority going under a pseudonym controls the rate at which these coins are made and distributes them via lottery (where computing power = money wagered) and this is suppose to be better than a central bank we can at least identify?


I'm not actually recommending bitcoin. The system has a lot of interesting ideas, but it also has some serious and probably fatal flaws. I have mined a couple of bitcoins with my graphics card, but when it comes to real money I've invested more in tulips than I have in BTC.

However I think you overestimate the power held by that "secretive central authority". They set up the initial rules, but since then the system has operated by consensus of all of the other users. If the founders suddenly tried to change the rules of the game (e.g. to give themselves a 1% cut of all subsequent mining operations) I'd wager that the other users would respond with a convincing "nope".
 
2013-04-23 01:31:36 AM

phamwaa: I'm sorry, but I don't understand why the dollar's losing 96% of its purchasing power over the past 100 years is a good thing. Please explain.


Because prices adjust for growing population's demand relative to their capacity to produce. Inflation is a tax on hoarding cash in a system designed around consumption as the primary driver.

Idle capital does nothing to enhance the economy (and it causes a great many problems - not unlike an engine with a fuel injector that only shoots into half the cylinders). If I have $100 dollars after all basic needs are met (food, shelter, safety, etc), I have three options: hoard, spend, invest

Hoarding means putting the money away in a can in the backyard (or under a mattress or in a safe) and not touching it. It's fine for the paranoid and those old enough to remember the depression because the effect is minimal. But, the effect is still there. For the short term, that money is out of the economy and it costs someone approximately 2% per year to do it.

Spending is the usual choice for people in the lower income brackets because most of us operate in the idea that extra stuff is fine. What you choose to spend that hundred dollars on is your choice, but the act of purchasing something means that money passes from one person to another (buying a hamburger means the employee gets paid, the meat plant gets paid, the grain farm gets paid, the trucker who hauled all the product to that store gets paid, the grill manufacturer and power company get paid, and countless others by a fractional amount because of that hamburger). Consumption begets consumption, such as the employee who rang up the hamburger using his share of the money to buy a beer after work. The idea is to spend your money now before it gets too unvaluable and you lose out - that's the basics of macroeconomics.

Investing is deciding that you don't want a new thing with your $100 and giving it to an entity who could use it to make money for you. If, for example, you knew the beer the employee in the previous example was going to buy was a popular beer looking to expand their brewing line, you might give the company that money in the hope that they can pool lots of money and turn it into more money through production. You, being a smart investor, naturally pick a good time to buy and in a year, your $100 is worth $115. Now you can keep your hundred and use the fifteen for consumption of shiny things.

Hoarding hurts the economy. Investing helps some, but only if the company being invested in actually provides value to the process. Consumption helps the most, as long as the consumption is sustainable and doesn't exceed a personal limit where debt becomes the dominant expense. The entire system is set up to punish you as a person for doing what's bad for the economy - not spend. THAT is why inflation is a good idea.
 
2013-04-23 01:42:41 AM

Chris45215: Snarcoleptic_Hoosier: Chris45215:

You know what other currency is really good as a medium of exchange and is accepted damn near everywhere in the world? The US dollar.

Snarcoleptic,
Dollars are hard to spend over the Internet. There are also many parts of the developing world where people just won't accept dollars without charging extra, but will accept the local currency.
I don't think bitcoins are intended to replace hard currency any more than credit cards are; though a system may be developed so that a bitcoin wallet can be used much like a debit card.
But compare bitcoins to dollars. Both can be verified as authentic and legitimate relatively quickly; dollars take seconds and bitcoins take minutes, but checks and and credit cards can take days. They can also be transferred with virtually no fees, just like dollars. And finally, the act of transferring proves that you have the funds for the transaction; again, checks and credit cards require days to do that.


I agree the dollar has issues, but its issues are related to access and availability, not soundness. The bitcoin is literally worth money because people think it is. The dollar is worth money because it's based upon the production and stability of the United States as the global superpower.

There is also a difference between money and currency, which I hope is simply a difference you glossed over rather than ignored. You can spend money on the internet, but you can't spend currency.

Verification of authenticity is not a problem as I haven't heard of counterfeit bitcoins (yet). Even counterfeit dollars are accepted as legitimate money (until discovered as fake, naturally) despite known examples of people printing fake bills. It's done so because the dollar is so well respected as a financial institution; it is literally the cornerstone of macrofinance and trade. All bond yields are measured against the US treasury bills because the entire planet has that much faith in the stability of the United States dollar. Bitcoins, while a novel idea, are trying to fill a gap that doesn't exist except for those in money laundering or illegal markets.

While it's true that one may not be able to pay a street merchant in dollars, one can certainly go to an embassy or bank and trade dollars for local currency. I cannot think of a bank on the planet that would not accept US dollars. Very few, if any, would accept bitcoins. I stand by my words.
 
2013-04-23 06:13:22 AM

Chris45215: However, I cannot figure out where the value of my stocks actually comes from.  I have a tiny minority ownership in the company - but so much of the outstanding stock is owned by the company itself that my voting interest means nothing.   If the stock does not pay dividends, as many stocks don't, then I have a tiny ownership of a company that never intends to divest its profits to shareholders. And if a company does not distribute profits to shareholders, then my finance degree tells me that any ownership is actually worthless - it's like owning a milk cow that never produces milk. The only money I can make is by selling to some later fool down the road, if the company grows and the stock value increases. And the company has more capital to grow if it keeps all its profits.So, I can understand the value of bonds, but I cannot understand the value of non-paying stocks.


Non-paying stocks are worth it because in the future they are expected to  pay dividends (see Apple for a company I think historically has paid little or no dividends, but currently is paying around 2.6%), or because someone will buy out all the stocks to take over the company, or because the company will buy back shares in the future. Back in the past dividends used to average 2-3% or so, which assuming the company was growing faster than inflation on average also meant the dividend was growing in real terms making the return more than it sounds. Since the 80s dividends have mostly been around 1-2%, but this is probably to do with a takeover premium increasing prices faster than otherwise expected rather than to do with companies cutting back on dividend payouts.
 
2013-04-23 06:23:10 AM

phamwaa: I'm sorry, but I don't understand why the dollar's losing 96% of its purchasing power over the past 100 years is a good thing. Please explain.


Because for a currency to work it has to continually lose value (well certainly not gain value). As we see with bitcoins, if you can become more wealthy by NOT spending the currency and nothing else, then people will hoard it. This becomes a vicious circle as the faster the price goes up, the less willing anyone is to use it until they think the boom has run its course, and then everyone wants to cash out, cratering the price. This boom and bust cycle creates a complete lack of confidence in the currency - it is difficult to do business when your prices are changing so rapidly, and no one is willing to buy your goods because they might be able to buy them tomorrow for half the number of bitcoins.

Obviously this is more apparent and easy to happen with something like bitcoins where the entire market for them is quite small, and is much harder to do with something like US$ which have 1000x the market size or whatever, but the same concept applies. This is why instead you engineer the economy and the money supply so that the value of the currency is constantly declining slowly - 2/3% is considered ideal in most places, but the main issue is that is as stable and predictable as possible, so people can plan ahead. This constant loss of value for holding currency encourages people to actually do stuff with the currency - buy things, invest in businesses, put it in a savings account, etc.
 
2013-04-23 07:43:27 AM

Chris45215: In my opinion, bitcoins are a lunatic investment, but a brilliant medium of exchange. The quick verification, low transfer fees, and irreversible transactions can be wonderful to companies that work with not-so-great economies. Mastercard or Visa will charge a merchant upwards of 1% or 2%, but bitcoin transactions can have much lower costs; and bitcoins offer more savings if the buyer and seller otherwise would use different currencies. Any business that sells online to developing countries rife with credit card fraud can have much more safety dealing in bitcoins than credit card transactions, and they will be able to ship products days earlier. This will be good for both the company and the legitimate honest consumer in the developing country.


I too can see the value of bitcoins as an exchange of currencies through the Internet. Their problem is that they must have some value in order to do this, which leads others to horde them in speculation, which makes their value volatile, which makes their use as an exchange problematic.

Some valuations of bitcoin are outright hilarious too - that they will overtake most major currencies in the world, so their market cap will one day be a significant size of the whole world's economy.

These valuations are often juxtaposed with the error of confusing money/time with just money. If the GDP of the hypothetical economy bitcoin replaces is 1,000,000, that doesn't mean the market cap of bitcoins should even be 1,000,000. The problem lies that "per year" is inferred in GDP numbers. 1,000,000 GDP means 1,000,000/year. The value should be closer to GDP/(# of transactions per yer). This knocks off a few orders of magnitude from the erroneously estimated value.
 
2013-04-23 07:44:35 AM
FYI: horde is the UK spelling for hoard. That's my story.
 
2013-04-23 09:28:19 AM

phamwaa: neon_god: Brontes: soakitincider: why is "mining" involved anyhow? doesn't this reward people who put their machines to work? how is that a part of this economy?

Where our currency is generated through debt, bit coins are generated through computational horsepower.  Seems like a step in the right direction...

tl;dr version: no, it's at best just as bad and probably a step backwards

Fiat currencies like US dollars aren't really based on debt. The Fed generates more of them, when it chooses to, by buying government debt. But that doesn't mean the currency is based on debt. Buying debt is just a way to get the money into circulation. They could theoretically buy anything to get the money into circulation, but government debt is the only market big enough that they can do multi-billion dollar transactions and not break it. Currency used to be debt based, sort of, when the gold window was open, because holding $35 meant the US government owed you, at some point of your choosing, an ounce of gold. Now it's based on absolutely nothing except the faith of a seller that they'll be able to pass on that money to another seller who believes the same thing, for nearly the same amount of goods. The whole 'based on debt' thing is a little confused. Whether any of this represents a problem depends on your belief in the stability of the system and what you think of the Fed. If you believe the Fed is unlikely to radically change the rate at which the amount of currency in circulation grows, the system works well. Looking at the M2 money supply, which is basically cash, money in banks and household investments, they've increased money supply significantly since 2007 but not way outside the historical norm.
The problem with bitcoins is that a) they're equally based on nothing. They way they're distributed is different, but ultimately they're worth nothing unless you believe you can sell them to someone else. They have no intrinsic value, so in that way they're as bad as dollars (if you consid ...

I'm sorry, but I don't understand why the dollar's losing 96% of its purchasing power over the past 100 years is a good thing. Please explain.


As long as it's predictable, for most people the losing value doesn't matter. Interest rates, wages, everything is set assuming 2% inflation per year. Since the early 80s, we've been fairly steady on that track. Unless you hold cash, it doesn't really hurt you. And we want to discourage holding cash, because it's better that money be used for something, either investment or consumption. Deflation is very bad because it tends to spiral into more deflation, freeze credit markets and prolong recessions.
 
2013-04-23 11:25:59 AM

PDid: Bitcoin is "backed" by the wishful thinking of internet armchair economists lolibertarians. This actually makes it a stable currency because delusional thinking will never be in short supply.


Fixed that for you. Bitcoin, in 2010-2011, was the center point for a hilarious community of scammers, idiots, lolibertarians and "idea men" who wanted to pay Engineers 10% of the profit to design and implement their brilliant idea.

In 2013 Bitcoin is the center point for a hilarious community of scammers, idiots, lolibertarians and "investors" who will take their wife's 401K to invest in this wonderful currency of the future. Oh, and the Winkledink Twins.

Even if it was a viable currency the wild swings in price (last BTC thread had them priced at $250, then they plummeted to $60-$70, then up, then down, then up...you get the picture) make it worthless for anything else than baby's first risky investment. Libertarians who pimp BTC always place emphasis on how it's "not centralized" and "no chargebacks" and "be your own bank".

Well, it is centralized. Buy a BTC. Now, try to cash it out to pay rent or buy a burrito. You can choose a sketchy exchange that teeters on the edge of collapse in Poland or the famous Magic: The Gathering Online Exchange, which limits your daily withdrawls, lags like a motherfarker when trading is hot and is subject to multiple DDOS attacks. Oh, and the they close on Fridays.

No chargebacks: If you dig into bitcointalk forums, you will quickly see that much of the BTC community are taking advantage of that in the scummiest way possible. Look up "pirat" and his ponzi scheme that resulted in what probably approached a million dollars getting scammed away by him.

Be your own bank: Yeah, and get to download the 6 gig block chain in order to do any transactions. Oh, and have to wait for your transaction to be approved. Which could take days if it is small and not worth the fee. I would rather stuff money in my mattress.

Basically, BTC was written as proof of concept and was never intended to become the currency of the future. It's generally useless and the community is full of gullible idiots who get scammed by the other part of the community. Look up Bruce and the Bitcoin show or, even better, Butterfly Labs and their ASIC scam.

One last point. You can't mine them anymore with any sort of reasonable efficiency. If you have anything less than an ASIC mining pool, you will use more power than the fraction of BTC you mine is worth. You will also ruin your graphics card. Case in point: Somewhere around 30% of the network is controlled by an ASIC mining pool in China.

To sum it up: invest your money in Eve ISK. More stable, less spergy community and it's at least kinda fun to play the game.
 
Displayed 50 of 60 comments

First | « | 1 | 2 | » | Last | Show all

View Voting Results: Smartest and Funniest


This thread is archived, and closed to new comments.

Continue Farking
Submit a Link »






Report