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Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

blog.coinbase.com

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Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#111

Post by Jd »

Symmetry wrote: post #110
Jd wrote: post #22

Earlier quoted context omitted.

The problem with all fiat currencies is they have no inherent value; it is all in the eye of the beholder. So what is an "appropriate" price is quite difficult to determine. Most currencies are driven by being effective monopolies wherever they are issued, so the market price remains somewhat stable. Even so, many professional economists have opined that the exchange rates even between major currencies are way too vo…

Well, in general the price level of bitcoins, how much individual bitcoins are worth compared to other goods, is going to end up being governed by MV = PQ Where M is the quantity of bitcoins, V is how fast they criculate, P is the price things in bitcoins, and Q is the size of the economy that bitcoins are used for. Since the bitcoin design prevents M from increasing that much, and since V tends to fluctuate a lot bu…

I think Q is closer to the size of the market rather than the size of the "economy." "Economy" implies both tangible goods and buyers and sellers for those goods. The problem with Q in the Bitcoin sense is that it can move around a lot, since it is an obvious target for speculators with no interest in tangible goods.

Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#112

Post by Jd »

smosher wrote: post #95
nullc wrote: post #60

Earlier quoted context omitted.

You've misunderstood that defintion. Economically speaking fiat is a currency that exists by rulemaking instead of having an inherent value— it's constructed. The definition doesn't say who does the constructing or how. Bitcoin is a fiat currency— the fiat is embedded in the software that runs on and is enforced by all the Bitcoin nodes, it's the rules that make the currency exist and work. It's largely immutable, pa…

I still don't buy it. I disagree on many points, but the easiest to argue is that it does, in fact, have inherent value. At its most general, that value is in allowing people to make exchanges they wouldn't otherwise be able to make. In particular, that sadly seems to be centered on drug trade. The fact that someone designed the mechanics has little to do with it. Back when BTC was close to USD$30, I was wondering ho…

>> that value is in allowing people to make exchanges they wouldn't otherwise be able to make.

Well, you could say the exact same about every currency. If you are a chicken farmer, it is easier to buy a pound of pork for $5 than trying to trade your chickens for a slab of a pig (i.e. barter). All currencies provide value, since they are a lot easier than barter. The question is not that, it is whether or not they are based on something of inherent value.

Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#113

Post by Jd »

pixie_ wrote: post #108
tedunangst wrote: post #94

Earlier quoted context omitted.

You have made the Internet-libertarian/goldbug mistake of thinking fiat is a dirty word.

Show me a fiat currency the appreciates over time and maybe I'll look at it differently. Have you ever thought of that the root of our over-consumption society might be caused by the need to keep our money always moving to prevent it from depreciating?

This is a very complicated and interesting topic. Many economists believe that inflation is necessary to keep people from hoarding. Spending, either in the form of acquisition or investment, is necessary to keep the economy juiced up.

In other words, your criticism would be considered a design feature by many economists. Some even considered adding a fee (demurrage) instead of facilitating inflation, encouraging you to use whatever money you had. This would be akin to a 1% asset tax instead of an income tax.

Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#114

Post by sliverstorm »

Dylan16807 wrote: post #70
sliverstorm wrote: post #50

Earlier quoted context omitted.

It isn't that surprising to me, considering the payout for miners was halved a month or two ago.

Do you really think the price would change very much if the miner payout was raised or dropped by a factor of ten? Over half the bitcoins have already been mined; expecting the price to be based on the trickle of new ones is unrealistic.

It may change eventually, and the exchange rate does fluctuate dramatically sometimes, but it has been shown in the past that the market value of bitcoins tends to stabilize around the electricity cost of mining.

Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#115

Post by Jd »

nullc wrote: post #103
teebs wrote: post #80

Earlier quoted context omitted.

Just based on the Wikipedia article, I don't think you're right that fiat implies manipulation: http://en.wikipedia.org/wiki/Fiat_currency So, based on that definition, it is true that Bitcoin is not a fiat currency because it is not given value by law or government. However, although it technically does not have a centralized issuing authority that can arbitrarily create Bitcoins, Satoshi Nakamoto did hard code a cr…

You're making the mistake of consulting a medium writable by throngs of InternetLibertarians™. :P There is nothing inherent in the economic concept of a fiat currency of government. What is a law or a government in any case? Bitcoin is created by rules. The rules are embedded in a program instead of a law-book. The governed users opt in by using the software rather than by living in some geography. The rules are enfo…

Although I do agree with you that the difference between Bitcoin and other fiat currencies is a matter of degree and not type, there is a rather important difference that you are skipping over. The fact is that there is accountability with respect to Bitcoin issuance, whereas there is little to none with respect to the amount of currency issued in other venues (i.e. central banks), except the possibility that people will flee the currency and devalue it.

In fact, with respect to money creation there are not a lot of set rules. The main problem is keeping supply matched with demand. From a governmental standpoint demand is usually enforced (at the very least by forcing taxes to be paid in your currency).

Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#116

Post by conroe64 »

Symmetry wrote: post #110
Jd wrote: post #22

Earlier quoted context omitted.

The problem with all fiat currencies is they have no inherent value; it is all in the eye of the beholder. So what is an "appropriate" price is quite difficult to determine. Most currencies are driven by being effective monopolies wherever they are issued, so the market price remains somewhat stable. Even so, many professional economists have opined that the exchange rates even between major currencies are way too vo…

Well, in general the price level of bitcoins, how much individual bitcoins are worth compared to other goods, is going to end up being governed by MV = PQ Where M is the quantity of bitcoins, V is how fast they criculate, P is the price things in bitcoins, and Q is the size of the economy that bitcoins are used for. Since the bitcoin design prevents M from increasing that much, and since V tends to fluctuate a lot bu…

I think you need to include speculators in your equation. If S is the number of bitcoins being horded, we would get (M - S)V = PQ. Since the perception seems to be shifting where more and more people believe that Q is going to continue to increase, S becomes larger (and in extreme cases, a bubble).

Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#117

Post by conroe64 »

Dylan16807 wrote: post #93
jswinghammer wrote: post #92

Earlier quoted context omitted.

Correct. The problem being the use of the word inherent to describe value. There is no such thing as inherent value unless you are describing a use and not the price someone would be willing to pay for something. For example, wood can be used to fuel a fire but that doesn't tell us anything about its' inherent value in exchange. That it has inherent value on these terms is obvious enough. For me it has almost none be…

You have to take a more general sort of view to things. To the median person making use of the value, how much are they getting out? How many people would find value? For example not everyone likes shiny things but gold is also compact, protective, conducting, nonreacting, testable, etc. Wood has a thousand and one uses but it's a bad currency because in addition to being bulky it's easy to make more wood. But in cer…

Just because some things have intrinsic value and have been used as a currency doesn't imply that something that doesn't have intrinsic value and is a currency can't be trusted.

You have to take a look at society's motivations, situation and psychological makeup, and from there you can make a prediction as to whether a currency can be trusted or not.

Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#118

Post by conroe64 »

sliverstorm wrote: post #114
Dylan16807 wrote: post #70

Earlier quoted context omitted.

Do you really think the price would change very much if the miner payout was raised or dropped by a factor of ten? Over half the bitcoins have already been mined; expecting the price to be based on the trickle of new ones is unrealistic.

It may change eventually, and the exchange rate does fluctuate dramatically sometimes, but it has been shown in the past that the market value of bitcoins tends to stabilize around the electricity cost of mining.

Since the amount of mining is going fluctuate based on the potential profit, I'd say the electricity cost of mining is stabilizing to a factor around the price of bitcoins rather than the other way around.

Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#119

Post by Jd »

jstalin wrote: post #96
Jd wrote: post #22

Earlier quoted context omitted.

The problem with all fiat currencies is they have no inherent value; it is all in the eye of the beholder. So what is an "appropriate" price is quite difficult to determine. Most currencies are driven by being effective monopolies wherever they are issued, so the market price remains somewhat stable. Even so, many professional economists have opined that the exchange rates even between major currencies are way too vo…

Nothing has inherent value. All value is relative. The difference between fiat (paper) currencies and currencies that are composed of a physical good, like gold, is solely the ability to control quantity. Fiat currency can be (and often is) produced in unlimited quantities, which leads to inflation. So-called hard currencies, backed by a precious metal, are limited in their expansion by production of that metal. This…

If all value is relative then there is no such thing as value at all. Of course the converse statement, that "inherent value" is a construct is true, since people rarely agree on the value of any given object, and generally the only way we can speak meaningfully about value is to take something that people agree has value. That said, there are certain types of objects that have been considered by most people to have value at most points in history. Gold, a fungible, maleable, shiny metal has been considered to be this for most of human history. There are other things of course, water being a very good example. The problem for currencies has historically been that alternative valuable objects either are not especially limited or not fungible, making them a bad base for a currency.

There may also be things that have "inherent value" insofar as they are necessary to the continued existence of humanity, whether or not we perceive them as so. Damaging our environment beyond a certain degree would certainly be this. Unfortunately international governance has not risen to this particular challenge and fully utilized available technology (e.g. carbon credits).

Re: Coinbase Is Now Selling Over $1M USD Of Bitcoin Per Month

#120

Post by smosher »

Jd wrote: post #112
smosher wrote: post #95

Earlier quoted context omitted.

I still don't buy it. I disagree on many points, but the easiest to argue is that it does, in fact, have inherent value. At its most general, that value is in allowing people to make exchanges they wouldn't otherwise be able to make. In particular, that sadly seems to be centered on drug trade. The fact that someone designed the mechanics has little to do with it. Back when BTC was close to USD$30, I was wondering ho…

>> that value is in allowing people to make exchanges they wouldn't otherwise be able to make. Well, you could say the exact same about every currency. If you are a chicken farmer, it is easier to buy a pound of pork for $5 than trying to trade your chickens for a slab of a pig (i.e. barter). All currencies provide value, since they are a lot easier than barter. The question is not that, it is whether or not they are…

Well, you could say the exact same about every currency.

There is an online market (of goods) built around BTC because of its particular properties. This market wouldn't exist without it. You can't sub in barter or gold or most other forms of money, and especially not anything that leaves a record.

The nonsense argument about BTC being a fiat currency is confused. There is an authority in a sense that dictates the mechanics (but I see it much like the 'rules' for determining what is and isn't gold.) However there is no authority that confers value of any kind to the currency.

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