What? Any London store that accepts euros will check the rates daily to make sure they can convert back into the GBP price. Currency rates fluctuate all the time, every second of every day.
They are willing to use euros as a medium of exchange, but only because they know they can exchange them for (to them) real currency. (Currency is relative, obviously. And just as obviously it helps that somewhere in the world there are people who use that type of money, which gives you comfort that even if you don't exchange it now, you can later.)
If this was the fate of bitcoins then it would be a failure. People may use it to send value over the internet, but no one will keep their savings in bitcoins.
To be money you have to be willing to save it. If all you do is use it as an intermediate it's not money - yet. It may eventually become money (historically intermediates often do that - especially if the conversion is difficult), but it's not money yet.
The reason it's so important for people to store the currency in savings is very simple: If no one want to keep your money long term, practically speaking there will be very little of it in circulation, which makes it hard to use.
Nowhere did he suggest that the restaurant owner exchanged his BitCoins for USD. Maybe he saves them and uses them to buy something else. Who knows, maybe he buys the ingredients for his Meze using Bitcoins?
If he does that, then why does he look up the exchange rate first?
You might more accurately have put 'a few people hold bitcoins for reasons of speculation'. This is not the same as saving.
[Disclosure - I hold no bitcoins]
PS - it's probably about time that people disclose whether or not they hold bitcoins when commenting.
Any person or business is only willing to use a currency as a medium of exchange because they know they can exchange them for other goods. "Currency" and "medium of exchange" aren't mutually exclusive, the former is a special form of the latter that is recognized widely (and in modern times, usually has no intrinsic value).
> * To be money you have to be willing to save it. If all you do is use it as an intermediate it's not money - yet.*
That's an insane definition for "money." You would claim that the fast food wages of a teenager who always spends it immediately is not money.
Just because he doesn't save it doesn't mean he's wouldn't be willing to if he had a lot of it. He isn't spending it because he thinks it doesn't keep value, he's spending it because he wants to buy things.
It's definitely being used as a currency already, as the article proves.
It's a highly fluctuating currency, but that doesn't remove it's properties as a currency.
People tends to vote on divisive issues in whichever post they agree.
Although not perfect and not entering in details, maybe because of generalization, I found his explanation resonating with what I know about monetary history, but I'm not a monetary economist.
Don't mistake what is offered as a convenience by some merchants as normal and accepted.
From the sound of it, you defined currency as "a stable medium of exchange" which by definition prevents any unstable currency from being a currency.
Is there a definitive reason why a less stable medium of exchange cannot be a substitute for a stable one? Especially with today's technology when increasingly many things are being done in "real time".
I'm not an expert on currency and I'd appreciate further education. To me, it seems that knowing (and potentially being able to predict) the variable forces that are affecting the volatility of a medium of exchange is, in the long run, more valuable to its users than artificial relative stability provided by a governing body.
A currency is stored, a medium of exchange is used right away (or traded for a currency).
> Is there a definitive reason why a less stable medium of exchange cannot be a substitute for a stable one?
Yes. Since it is unstable no one can rely on it. Since no one can rely on it people are unwilling to collect (and store) large quantities of it.
> To me, it seems that knowing (and potentially being able to predict) the variable forces that are affecting the volatility of a medium of exchange
If you can predict it, so can others. If I predict it will go up, everyone else will too. So everyone will hoard it - easy way to make money right? That means everyone wants to buy it, no one wants to sell - the price will skyrocket. Till it collapses, since it eventually will.
Then it collapses, people see the collapse, and everyone sells, the price goes to zero, and the process reverses.
To be a currency it must be stable.
A currency is simply a medium of exchange that is widely recognized, where "widely" is subjective. Most modern currency also is notable because it has no intrinsic value (gold coins, for example, have intrinsic value). I think bitcoin certainly qualifies as a currency, albeit an unstable one.
When I said that gold coins have intrinsic value (the same is true for copper coins, etc.), I mean that regardless of what nation minted the coin and what value appears on its face, it will always be worth at least its weight in gold.
No one willingly stores unstable currencies. The only time people use unstable currencies is if they are forced to by law, or if they are speculating.
When you hear people talk about "the stability of a currency" they are talking about fluctuations of a few percent, not 10s of percents.
Maybe he looked up the exchange rate rate because he wants to be fair: he wants to charge the same price for a lunch regardless of whether people pay with Bitcoins or dollars.
You don't have that - the owner first looked up the exchange rate to US dollars.
What you have is a medium of exchange, but you don't have a currency.
A medium of exchange is useful, and can eventually become a currency. But bitcoins are not yet a currency.
Perhaps someone can make a bank, where you store US dollars. Using that bank you can send and receive bitcoins. Only the bank can create bitcoins, but once created anyone can trade them without input from the bank.
If you are familiar with history this is how paper currency actually got started - goldsmiths would store gold and give chits of paper. Those chits started getting exchanged, and a currency was born.