Quote from: Cluster2k on October 23, 2011, 11:04:21 AM

If the only way to use bitcoins would be to trade them for good or services, how do those goods and service get purchased to make the trade? There is one, perhaps two degrees of separation at all points in the chain between bitcoins and your national currency.

Oh no doubt, its use would be limited for quite some time, and BTC wouldnt be an option for amazon&co. But its not like amazon is accepting bitcoins now.

What Im pretty sure off, is that it would spur a slow, but more organic growth, like trade between individuals, "ebay" kind of stuff. Right now even on this forum, most things that are put up for sale are denominated in dollar, and can mostly be bought with dollars. If you no longer have an exchange to buy bitcoins, Im pretty sure a lot of people would sell stuff for bitcoins exclusively in order to get some. Likewise people with "too many" bitcoins, be it miners, pool operators, merchants, would be more eager to spend them on whatever the bitcoin economy has to offer, even if its just second hand hardware or alpaca socks. Right now there is very little incentive to do so. You might as well use dollars since everyone just converts the price from btc to dollar and back, even though the exchange rate is utterly artificial and purely driven by daytraders. I would also guess most of the btc trade (however little it is), is also converted to dollars almost instantly.

Its like the global future markets for oil, commodities, even food; they used to serve a purpose in facilitating trade, future markets, like exchanges are essentially a good thing, helping trade by protecting producers from price swings etc. But then the gamblers took over and turned it in to a casino, driving up global prices and actually hindering trade. Most economist will tell you you need some speculation, to act as "grease", but more than 25% speculation is a recipe for bubbles and bursts, which hinder the economy, and for instance farmers now no longer use future markets, as it has lost its purpose and has become purely a casino. In our bitcoin economy its far far worse than that, its more like 99% speculation and 1% trade. So anything that gets that ratio down, even if only temporarily, I can only see as a good thing.