Quote from: swusc2 on July 01, 2011, 03:26:32 AM

The idea is that Bitcoin as a currency is just a medium barter good that is commonly used to barter. The value of the medium is based on the number of people who agree to use it and other infrastructure such as the estimates worth of the economy.

And about the idea that people won't spend Bitcoins because if other people spend it, its value increases: it's just a social contract that people inherently make with any system. Otherwise no one would sell Bitcoins on exchanges and people would just hoard US dollars and never spend them. The issue is if no one spent anything then the value would never increase, in the worst case scenario someone breaks. And if anything if you start using the medium of exchange to start a business that makes money, it generates increase in value buy spending medium.

For something to have value it either has to be rare (gold) or almost universal (US Dollar). Gold was used to as money once because it is accepted as the "best" method for exchange, then the supply couldn't meet the amount to allow it to be more widespread method of exchange. Bitcoin on the other hand can be divided, although maybe at .0000000000000000000001 Bitcoins per square mile of land will not be the best currency because it would be just as hard to use as a single gold atom. Either it gets replaced by another currency as paper money replaced gold or Bitcoin increases the number of coins sooner or later. But that is just how goods work.

The thing to get out of this:
Whether or not Bitcoin becomes more of a transaction currency is based on whether or not the population using Bitcoin grows. And starting businesses that accept Bitcoin makes Bitcoin more accessible to people thereby increasing the number of people that are willing to consider using it.

I understand how bartering works, and bitcoin's intention and necessity to be barter fodder, and I also understand what it will take bitcoins to become a transaction currency. What I don't understand is whether satoshi realized he was overcompensating the bitcoin or not. It's not a revolution of the currency system, but moving complexity to another part of the system. The revolution is in the p2p / electronic transactions. Why go through all this trouble and not design it so trading was inevitable? To me, that's a fundamental flaw. Would the best currency not be immediately apparent even to average Joe? Would it not automatically assume control of all businesses because it just does what its supposed to? Bitcoins are slowed down by the nature of their existence; prospecting.

Most people don't hoard US dollars because the money supply inflation rewards "double debt now pay back later"...they hoard ownership and deeds instead. That's why I said that people will spend everything else, before bitcoins, then obviously use bitcoins and other precious things like gold when they have nothing else but need to pay for something. This is all assuming negative cashflow, of course, as that's the only reason to ever really dip into savings.

Gold has a value over bitcoins simply because there is intrinsic value: "If I can't find a buyer for this in the future, I'll just let my wife wear it, or use it in electronics etc." But the governments have decided to hoard it, and it's a pain in the ass to melt down and split all the time. Bitcoins are easy in that way, but do not have intrinsic value, so thus must get 100% of their value from being that trade token. How much would you pay for the the ability to not have to buy a whole pig? In the fiat system, you pay the banks an interest rate for the creation of their IOU barter notes, and that is the premium. With bitcoins, the premium is the mining and network hashing involved, but current prices are ruined by speculators of the "bitcoins are valuable in 20 years" school - enough to destroy their use as a trade token (the premium is too high).

Satoshi has achieved ability to trade and difficulty in forgery. However, by making it like gold, but not gold, there is no "fall back" if it no one will trade it. Fiat currency *has* to be guarenteed by the government issuing it, essentially saying they'll tax the crap out of everyone to make sure it holds its value, and they do. Gold is guarenteed by the fact that it is a great heavy inert metal and looks good. Bitcoins are backed by nothing, and that's the experiment; to see if people will accept it just because it is, and they will not if the premium to use it is too high (hence this thread, but add cost of speculation). Businesses don't care how they get paid. People care about how they pay. I don't see other currencies vanishing anything time soon, and thus, bitcoins only value is in value storage due to scarcity.

What I don't understand, then, is why Satoshi decided to allow the creation of bitcoins via competitive mining (which has its own merits if you want to create a store of value), when its to be used as a currency (which is simply an IOU). Gold is not an IOU...gold is...jewelery and happy wives. Fiat currency used to be a paper version of gold, since they could be exchanged, and since that stopped...it has been narrowing down to essentially it's real worth; nothing but the paper its printed on. Why not simply design bitcoins to be a record of a transaction in a community? In a way it supposedly is, but there's a subtle difference.

If the idea is to use bitcoins as "a valuable thing" to trade for a "valuable thing", as opposed to an IOU for "a valuable thing", then there's nothing wrong with what's going on now. The market will take its course, in 100 years all the coins will have been mined and its established that they're safe, and at some point close to that time bitcoins would have built a working trade economy around the bitcoins. However, because bitcoins are NOT a commodity that can be consumed (essentially a fiat currency), they are not an inherently valuable thing, and so must be used as an IOU, which is again unlikely when they're so expensive.

Quote from: andes on July 01, 2011, 03:48:03 AM

Quote from: Hunterbunter on July 01, 2011, 03:08:33 AM

but because there is no inconvenience storing them (other than wallet security), their value is too high to trade. "I will get rid of my other stuff before I get rid of this"

You cannot understand bitcoins isolated from its context. This is a typical mistake I see over and over in this forum. Most people are so corrupted by the fiat monopolic currency mentality, that they cannot see beyond that reality.

Bitcoin will not grow in value for ever, that is impossible in a free market. If the bitcoin concept prooves to be succesful, many other similar crypto currencies will come along. As long as there is enough incentive to mine, there is no problem for other currencies to come along. Of course right now nobody knows if bitcoin will last, so no serious contender has come along yet. But expect more currencies (wich means more crypto currency supply) will come along in a not very distant future. As there is more competition and supply, bitcoin price will eventualy drop or become stable.

Bitcoin is an experiment in free markets; bitcoin and its philosophy are inseparable. You cannot understand one, without the other. If you see bitcoin through the lens of a monoplistic currency (that has to dominate the whole economy), you will invariable come to false conclusions. Instead, if you see bitcoin in the context of free market in currencies, you will start think more clearly.

Aye it will absolutely grow in value forever assuming increased human population, use as a trade tool and inability to forge. Did the discovery of silver stop the price of gold going up?

Your post is arrogant and wrong.