Post
Topic
Board Economics
Re: Do bitcoin accepting businesses inherently add value to the currency?
by
Stephen Gornick
on 03/07/2012, 16:40:06 UTC
So, are bitcoin businesses really that important to giving value to bitcoin?

Money, just like electrons, flows through the path of least resistance.

If your revenue or income is in the form of bitcoins, then cashing out to buy something using fiat is friction (resistance).  So then when you spend using bitcoins, the next person's revenue is in bitcoins.  And they have that same desire to avoid the friction by using the bitcoins for spending rather than cashing out to fiat.

So there ends up being a multiplier effect.  The longer the friction can be avoided means a longer period that those bitcoins are not available for sale on the exchanges.

And that is why not just having businesses accept bitcoin is important, but that it is seen as a method with less friction (either in a greater value for the money, or in convenience.