Maybe in your town, but for me the spread on LocalBitcoins is hilariously huge. I just punched in my city (Chicago) and got $818 bid by $850 offered. That's a $32 spread, which is much larger than I see on any of the online exchanges.
edit: Actually I think you are talking about the equivalent of a resting order (placing an ad) which isn't what I'm talking about. My scenario involves crossing the spread, which in the localbitcoins case would mean answering an ad.
edit 2: I encourage everyone who hasn't seen localbitcoins to go check out the ads there. "Hilariously sketchy" is about the best way I can describe it.
I think we passed that point, there is an adoption of bitcoin, but it will NEVER be used as a currency IMHO.
I really hope the price stops fluctuating so we can use it as a value storage medium, but even that can be disputed.
When money supply is controlled by central authority, it can be used as a tool to control prices and volatility. It's still early days but the inflation-targeting independent monetary policy experiment happening in some developed economies over the last 2 decades seems promising.
I'd be interested if anyone were willing to start a "centralised" Bitcoin governed by benevolent dictators for life. I'd rather put my savings with people who understand monetary theory and how to use big data to inform supply decisions than a system prone to cycles.
I have traveled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won’t last out the year. - Editor of Prentice Hall business books, 1957
There's no chance that the iPhone is going to get any significant market share. - Steve Ballmer, USA Today, April 30, 2007
I think there is a world market for maybe five computers. -- Thomas Watson, chairman of IBM, 1943
Machines will be capable, within twenty years, of doing any work a man can do. - Nobel Prize winner Herbert Simon, 1956
By the turn of this century, we will live in a paperless society. - Roger Smith, chairman of General Motors, 1986
I believe OS/2 is destined to be the most important operating system, and possibly program, of all time. - Bill Gates, Foreword to the OS/2 Programmer's Guide, 1987
Segway will be to the car what the car was to the horse and buggy. - Dean Kamen, December 2, 2001
Let me rephrase some of these for you to illustrate:
- There is no reason [in present time, that I know of as to why] anyone would want a computer in their home. - Ken Olsen, 1977
- I have traveled the length and breadth of this country and talked with the best people, and I can assure you that [from their current understanding of current applications of data processing that] data processing is a fad that won’t last out the year. - Editor of Prentice Hall business books, 1957
- There's no chance [that I am going to admit to my share holders] that the iPhone is going to get any significant market share. - Steve Ballmer, USA Today, April 30, 2007
- I think there is a world market for maybe five computers [currently/at this time]. -- Thomas Watson, chairman of IBM, 1943
But, I do get the point that at least the USD dollar doesn't lose/gain 50% value in a few hours by wild speculation every month.
Like, you do realize that no one in the history of mankind has a use for something which "stores value" for millennia right?
And that timescale is so ridiculously huge that gold, silver and everything else does inflate away. We might be a type II Kardashev civilization in 1000 years. The volume of gold available will be absurdly large by then either way.
Still have to exchange for taxes.
Credit card fees eat into many businesses' profit margins, especially the ones with low margins.
And that's not the only Bitcoin's advantage.
Fiat currencies are to be contrasted with currencies that have intrinsic commodity value -- like gold, or livestock. Bitcoin has no intrinsic value.
The only difference between a governmental fiat currency and a distributed fiat currency (like gold) is that there is no government backing the latter. This has no bearing on the existence of fees for transfer and storage. If you're willing to carry physical currency around and store it in your mattress, payment via US dollars is fee-free as well.
That does not include Bitcoin.
Gold is not a distributed fiat currency. It is just Gold. You can exchange gold for currency, or you can make payments directly with it, if the person is willing to receive them.
No, it is not. You are falling prey to a rather politicized definition of the term. All non-commodity currencies are fiat money, but not all fiat currencies are backed by a government.
The word "fiat" is Latin for "let it be done" or "it shall be". It implies only that something happens by decree. The party making the decree does not have to be a government, or even a person of authority.
And really, a currency like gold is valuable because it has a fixed supply and is universally accepted. Bitcoin has a fixed supply and is rapidly moving towards universal acceptance. It's totally different when a government chooses to make a dollar worth approximately X much and then prints 85 billion of them per month.
So, yeah, gold isn't a fiat currency. And Bitcoin isn't one either.
.. and a distributed fiat currency (like gold)
I think there are a few definition of "fiat"* (one of which, as you mentioned, is lacking "intrinsic value"). I agree though that the word "fiat" adds only ambiguity to this discussion.
To understand how a currency works (and why intrinsic value isn't required, difficulty in counterfeiting is the only requirement ) Will be covered in a text or class covering microeconomics.
http://bitcoinsurvey.wordpress.com/2013/04/08/what-is-the-re...
The shocking truth is that almost nothing has an "intrinsic value". But things DO have "subjective values." The consensus of a lot of those, plus some rarity, shapes the "market value." Gold? It is shiny (whoop-de-frickin-doo) and it conducts electricity (and in that capacity can be replaced by many other metals) and it doesn't corrode easily. Its "value" is almost entirely subjective. Not much "intrinsic" about that, certainly not nearly enough to justify its $1200/oz market price.
1) Divisibility : it is easy to divide a large amount of the metals into smaller amounts (ingots->coins) 2) Durable : as noted, it doesn't corrode. You can bury it in the ground for a thousand years, and it comes up shiny and new 3) Rarity : There isn't that much around. All the gold mined since the beginning of history would fill an Olympic sized swimming pool.
The intrinsic value of gold as a store of value are from lack of competition. It's the best thing for the job, simply by being best at those three criteria. Add in cultural history and it's a lock.
Other things have higher usage as a store of value - prime agricultural land - but it's hard to sell 1/150th of an Acre to buy some bread. Other things as just as durable (rocks) but don't have rarity. Some rocks are durable and rare (opals, diamonds) but aren't easily divisible.
It's easy to get existential about Gold - 'it's just a shiny metal, WTF?' but countless societies have valued it highly as a store of value and as a trading currency, and that is not likely to go away anytime soon, because of a lack of alternatives. Societies and economies need stores of values, and Gold continues to fit the bill.
The fact that Gold is worth $1200/oz says more about the $ than it does about the oz. It's the $ market price that you're commenting on.
> but countless societies have valued it highly
I was not commenting on its value history. I was trying to convey that this value is almost entirely subjective, which goes against what one would think "intrinsic value" means. "Expected value" might be better, but that would weaken the argument against Bitcoin.
So then what, is your definition of "intrinsic value" that a recognized government accepts it as their official currency and exchanges bail bonds for it?
That's incredibly arbitrary.
Actually, can you even define "intrinsic value" without going in circles or defining it simply as current value?
All that barrel does is stop counterfeiters and tax evaders. Neither of those things are "intrinsic value". And Bitcoin is FAR more difficult to duplicate (you can't even forge or counterfeit it, you have to "double spend" it in a tricky operation requiring owning at least 50% of the network, good luck with that) than any other currency.
Read this: http://bitcoinsurvey.wordpress.com/2013/04/08/what-is-the-re...
Basically, a currency cannot drop to zero value unless ALL trade in it stops. If you think about it, this makes sense. So that is its "intrinsic value". The trade volume props up this minimum. There is of course "speculative value" laid on top of that, but where one stops and the other begins is anybody's guess.
If anything can be said to have 'intrinsic value', being free from prosecution is surely one of those things. Dollars can buy you freedom from prosecution for non-payment of taxes. That's a lot closer to 'intrinsic value' than anything bitcoin can put up.
It's not a 'nonargument'. It's true, and very relevant.
>I am sure they would take Bitcoin directly if pressed.
That's speculation. You have no reason to believe they'd accept bitcoin. As of right now, they do not. That's all we have to go on.
>Just ask the FBI, who is now in possession of the largest bitcoin cache on the planet... I suppose you think they're just going to erase all of them because, you know, they're not "backed" by anything?
Is there a reason for making this absurd strawman? Where has anyone ever suggested that people should erase their bitcoins because they're not backed by anything?
If they'd seized a bunch of legal movies or video game licenses they'd also do that.
The war in Iraq and the coup in Libya were done purely out of economic self-preservation, and not because a few savages with AK47s would pose a serious threat to the western world.
An agreement between two or more parties.
Hypothetical situation: Water holds "intrinsic value" to me, for obvious reasons (in much the same way as your freedom from US government prosecution). I know a guy who will trade me some water from some snail tails. Therefore, snail tails are "intrinsically valuable".
I reject your definition of "intrinsic value". Sounds sorta' like "regular value" to me.
>I reject your definition of "intrinsic value". Sounds sorta' like "regular value" to me.
I don't like the term 'intrinsic value' at all, since it sounds like it's suggesting some type of absolute value, which I don't think very many people (at least, not the ones having these conversations) really believe exists. I think the way they mean it is more in line with the way I defined it, to distinguish between something some people buy for its own sake versus something people only buy so they can trade it away to someone else, who is in turn only buying it so he can again trade it away. The latter still clearly has value to those people who take it in trade, and 'intrinsic value' is a convenient term to distinguish between the two.
I agree that intrinsic value is sort of a nebulous thing to begin with, and I'm not convinced that the idea even makes sense to at all (as you've suggested), but your definition just seems confusing at best, and perhaps even useless (though if it's useful to you, then have at it).
According to the definition I gave, yes. If you're thinking of 'instrinsic value' as meaning 'absolute value', then yes it's just as absurd to say snail tails have intrinsic value as it is to say anything else has intrinsic value. It certainly sounds absurd to say "snail tails have intrinsic value" for any definition of "intrinsic value", but then, it's absurd to be as certain some guy is going to trade snail tails for water as you are that dollars will buy you freedom from prosecution for non-payment of taxes.
>but your definition just seems confusing at best, and perhaps even useless (though if it's useful to you, then have at it).
Ya, I have no idea if it's useful or not. There are certainly people who are suspicious of using goods as currencies if they don't have 'intrinsic value', according to that definition. I don't know if that suspicion is well placed or not, but it is there.
'Intrinsic value' meaning 'objective value' is a useless concept because all value is subjective.
What I think people generally mean when they say 'intrinsic value', especially when talking about currencies, is something more like 'having some uses other than to simply trade away again to someone else, or perhaps being backed by something which has intrinsic value'.
Dollars have intrinsic value according to that definition, because they are backed by the fact that there are many people who must give the US government dollars in order to avoid being prosecuted for non-payment of taxes. That's where taxes come in. Without taxes, and perhaps some other things like legal tender laws, dollars would have no 'intrinsic value' according to this definition, just like BTC.
Both USD and BTC could still have value, even if they don't have 'intrinsic value' according to that definition.
Why does everyone fall back to the default argument that the USD is "backed" by the US govt. It is in theory but what does it really mean? The USD is no longer backed by physical gold. If the world decided the USD was useless tomorrow, does "backed" mean you walk up to Capitol Hill and they will give you something in exchange for your dollars? Unlikely IMO. It's backed by debt that the Fed just creates out of thin air. All this talk about "intrinsic value" is nonsense.
I just gave you my definition of intrinsic value and explained exactly why the dollar has intrinsic value according to that definition. If you want to argue that what I said was wrong, you can either prove my definition is contradictory or useless, or you can prove the dollar doesn't fit the definition that I gave. Simply stating 'no currency has intrinsic value' suggests to me you didn't read, or didn't comprehend, my comment.
>If we went back to the days where I'd trade you 2 bags of rice for a fish, those things have value and other use.
Yes, so according to the definition of 'intrinsic value' that I gave, they have intrinsic value.
>If the world decided the USD was useless tomorrow, does "backed" mean you walk up to Capitol Hill and they will give you something in exchange for your dollars? Unlikely IMO.
'Backed' means the IRS is going to accept dollars in exchange for not prosecuting you for non-payment of taxes. That is the crucial point. People value not being prosecuted for non-payment of taxes. The state of being free from being prosecuted has 'intrinsic value' to people. The IRS, at least as of right now, guarantees people that if they pay the IRS the dollars the IRS says they owe the IRS, they will be free from being prosecuted for non-payment of taxes. If the IRS stopped taking dollars in exchange for guaranteeing people freedom from prosecution for non-payment of taxes, then dollars would cease to be backed by the US government. It is certainly true that not all people (like people living in foreign countries) have to worry about being prosecuted by the IRS in the first place. But there are millions upon millions of people who do have to worry about being prosecuted by the IRS. There are enough to establish that the dollar is backed by freedom from being prosecuted for non-payment of taxes.
So are they giving you something in exchange for your dollars? That depends on how you look at it. Either they're giving you freedom from prosecution in exchange for your dollars, or they're not taking your freedom from prosecution away from you. Whichever way you look at it, the argument is the same. To the extent that you believe the US government will continue to accept dollars in exchange for not prosecuting people for non-payment of taxes, you believe the dollar is backed by the US government.
>It's backed by debt that the Fed just creates out of thin air.
What does it mean for something to be backed by debt? Am I guaranteed to be able to buy the debt someone owes someone else with my dollars, like when banks sell mortgages to other banks?
Do you realize how little sense you're making?
It's like you wanted to insert meaningless buzzwords like "freedom", not to mention that there's no freedom from being prosecuted for non-payment of taxes.
Well, in that case Bitcoin's intrinsic value is that it's backed by the freedom of storage, transfer, global acceptance and low fees, immunity to being counterfeited, immunity from inflation caused by printing, etc.
What? If I pay my taxes, I won't be prosecuted for non-payment of taxes.
>in that case Bitcoin's intrinsic value is that it's backed by the freedom of storage
Storage of what?
>transfer,
It doesn't matter how easy it is to transfer something to someone else if they don't want it. That thing must be seen as valuable for some other reason for anyone to care how easily it can be transferred.
>global acceptance
Who across the globe is guaranteeing they'll accept a certain number of bitcoins in exchange for a certain amount of something else?
>immunity to being counterfeited
If I generate a random RSA public key and use it to sign some randomly generated blobs of useless bits, do those blobs of bits and their signature have intrinsic value because it's hard to counterfeit them?
>immunity from inflation caused by printing
These things you're listing make bitcoin a more suitable currency than some other arbitrary thing that doesn't have those properties, all else equal. It doesn't mean bitcoin has intrinsic value, as I've defined it, and it certainly doesn't mean bitcoin is a good currency overall.
Second of all, your dollar's "intrinsic value" being an American criminal law makes zero sense. It's geography-specific. Suddenly if I'm not from US, that "intrinsic value" disappears. So much for that dumb definition.
> It doesn't matter how easy it is to transfer something to someone else if they don't want it. That thing must be seen as valuable for some other reason for anyone to care how easily it can be transferred
There are multibillion global transportation industries out there, and they don't care what they transport (as long as it's legal). People pay them because they provide ease of transportation at a reasonable price per pound.
I'd say ease of transportation is much more valuable to the majority of the world than some "freedom from prosecution" by some government that can't touch them.
That company doesn't pay the US government in bitcoin. They just buy dollars on your behalf. Every dollar owed in taxes must be paid in USD.
>Suddenly if I'm not from US, that "intrinsic value" disappears. So much for that dumb definition.
It doesn't 'disappear'. There are still millions upon millions of people who need USD to pay their taxes. That's where the backing comes from. It doesn't matter if not everyone has to pay taxes in USD. Quite a lot do, and they need to buy dollars from other people in order to do so.
>There are multibillion global transportation industries out there, and they don't care what they transport (as long as it's legal).
I'm sure the people that hire them to transport goods value what's being transported.
>People pay them because they provide ease of transportation at a reasonable price per pound.
What point are you trying to make?
>I'd say ease of transportation is much more valuable to the majority of the world than some "freedom from prosecution" by some government that can't touch them.
Freedom from prosecution is pretty important to the people in the US that owe taxes to the US government. But you're comparing apples to oranges.
Ease of transportation is a feature of bitcoin. But ease of transportation does not itself give anything value. You are easily transporting your words to my computer. That doesn't mean they're valuable. Ease of transportation makes bitcoin a more suitable currency than something that is equal in all other ways but is harder to transport. But something having some features that make it suitable as a currency doesn't mean it is actually a good currency.
On the other hand, freedom from prosecution is something you can buy with USD. It's not a feature of the piece of cloth called the USD that you can pay taxes with it. It just happens to be that way. And I would say that a guarantee that your money will be worth something [because people will always have to buy it in order to escape prosecution from non-payment of taxes] is more important than ease of transportation.
You have a fundamental misunderstanding of what "value" means.
> That company doesn't pay the US government in bitcoin.
But I don't care. I paid in Bitcoin.
> That's where the backing comes from
I doubt dollar "intrinsic value" comes from the fact that you have to pay taxes in it. It can spiral into a 10000%/year inflation and lose most of its value, and you will still be able to pay taxes with it.
In fact, you've been required to pay US taxes in dollars for the last 100 years. It didn't stop the dollar from losing 97% of its value.
Again, you're confusing value with some criminal law.
> I'm sure the people that hire them to transport goods value what's being transported.
What? You can't transport something that has no value? Like an empty box?
> Freedom from prosecution is pretty important to the people in the US that owe taxes to the US government
Ah, red herring. I was talking about "majority of the world", and you switched back to the Americans, as if that somehow proves that most of the world doesn't give a crap about US criminal codes, which, according to you, somehow back the value of the dollar.
> Ease of transportation is a feature of bitcoin
Which adds to its value, like features of... everything.
Trying to play with words will get you nowhere.
> But ease of transportation does not itself give anything value
We already went over this. Multibillion transportation industry.
Let's say I'm a schoolyard bully. An honest one. I hand out slips of paper that say "Keep your lunch". If I tell you I want your lunch, and you give me a "Keep your lunch" ticket, you get to keep your lunch that day. If you don't have one, or don't want to give me your "Keep your lunch" ticket, I take your lunch. Clearly if you believe I'm capable of taking your lunch, that slip is going to have value for you. Agreed?
Now let's say you're three grades above me, so you aren't worried about me taking your lunch. But there are still plenty of people who are worried about me taking their lunch because they're smaller than me. That ticket still has value for them. You know you can trade it to them, and they'll take it. Therefore it has value for you, even though you have no direct use for it. The fact that I am willing to take that ticket in exchange for not taking someone's lunch backs the value of that ticket, even if you yourself don't need the ticket to stop me from taking your lunch. You can trade it to others who will use it for that purpose. Now do you understand?
>But I don't care. I paid in Bitcoin.
I know you don't care. But they had to buy dollars. Someone has to buy dollars in order to pay your taxes. That's the whole point. Someone has to buy dollars in order to pay your taxes. Someone has to buy dollars in order to pay your taxes. Someone has to buy dollars in order to pay your taxes.
>I doubt dollar "intrinsic value" comes from the fact that you have to pay taxes in it.
The fact that you have to pay taxes in dollars is one of the biggest reasons why people trade in dollars rather than some other random currency.
>It can spiral into a 10000%/year inflation and lose most of its value, and you will still be able to pay taxes with it.
I never said it was the perfect currency. I never said it got 100% of its price from the fact that you can pay taxes in it. You are completely missing the point, and I'm guessing it's because you just don't understand what's going on in this debate.
>In fact, you've been required to pay US taxes in dollars for the last 100 years. It didn't stop the dollar from losing 97% of its value.
What did I say that would lead you to believe this contradicts what I think?
>Again, you're confusing value with some criminal law.
No, you just have no idea what they have to do with each other.
>What? You can't transport something that has no value? Like an empty box?
Do people normally transport things that have no value to them or anyone else?
>Ah, red herring. I was talking about "majority of the world", and you switched back to the Americans, as if that somehow proves that most of the world doesn't give a crap about US criminal codes, which, according to you, somehow back the value of the dollar.
See the first two paragraphs of this reply.
>Which adds to its value, like features of... everything.
It is more akin to a multiplier. If it has value, it makes the value greater. If it has no value, then no one cares how easily it can be transported, because no one wants it to be transported to them.
>We already went over this. Multibillion transportation industry.
The transportation industry is moving things that people value for reasons other than the fact that they can be transported easily. If people didn't already value the things they have shipped, they wouldn't pay to have them shipped. If I had some worthless box of cat excrement, it wouldn't suddenly be worth something because I could cheaply ship it to a foreign country. If I had a worthless unit of cryptocurrency, it wouldn't suddenly be worth something because I could cheaply send it to someone in a foreign country. If no one wants it, they don't care how cheaply I can get it to them. They don't want it. Do you get it?
It is true that it's stretching it to say taxation gives an 'intrinsic' value to us dollar. Really I would say that the phrase 'intrinsic value' should be reserved for things that are useful for some survival purpose directly, like food, water, shelter, machetes, etc.
However, taxation does mean that there is a continued guaranteed demand for us dollars, placing a floor on the price. There is also the fact that having a store of something considered to be legal tender gives you some extra rights to protection from the criminal justice system in that country.
So 'intrinsic' is perhaps too strong a claim, but it's guaranteed to have at least some value as long as the US government endures, which is still a pretty good guarantee.
I accepted bitcoin for some freelancing work and I didn't convert it.
With fiat you're stuck with the fees forever.
Also your 0.5% assumption is wrong. You can place a buy ad on LocalBitcoins and actually buy at below the market rate. Also, coinsigner.com.