All of this is fundamentally correct, but what you're missing is that this is not actually a good thing at all. Because why would you spend 20 bitcoins to buy a new car when if you wait six months and do absolutely nothing, the car will now be worth 15 bitcoins because each bitcoin is worth more? And since the car dealer can now only get 15 bitcoins for his car, he'll need to cut costs by firing workers or reducing their pay, which encourages the workers to stop spending their bitcoins especially since they know that each bitcoin will be worth more down the line and... That's why bitcoin's detractors keep pointing that bitcoin is inherently deflationary, and this is a massive, massive problem in a currency, especially a currency which is as voltaile as Bitcoin. I want to know why someone is so self-important that he thinks that anyone would give a **** about the fact that he brought a loaf of bread, some meat, and the latest movie. This is something I touched upon earlier - people need to get over the fact that if someone really, really wants to figure out who you are, they can. In general, people don't care, but if you start buying kiddie p*rn or cocaine, that's when things change. Bitcoin is one of the few examples where "if you have nothing to hide, you have nothing to fear" actually IS true. Irrelevant, because I can use debit/credit cards online as well in addition to using debit card in places where I can't use bitcoins ( like say, a small place like a grocery store) Supply is not the sole determinant of value. If it was, then prices under the gold standard would have been more stable than our current system where you declare that " central bankers that can devalue currency with a keystroke by creating more supply and giving it to big banks (bailouts, zero interest loans, etc)." Here's a tip: They weren't. If the problem was physical creation, then explain why Amazon, Steam, iTunes and most online stores do not price their goods at random prices like $4.65 or $17.32, but rather put everything at 99 or 49 cents. My answer is that people don't really care if their goods are priced at $8.92 or $8.99, which thus means that 1. People don't really care for microtransactions for something that little and 2. Dollars can do this anyways, because there's nothing stopping a store from pricing a good at $6.57 if they really wanted to do so.
^youre not dennominating your transaction in btc. $5.00 is $5.00 no matter what the btc rate is. The fact that the dealer get 5000 less btc selling a car doesn't mean anything when he cashes it out instantly at the fixed price he asked for. Coinbase works with various vendors and you can customize any way you want. Ive seen this at subway and it works well. As for btc itself, I've managed to profit over $70k trading this unregulated currency. The key is to not be greedy. The cycle just "clicks" to me.
merchants will usually have an automated exchange system setup to immediately convert to fiat like you said.. business still deal with taxes and expenses in dollars so they don't care about bitcoin futures just as long as they are getting fair value in the present which is made into dollars ASAP
I know it's a bad thing, I just posted it to see if anybody was going to try and argue against it. Lovely pic of the cycle too, I'm just more surprised that nobody has brought up the deflationary argument.
You are assuming that you are holding the majority of your wealth in dollars. But if bitcoin is supposed to go mainstream, then you'd reasonably expect some people to start only purchasing and denominating things in bitcoin for all their purchases and, more importantly, earnings. IMO it's this reason why bitcoin cannot go mainstream. imo its fine if you are looking to convert your main currency into bitcoin, and then immediately back to your main currency,but if you want a whole economy (both consumers and producers) to be sustainable on bitcoin (a finite resource), seems difficult if not impossible.
Why do people stand in line to buy the newest smart phone the day it's released, when they know six months later it will be half the price? Eventually you buy the things you want to buy, when the downside of delayed gratification exceeds whatever money you would save. The potential to have your wealth destroyed by central bankers inflating the money supply is a bigger problem than (gasp!) your savings having more buying power over time. A significant portion of the price you are paying is the transaction fee the seller owes to the credit card company. With bitcoin, that all goes away, and prices drop. But supply can be significantly altered instantaneously, impacting the value. That's more of a psychological thing, a relic of hard currency transactions. Let's say I want to raise money for a hypothetical relative to get a life saving procedure. People might be willing to send me $.01, but the transaction costs make this impractical. But $.01 in bitcoins could be sent instantaneously for no cost. Or a million people might each send $.0001 in bitcoin. So much of our time/human capital is spent moving money, and verifying those transactions. Imagine if all those accountants/lawyers/bankers were now freed up to do something more productive? The institutions most threatened by bitcoin are Visa/MasterCard/Paypal. In the same way email/internet freed up vast amounts of capital, electronic currency can create a similar revolution in productivity.
Of all the examples you could use, you pick an iPhone? Really? You are trying to compare a medium of exchange (bitcoin) with an actual usable good, the iPhone? If you are trying to argue for the case of deflation, then you're pretty much going against the entire economics profession plus the case of Japan. Good luck.
So, for those skeptical here is an example of the power of bitcoin. This was posted on reddit and I'm stealing a comment from a redditor and then I'll post the article. Ukraine Protestors Turn to Bitcoin to Ease Cash Crisis The dust is yet to settle on the recent, often violent protests in Ukraine that began last November and saw at least 82 people killed and hundreds injured, many seriously. President Viktor Yanukovych was removed from office and has gone into hiding. On the ground in the capital, Kiev, particularly around the protests’ focal point, the central square known as Maidan Nezalezhnosti or simply ‘Maidan’, there are thousands of people volunteering to deal with the aftermath as winter drags on. Field surgeries and hospitals treat the wounded, kitchens feed the crowds, blankets and clothing are distributed to those who need them, and people with vehicles shuttle everything around. Not only is this a major logistical and people-management feat to co-ordinate, but it must all be paid for somehow. So, expatriate Ukrainians around the world have joined the fight to campaign and raise funds to assist the struggle back home. Sending the funds home is another matter. PayPal only allows money to be sent out of Ukraine, while international bank transfers can take days to complete. Much of the time, transfers happen through friends and trust networks. This week sees a new campaign to raise funds directly via bitcoin. Photos are beginning to appear online with protestors holding up QR code signs, as part of a co-ordinated effort to collect donations from anywhere in the world, in any amount, in an instant. On the ground (and the Web) Organizing the campaign at the Kiev end is Nastasia Pustova, part of a network of 900 volunteers. Having worked as a manager in the advertising industry for 10 years and more recently as a strategist, she knows all about social media marketing and image management, as well as dealing with tough deadlines and team management. She recently – “and by accident”, she says – provoked the creation of an activist group on Facebook that collected donations for the protestors and supporters, and now spends 12 to 16 hours a day at the keyboard co-ordinating her team. Jake Smith, a bitcoin entrepreneur, now based in Beijing, contacted Pustova after seeing a posting on Listserve about the situation, to see if she would be interested in building bitcoin into the campaign. “I’d heard a lot about bitcoin – many of my friends are geeky guys working abroad. Bitcoin was often joked about, but I didn’t get into much detail until Jake contacted me,” she said. Does she think bitcoin could be useful as a day-to-day tool for transactions between locals as well as to remit money from overseas? ”The way I see it, the main obstacle for bitcoin here is that it’s only possible to use online currencies and e-money (such as bitcoin and PayPal) for online purchases outside Ukraine. So the problem here is not in technical infrastructure, but in the legal and financial one.” The majority of Ukrainians prefer to do their social networing via Russia-based social network Vkontakte, with Facebook as a secondary option. Pustova says her statistics revealed Internet penetration for over 14-year-olds in Ukraine is 42%, with about 17.2m people being regular users. Fourteen per cent of its 44.6m population have smartphones. These figures will probably increase, she says, “because gadgets are getting cheaper, as well as mobile Internet, and they become affordable to more and more people”. The expat connection Assisting Pustova from the Czech Republic is Viktor Kiyashko, one of those Ukrainian expats living abroad and helping collect funds and channel them to local coordinators. Working as an IT Manager for DHL Information Services in Prague, Kiyashko says he has transferred the equivalent of over $15,000 so far, sometimes needing to convert currencies multiple times and using his own money to pay a fee for each one. “At the beginning via PayPal it was around 7-8%, as I was doing four conversions. Now it’s less, as I do it via friends who give their money now and will wait for me to give it back to them later,” he said. ”The benefit I have is living in the EU, where banking and financial systems are a bit more advanced than in Ukraine. [Since the downfall of Yanukovych] it’s better, as there’s no such hurry, but still people need help and can’t wait for official banking transfer dates, which can take weeks.” The fees themselves don’t bother him so much: “If you have wounded people, and need money now, the same day, you don’t care about that.” To get around the financial system’s roadblocks, he has been using a kind of hawala system, holding the funds himself and promising to pay friends in Ukraine back at a future date. Kiyashko said he wasn’t familiar with bitcoin until Jake Smith explained it to him as well. http://www.coindesk.com/hold-ukraine-protestors-turn-bitcoin-fundraising/
I think he's arguing the case of instant gratification. Some people may squirrel away their btc hoping it increases in value, while plenty of other people have to have the iPhone the day it comes out. Those people won't wait for their btc to increase in value, but rather purchase whatever they want whenever they are able because they have to have it right then.
Arguing that deflation is okay because it won't TOTALLY destroy consumer spending...is not a very good argument.
I should clarify. I'm bitcoin neutral. I'm anti stupid. Stupid is criticizing a fiat currency backed by the greatest war machine on earth, then buying a fiat currency backed by even less. Make sense?
For those here that support Bitcoin, can share with us how many coins you have and how frequently do you pay for things with it? Or is it mainly for "investment" purposes at this point?
I honestly haven't found a strong argument for why it would or wouldn't work probably because this technology really is novel but, from my vantage, it really depends on how BTC is adopted. Right now, people are hoarding BTC as the scenario is saying but once commercial entities start accepting it, that should start up a real economy. The question is, when will prices stabilize? Will, they ever, to start? Depends on the rate of how much BTC is lost. But the more people are using it to buy goods and services, then the sooner we know. I just don't know if it'll take a big swoop of commercial entities accepting or we can do it gradually but the more people to get over this hump. But people are spending BTC for goods and services, right now. On the matter of falling prices, we'll need newer systems to continuously report how much each BTC is worth. Sounds like a tall order but is it really that much worse than the current regulated system where we have to pay taxes for the government's services and have the value regulated by people? And we get all the other advantages of Bitcoin. That's about it for that. All his other concerns are non-issues, though. Ridiculous how loud he's going about it.
my friend got some to use when it was at 100 then it boomed out to like 6-700 he made a **** load off it
long interview with Chief Security Officer of blockchain.info <iframe width="560" height="315" src="//www.youtube.com/embed/wzwWIDIVSTo?start=61" frameborder="0" allowfullscreen></iframe>
