Re:Why bitcoin failed as a currency and is on its way to bec...
by etherael on Thursday June 09, 2011 @12:53AM
(#2636040)
If you want to talk historically over long terms; gold is a far, far better store of value over time than fiat currencies, including the USD. None of this however changes the fact that rapid convertibility to and from bitcoins allows you to price any financial instrument in any kind of currency and perform the actual transfer at time of execution, effectively transforming bitcoins into nothing more than a fee free electronic funds transfer with no regulatory oversight.
Re:Why bitcoin failed as a currency and is on its way to bec...
by skybrian on Thursday June 09, 2011 @03:18PM
(#2638420)
Over the long term, lots of assets are better investments than cash. That's not what I'm getting at. If I go to the store and prices are in dollars and not Bitcoins, or if loan payments can't reasonably be priced in Bitcoins, they aren't performing one of the primary functions of money.
Put it this way: people are excited because the price of Bitcoins in dollars is going up. If things were priced in Bitcoins then it wouldn't make any difference - the prices would still be the same (in Bitcoins).
Stable assets are more useful for writing long-term contracts. People who are trying to avoid risk (rather than pursue it) will want to write contract terms that have future payments in a stable currency rather than in some more volatile asset like gold or stock. For example, if you wrote a contract where one person does the work and the other one pays in gold in five years, how do you know whether it's fair or not? Would you be willing to take either side of the bet? It's all going to depend on where you think gold will be, and if opinions differ on that then it makes contracts that much harder to write.
Of course there is inflation risk with any currency, but usually it's at least possible to estimate it and make allowances for it when setting a future price. It's a matter of degree and Bitcoin isn't even close to being stable. Both upside and downside risk are a problem, for opposite sides of any deal.
There's also little reason to think that broader adoption will make it more stable. Supply is fixed, but demand could go either way, depending on greed and fear. For a stable currency, you need a stable demand that can withstand (at least to some extent) big swings in popular sentiment.