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Why Bitcoin Matters

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Re: Why Bitcoin Matters

#21

Post by mcherm »

tptacek wrote: post #7
eatitraw wrote: post #6

Earlier quoted context omitted.

> I don't understand this. Someone is taking the risk right now. Correct. > Currently it's the exchanges and merchants directly, because they rely on the exchanges. Incorrect. There is the solution: https://bitpay.com/ , which automatically does conversion for a small fee. Buyers pay in bitcoin, but sellers receives fiat money(e.g. USD). The risk is taken by bitpay, sellers always receive fixed amount in fiat money,…

"Fiat money" is as I've seen it used a political message, used most often to assumptively introduce the idea that government-backed currency is suspect. But fiat currencies are simply currencies that aren't backed by collateral. To the extent that you believe it's a currency and not a tradable instrument that happens to have interesting barter and liquidity characteristics (right now), Bitcoin is a fiat currency as w…

Within the Bitcoin community, there is a strong need for a term that means "normal money, the kind that gets printed by governments, as opposed to gold, Bitcoins, stock certificates, commodities, and other fungible stores of value".

The community has been using the term "fiat currency" for that. It is, effectively, a new meaning of the word (although VERY closely tied to the older meaning). Unless you have a better term (and can persuade others to use it) you may need to accept this new meaning for "fiat currency" in order to effectively communicate with others.

Re: Why Bitcoin Matters

#22

Post by candybar »

yummyfajitas wrote: post #17
candybar wrote: post #10

Earlier quoted context omitted.

Except, you're not getting around the problem here either - I need to find a real money payment system that the bitcoin exchange and I both trust and and the merchant needs to find a real money payment system that they and their bitcoin exchange both trust. You're doubling the problem no matter how you look at it, because the problem of you sending money to the bitcoin exchange is the exact same problem as you sendin…

You're doubling the problem no matter how you look at it, because the problem of you sending money to the bitcoin exchange is the exact same problem as you sending money to the merchant. No, because we've introduced loose coupling. I need to figure out how to turn USD into BTC. My wordpress guy needs to figure out how to turn BTC into UAH. Either of us can swap out our solution and the other doesn't care. Suppose we…

No, you haven't introduced anything, because sending money to a bitcoin exchange is exactly as hard as sending money to a merchant.

I already conceded the global bridge argument, but that's just a legal loophole. Authorities can easily legally treat depositing money into a bitcoin exchange as sending money abroad and make it just as hard.

Re: Why Bitcoin Matters

#23

Post by baddox »

candybar wrote: post #5

The part about bitcoin entirely as a payment system makes no sense, because both the consumer and the merchant need an existing payment system, to convert into and out of bitcoin for this to work, in which case bitcoin is just a middleman doing no work. I suppose some payment systems are localized and bitcoin can work as a global bridge, but that seems like a trivial legal hack that will be shut down soon.

> in which case bitcoin is just a middleman doing no work

So you're saying that, pessimistically, all Bitcoin could do is disrupt the credit/debit card companies? That's very pessimistic, and still a very big deal.

Re: Why Bitcoin Matters

#24

Post by npongratz »

tptacek wrote: post #7
eatitraw wrote: post #6

Earlier quoted context omitted.

> I don't understand this. Someone is taking the risk right now. Correct. > Currently it's the exchanges and merchants directly, because they rely on the exchanges. Incorrect. There is the solution: https://bitpay.com/ , which automatically does conversion for a small fee. Buyers pay in bitcoin, but sellers receives fiat money(e.g. USD). The risk is taken by bitpay, sellers always receive fixed amount in fiat money,…

"Fiat money" is as I've seen it used a political message, used most often to assumptively introduce the idea that government-backed currency is suspect. But fiat currencies are simply currencies that aren't backed by collateral. To the extent that you believe it's a currency and not a tradable instrument that happens to have interesting barter and liquidity characteristics (right now), Bitcoin is a fiat currency as w…

> But fiat currencies are simply currencies that aren't backed by collateral.

Apparently the definition is open to interpretation, at least if the wikipedia article[0] can be believed:

    Fiat money has been defined variously as:
    
    * any money declared by a government to be legal tender.
    * state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
    * money without intrinsic value.
[0] https://en.wikipedia.org/wiki/Fiat_money

Re: Why Bitcoin Matters

#25

Post by baddox »

jt2190 wrote: post #9

> The criticism that merchants will not accept Bitcoin > because of its volatility is also incorrect. Bitcoin can be > used entirely as a payment system; merchants do not need to > hold any Bitcoin currency or be exposed to Bitcoin > volatility at any time. Any consumer or merchant can trade > in and out of Bitcoin and other currencies > any time they want. I'm having trouble understanding this point of view because…

> I'm having trouble understanding this point of view because it implies that someone, somewhere is always willing to buy in to BTC, no matter the circumstances.

Why does it imply that? You could also say that the existence of cash USD implies that someone somewhere is always willing to buy in to USD, no matter the circumstances. Obviously, this won't literally always be the case, and there are always circumstances where people won't accept USD.

Re: Why Bitcoin Matters

#26

Post by candybar »

baddox wrote: post #23
candybar wrote: post #5

The part about bitcoin entirely as a payment system makes no sense, because both the consumer and the merchant need an existing payment system, to convert into and out of bitcoin for this to work, in which case bitcoin is just a middleman doing no work. I suppose some payment systems are localized and bitcoin can work as a global bridge, but that seems like a trivial legal hack that will be shut down soon.

> in which case bitcoin is just a middleman doing no work So you're saying that, pessimistically, all Bitcoin could do is disrupt the credit/debit card companies? That's very pessimistic, and still a very big deal.

No that doesn't work either because you need an existing payment system to deposit money into a bitcoin account at an exchange. You can't disrupt something by requiring your customer to use it.

Re: Why Bitcoin Matters

#27

Post by thinkcomp »

minimax wrote: post #16

Bitcoin is the first Internet-wide payment system where transactions either happen with no fees or very low fees (down to fractions of pennies). Existing payment systems charge fees of around 2 percent to three percent As long as consumers are paid in their local currency and vendors pay their employees, their taxes, and their other costs in local currency, then bitcoin as a payment technology has similar costs as cr…

This is absolutely correct. One other key point: Marc and his portfolio companies (among others) are deliberately evading regulations. Those regulations have real costs, which is why they are worth evading at all. Were companies like Coinbase to actually comply with U.S. law, they'd each have to spend $20 million on money transmission licenses and associated bonds (not including legal fees). These costs are not presently taken into account with a 1% fee structure.

Disclaimer: My company is the plaintiff in an ongoing lawsuit about this. http://www.plainsite.org/flashlight/case.html?id=2434524

Re: Why Bitcoin Matters

#28

Post by interstitial »

Personally, I prefer websites that take as a form of payment the riskiest tranches of securitized subprime mortgages or cosmetic surgery loans, while amplifying risk with my fundamental misunderstanding of default swaps.

Re: Why Bitcoin Matters

#29

Post by thomasmeeks »

jt2190 wrote: post #9

> The criticism that merchants will not accept Bitcoin > because of its volatility is also incorrect. Bitcoin can be > used entirely as a payment system; merchants do not need to > hold any Bitcoin currency or be exposed to Bitcoin > volatility at any time. Any consumer or merchant can trade > in and out of Bitcoin and other currencies > any time they want. I'm having trouble understanding this point of view because…

Basically you just ask for a varying amount of Bitcoin based on the current value and immediately turn the Bitcoin received into US Dollars. Coinbase is a good example of a service that makes this easy.

As an example, you want $10 for a widget. At 10AM that might be .001 Bitcoin, at 1PM that might be .0015 Bitcoin. You still get your $10. If there is a Very Bad Event, then that $10 widget might cost 7000 Bitcoin, you are still getting your $10.Or close to it.

Generally your big risk is the value of Bitcoin falling through the floor in a matter of minutes and your system (or third party provider) failing to keep up with such a change.

To answer your questions.

1. No. Bitcoin's value fluctuates pretty wildly and there's dozens of things that could cause the currency's value to implode. I think the challenges and risks for Bitcoin are different from government-backed currencies, but it is by no means immune to a crisis (has already had a few).

2. No. I'm sure some organizations and individuals would prop up Bitcoin. But there's no central authority with policy-making power acting on behalf of Bitcoin.

Generally I think Bitcoin is going to make it. There's a lot of interest in the currency from the financial sector, and a lot of money flowing into companies that deal as service providers for the currency. Basically, enough people have a vested interest in it that it is worth taking seriously. But that's just my guess at the moment.

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