* The nature of BitCoin could make it from an asset worth 350 USD to 0 USD overnight.

* Gold has been there for centuries.

I won't even comment on the asteroid thing.

No. Not unless it stops being traded for anything. Read this:

http://bitcoinsurvey.wordpress.com/2013/04/08/what-is-the-re...

It makes sense if you think about it. As long as 2 parties will accept Bitcoin as a trade medium, it literally MUST have a value in order to carry that exchange value. Whether it's 10,000 coins for 1 pizza or 1 coin for a gold bar.

So no, it will never go to zero anymore unless something as useful and unique comes out which is at least twice as good (due to network effects).

That doesn't mean a portion of the current value isn't speculative. But the speculative value is NOT "all" the value.

You: Not true, it would only fall arbitrarily close to 0 USD.

Me: Not reassured.

So if it ever goes back to there, it will most certainly be a buy... which will of course drive the price higher, into the speculative space.

Basically, since the cat is out of the bag, it won't be possible to get completely rid of the speculative portion of the value, but the fundamental portion of the value WILL keep rising (at this rate).

I'm optimistic myself about BTC, but don't think your comment as written is a good reason to think so in the context of the GP's point.

[1] specifically, "As long as 2 parties will accept Bitcoin ... it literally MUST have a value ... Whether it's 10,000 coins for 1 pizza ...". That last bit is the "arbitrarily close to zero" lower bound I was attributing to you.

But like startup customers, bitcoin users exist and eventually the new product takes over.

Because you can't refute it?

It's a complete irrelevance unless you're specifically talking about 100+ years in the future.

There is not really an agreement in the ivory towers that a limited amount of currency is a bad thing per se.

Could someone explain this to me?

As for the inflation / deflation thing: I'm pretty sure we all agree that the faster the relative prices of things can change to reflect changes in the underlying reality, the better.

A priori, it seems that these relative adjustments should be independent from the average adjustment and hence the overall price level.

However, economic actors tend to resist a nominal decrease of income much more than a real decrease of income. You may not think that this is rational, but you have to work with the reality that you have.

This means that inflation is beneficial, because it allows real decreases of income without nominal decreases of income, and this means that real income can decrease more easily, which is what you need for relative prices to adjust reasonably quickly.

http://blog.oleganza.com/post/66215430631/deflationary-spira... http://snitko.ru/blog/the-beauty-of-deflation.html

This is why people think a little moderate inflation is good for an economy, and deflation is bad. A currency needs to be spent to be of use, but if it is going to always increase in value, the sensible thing to do is to spend something else and keep the increasing currency as a nest egg. Unless you can mandate everyone only transact in Bitcoin, people will tend to spend other things and hoard bitcoin if it keeps increasing in value.

[1] https://en.wikipedia.org/wiki/Gresham%27s_law

Macroeconomists really have no idea what they are doing - except, I believe them that a sudden drastic drop in the money supply is bad

The primary service provided by a currency is facilitating the exchange of goods. Being inflationary is imperative for the population to use it. It is true that currencies are forced upon population by governments (or any form of governance) and it's true that anyone would rather be holding an asset that will not lose value over time compared to one that will.

Inflation is an indirect motive to spend money today and not hoard.

Now the above is the generally accepted truth in micro-economics and social theory, so I'm not feeling any heat proving the dominant view on this. It's how our world uses currencies actually.

All in all, to me makes sense: a currency SHOULD lose a small (1% or 0.5%) amount of purchasing power over time, to boost commerce/spending and so on. It's an indirect way but works. Until we find another way, I think we are stuck with it.

Bitcoin in my view, will never be a largely used currency because it does not have this imperative characteristic any currency should have. So people would rather spend dollars (as a user already said about PPCoin for example..) or any other inflationary currency instead of spending an asset.

Why is spending good? If I spend money on the things I don't really need because I'm afraid I'm gonna lose otherwise, why do you think it's good for the economy? Some spending is good, some spending is bad. If everyone spends money on cars while they don't really need that many cars, why is it good? Inflation might create some jobs, but those jobs wouldn't be secure for long, because workers would be producing things people really don't want. I don't understand how scaring people into spending is a good idea.

>Bitcoin in my view, will never be a largely used currency because it does not have this imperative characteristic any currency should have. So people would rather spend dollars

Since you argue that people would rather spend dollars, here's a thought experiment. Let's say Bitcoin is accepted in most places. Say you store your wealth in Bitcoin. Now you want to buy something. Why would you want to exchange it into USD, pay commission to the exchange and then make a purchase instead of paying it in Bitcoin in the first place?

Maybe you need to provide a complete frame, because I'm not sure I follow.

ps. I have a deep respect for Anarchism, as I have for Communism (Marx/Engels), although I don't endorse their views about society. That said, believing that bitcoin is in any way close to anarchy because you don't pay taxes is wrong. As Prof. Shamir (the 'S' in RSA) showed some time back, 98% of BTC is controlled by 2% of portfolios. If you have a financial background you can see how this is deeply flawed and extremely centralized.

What Bitcoin is able to do is to break this vicious cycle. Of course, governments are not going to give up easily, but fighting a war against mathematics is arguably a bad idea.

As for 98% of BTC being controller by 2% of portfolios - same can be argued for almost any currency, that's the state of the world. The difference with Bitcoin is that although those players can shift the market, they have a lot less power than any government. They can't force me to buy from them. And they arguably didn't get their money by stealing it from others.

The fact is that you know who runs the FED. You don't know who owns 95% of BTC in circulation.

They didn't stole directly, but it's a perfect Ponzi scheme if they choose to liquidate their BTC overnight :-) ... They are in a position to create "money" out of thin air. Money issued by people trusting BTC. So there is no difference from a trading Wall Street crook who sells garbage stocks for gold to naive investors (calling Goldman Sachs)...

For transactions the exact value does not matter, only matters how liquid this value is. And liquidity is measured by number of people willing to buy that assets at that price. In case of Bitcoin, the more people want to hold it, the higher the price will be (because they need to buy them from someone and outbid others).

Now, imagine Bitcoin and Freicoin. Freicoin loses value ("demurrage") over time. So people would be motivated to hold bitcoin instead. So Bitcoin will gain bigger liquidity and higher value. People will see that Bitcoin is more sellable on the market and thus is wider accepted. So they can rely on Bitcoin's price when doing transactions. While Freicoin remains less liquid and thus less suitable for exchanges.

The currency is the most marketable, most valuable asset. And to make it so it must be the cheapest to store and transport, hardest to produce and impossible to counterfeit.

The USD Gov allows to you to pay taxes in USD, not in BTC. Even if BTC get taxed you still will have to pay your taxes in USD.

If and when the US gov will start accepting taxes in BTC all this reasoning might have a solid ground. Until then, it's a utopia.

ps. The above, will never going to happen though. It's insane/stupid/unthinkable for a state to give such power to unknown people (%98 of BTC are located in 2% of portfolios) instead of controlling it's own currency by a central authority (FED, ECB, ...).

Unfortunately, the state is cutting the tree they are sitting on. Their massively inflated money supply is going to hit them hard when China and other foreign nations will refuse to accept USD as a reserve currency and all that printed nonsense will hit US economy and destroy it by hyperinflation. Or, USG will put up massive capital controls to avoid that thus closing the country in an iron curtain. Considering that externalised inflation destroyed a lot of production inside the country, isolating people from global market will also destroy what remains of the economy. In no theory it is sustainable in the long run to print shitload of money and not have its value massively dropped at some point of time. Each day it doesn't happen only makes the inevitable hit harder.

Once people all over the world start tasting Bitcoin and moving savings off fiat currencies, they will naturally hyper inflate - people will be trying to get rid of them quickly. This has nothing to do with orders of the state: it'll happen legally or illegally. And policemen will be among those people who try to save what's left of their savings.

Also: did you notice what Obama said when he asked Congress to raise debt ceiling? He said he wouldn't be able to mail the social security cheques. In other words, he admitted that there's absolutely no money that was extracted from people is available in form of cash or real investments. That he must have to issue new debt to pay that debt. Isn't it a good enough proof that the whole monetary system is going to collapse any time Link: http://www.dailymotion.com/video/x14y4cx_obama-tells-america...

As for the fact that they can't force you to buy from them it's totally irrelevant. They (or he) can drive the market back to 0.5USD : 1BTC in less than 24 hours should they choose to do so, and there's nothing stopping them. The fact the you don't know who this player is, makes things a lot worst compared to FIAT controlled by the state.

The monetary system is a total mess, but that's because of abuse from those in power, than by design. BitCoin is a good thing to have, but it will never replace the USD and it wasn't suppose to IMHO. It's properties attracted only the illegal market and various low level speculators so far.

The fact that BTC went up instead of down after SK bust shoes clearly that the general consent has little to do with its price. BTC became famous because of SK. Now will be used even less as a currency. Instead it became even more expensive.

My initial point stands though: As a currency BTC is/has failed. As an asset might work, but I don't know for how long.

In the real world most poor people cannot let any amount of coin remain unmoved for 30 days, so Peercoin in a privilege based coin and SunnyKing the creator intended this.

A simple change = Allow all coins no matter age accrue interest. Sunny is a rich millionaire and does not care about the wealth divide his coin will cause if it took off.

Besides, I hate fees in my coin, it hurts microtransaction applications.