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Does anyone here use Bitcoins?
tomos:
Yes app
it's not that I'm a fan of Bitcoin, nor even a fan of money at all - as we know it. Just wanted to point out to 40 that he ignored that important difference in his comparision with fractional reserve banking. It's a big reason it's doing so well and may be the making of it (could even possibly be the breaking of the fiat currencies).
40hz:
You ignore the *big* difference that Bitcoin is limited. Otherwise I agree with the above.
-tomos (April 08, 2013, 09:22 AM)
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I think I'm probably missing something again being a bitcoin neophyte. Limited in what way?
A pseudo-currency that was worth pennies a few years ago suddenly became valued at $100 last week and is now (or maybe has already) broke the $200 mark? Says who? And with what to back it? It's hyperinflating by huge amounts above all the other traditional value backers like gold.
If there were a sudden loss of confidence in standard currencies I'd think gold and all the other commodities would be hyperinflating in market value just as rapidly. But they're not. So I don't think the Cypress banking crisis (as one often given example) is driving the bitcoin roller coaster. I think it's pure speculative "gold rushing" fueld by the usual combination of greed and ignorance at play here. It's not sustainable. And when it crashes it will be far more likely to take down bitcoin rather than anything else.
wraith808:
I think I'm probably missing something again being a bitcoin neophyte. Limited in what way?
-40hz (April 08, 2013, 02:40 PM)
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http://blockchain.info/charts/total-bitcoins
Bitcoin uses an inflation source method of Limited Release, i.e. the rate of inflation will be halved every 4 years until there are 21 million BTC.
http://eprint.iacr.org/2012/584.pdf
tomos:
Sure, there's lots of differences. There's the novelty thing too.
You ignore the *big* difference that Bitcoin is limited. Otherwise I agree with the above.
-tomos (April 08, 2013, 09:22 AM)
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I think I'm probably missing something again being a bitcoin neophyte. Limited in what way?-40hz (April 08, 2013, 02:40 PM)
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Oh, I presumed you knew that - the production of Bitcoin is limited. I cant remember exactly but (I think) 20 million by 2040 and that's it. That is a big difference between it and current currencies. A lot of people blame fiat currencies for the economic state of the world. While I have grave reservations about fiat currencies, I think this is not the main problem at all. But for these people, Bitcoin is very attractive. Simply because it's limited. Well, also that it's 'free-market' and not controlled by banks or governments. And oh yes, it's a novelty thing too ;-)
[overlapped with wraith's post but will leave this bit anyway]
It seems to bother you a lot it not being backed by anything, yet you seem accepting of the same thing with the dollar (or am I misunderstanding your position there?)
If there were a sudden loss of confidence in standard currencies I'd think gold and all the other commodities would be hyperinflating in market value just as rapidly. But they're not. So I don't think the Cypress banking crisis (as one often given example) is driving the bitcoin roller coaster. I think it's pure speculative "gold rushing" fueld by the usual combination of greed and ignorance at play here. It's not sustainable. And when it crashes it will be far more likely to take down bitcoin rather than anything else.-40hz (April 08, 2013, 02:40 PM)
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very good points
IainB:
All this discussion seems to rather cloud the reality that Bitcoin started off as a very interesting kind of practical digital experiment in creating a crypto-currency, to test the theory as first described in 1998 by Wei Daito.
"b-money, a scheme for a group of untraceable digital pseudonyms to pay each other with money and to enforce contracts amongst themselves without outside help".
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The initiator of the Bitcoin experiment went under the pseudonym of Satoshi Nakamoto. Towards the end of 2010 Satoshi apparently left the project saying he had moved on to other things.
However, the experiment continues unabated, and this discussion thread is tangible evidence that we have effectively become participants in it to some extent. Even if we are not directly involved in Bitcoin, we are all apparently part of the associated and influencing environment within which it operates.
Though the relative value of a Bitcoin in terms of exogenous currencies seems to be the most compelling factor for some, it is actually a by-product of the experiment. The current artificial and deliberate cap of about 20 million BTC numbers (objects) that can be created in/by the Bitcoin protocol is very interesting in that it is a control - it safely controls the experiment and caps the bubble that we see inflating/deflating (it is currently re-inflating after having had one major deflation).
This control affects/limits the endogenous money supply (M3) in this enclosed system, but not necessarily the velocity of circulation of the money. The latter may be theoretically unlimited, but in practice could be under a constraint set via a function determining the necessary CPU cycle time forced to be consumed in operating the protocol.
The discussion in this thread around Bitcoin's comparative US$ value appreciation worries me, because I have kinda "seen it all before" in other artificial bubbles, in stock exchanges and commodity exchanges in different parts of the world, and witnessed the financial outcomes for the real people (and their families) involved.
From experience and the study of real-life practical market economics and from econometric modelling and modelling the behaviour of traders in stock exchanges and commodity trading systems, I would strongly suggest extreme caution when considering committing any hard cash (or other assets) into Bitcoin.
As I said above:
For speculators to focus on the profits to be made from gambling in arbitrage trading, as a new market develops, would be a natural thing for any emerging market, and will generally assist in its development and stability - Bitcoin would presumably be no exception to that.
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The rule-of-thumb for financial risk management in such speculative markets is: Do not risk more than you would be prepared to lose or could afford to lose.
$171.4/BTC now o.0
How I wish I bought them back in '12 when they were $5/BTC
Hindsight is a heartless bitch.
-Stephen66515 (April 07, 2013, 09:15 PM)
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Don't let the glare of the potential gains dazzle you to the extent that you are unable to see the potential losses (statistical history: there's already been one relatively major deflation, don't forget), and be aware that fear is likely to be a primary motivator in your behaviours - fear of potential loss of an unrealised potential and intangible gain. This is or would be absurd/irrational. As well as being irrational and acting as an amplifier for our innate greed under these circumstances, fear is one of the most destructive of human emotions, and it is extremely difficult to remain rational whilst in a state of fear - and therefore easy to make mistakes.
Money can make a very good servant, but a dreadful master.
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