Silk Road forums
Discussion => Philosophy, Economics and Justice => Topic started by: SelfSovereignty on November 16, 2012, 02:09 am
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See bottom for tl;dr version.
Since I've come to feel that old members of the SR community fall on the outskirts of who I consider "my own," I decided the incredibly small loss to myself from sharing this info is worth making sure all of you can make your own informed decision. Yes-yes, I'm aware I've only been around a few months, but the statement stands.
Today Wordpress.com started accepting payments in BTC. Not only that, apparently their checkout page has the price in BTC next to the price in USD (I have not verified this, but it's what some article somewhere said). This means that a lot of people who pay money to Wordpress are going to stop and wonder, "wtf is that?" Some of those in turn will look it up. They don't even have to use it or really care. They'll know about it, some bring it up, "there's this crazy thing I saw..." -- you know how it goes. The initial exposure of people like me retweeting and reblogging and reposting adds to that; the comments for the initial wordpress release make that clear.
Adoption of Bitcoin as a standard currency is where its long term value will come from -- if it doesn't fade into nothingness. But people are emotional and markets have spikes. There may be a big fucking spike in the next days or weeks. You may want to consider not checking out to dollars or euros or whatever the fuck they use where you happen to be, at least not for a week or so. Here's the bitcointalk.org thread if you're interested (clearnet of course): https://bitcointalk.org/index.php?topic=124482.0
tl;dr -- bitcoin price may skyrocket this month. I guarantee nothing.
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I feel stupid for not converting my savings into bitcoins before the summer when they were under five dollars a pop. At the back of my mind I always think, bitcoin is never going away, they will only ever increase in value over time, just horde them for fucks sake.
One day in the future when the bitcoin is worth an ounce of gold I am going to look back at my purchasing stats and say, wow I spent a million dollars on drugs!
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The downside is that bitcoin could be replaced bu something nearly identical. There is no intrinsic value in a bitcoin, even if it took significant resources to mine one. Also, the cost factor of mining bitcoin is solely electrical power. which can become cheaply available at off-peak periods of time at any point.
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This is good news. More BTC purchases will add stability to the market in the long run.
Ben, even the USD currency has no "intrinsic value" other than that other people are willing to continue trading it for things of tangible value to individuals in the economy. Unless you consider the whims of the Federal reserve intrinsic value.
Even to a certain extent, Gold has no intrinsic value. We don't need gold for our own survival. It's only valuable in a post-scarcity economy as a novelty (and with some manufacturing uses).
Bitcoins are no different.
The more companies and people using bitcoins, the more trading can be done, the more value it can provide to people.
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I posted about this subject here a few weeks ago and was met with a surprising amount of indifference. If you go to the bitcointalk forums, a similar sentiment is felt towards our kind as well. I find both quite surprising, as I always assumed there was a large overlap between proponents of bitcoin and Silk Road users due to our perceived similar philosophies towards the intrusions of "big government".
I'm betting a rather large amount of my portfolio to bitcoin though (at least for a unemployed college student with little disposable income). My reasoning for doing so is different than yours OP, although I do agree that the bitcoin movement very well might pick up mainstream support in the long run.
No, I'm betting "big" on bitcoin (about 50 BTC) for essentially the same reason this guy is:
https://bitcointalk.org/index.php?topic=116937.0 (Although the OP is kind of a dick, it's definitely worth a read)
I personally believe the Silk Road is still only at its starting line with regards to the illicit internet drug trade, something that requires the use of bitcoin to maintain its anonymity. Assuming places like the Silk Road and its variants are here to stay, and taking into consideration the ever-decreasing amount of bitcoin available to be mined (http://en.wikipedia.org/wiki/File:Total_bitcoins_over_time.png), I think investing in them isn't an irrational decision. If Tor-based drug sites continue to exist five years down the road, then it's only natural to assume that the value of bitcoin will go up substantially.
The one troublesome aspect in all of this is the fact that the majority of bitcoin speculators have similar "get rich quick" sentiments, so perhaps bitcoin is already overvalued. I was also fortunate enough to avoid the infamous bitcoin crash of June '11, so I may also have some rose-tinted glasses on due to my past luck with investing in bitcoin.
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Interestingly, if I had run out and bought $10,000 worth of BTC instead of making that post, I'd be a thousand dollars richer right now less than what, 48 hours later. I didn't have 10k sitting in an exchange ready to buy coins anyway though, so -- no sense lamenting what wasn't possible anyway. Don't feel bad about being poorer or anything, I'm just neglecting to admit I don't have 10k in cash anywhere for anything, heh...
Something came to mind while reading the replies though (I did not read all dozen pages of the link, BTW), which sure as Hell made me stop dead and do some thinking when I first read about it: interestingly enough, with Bitcoin, a lot of people subscribe to the belief that "there can be only one." When you think about the concept and implementation, any competing currency will either be based on a totally different proof of work (what makes it take so long to mine for coins is the "proof of work," thing, so you have to "prove" you've done a certain amount of work basically), which makes all the Bitcoin miners unable to transfer their vast Bitcoin-designed rigs to cash in on this new competing currency. That's one option, which means the competing currency could possibly overtake and destroy Bitcoin. Though it's pretty unlikely, since Bitcoin is kind of struggling to gain real traction itself and it isn't even fighting a similar & competing currency -- how would a new currency win. shrug. Could happen though.
Or, possibility two: the proof of work for the competing currency is similar enough that bitcoin miners can switch right over and swallow the competing currency whole. A group of mining pools could agree to act as one entity, and basically make the competing currency useless because they could almost at will successfully double-spend (the 51% Bitcoin network attack thingie, long story, but 51% or more is enough to start gaining control over BTC). So it would fail. Nobody would use it. It would be unreliable and pointless. Dead before it begins, hoorah for BTC, the miners all go back to their homes and some poor guy's cryptocurrency dream is squashed like a bug.
So in case 2, Bitcoin is the only cryptocurrency that can survive. And as for case 1, nobody is even sure if it's actually possible to have an effective, alternative proof-of-work mechanism. Nobody's proved that you can't or anything, but nobody's actually proved that it's possible either. It may or may not be. If it is, Bitcoin could possibly fail in favor of a competitor (but it seems like a longshot).
So, in a nutshell: in case 2, Bitcoin cannot be conquered and the competing currency dies miserably. In the case 1, *if* it's possible to have an effective alternate proof-of-work mechanism, Bitcoin is unlikely to be conquered. That's the argument as I understand it.
If you think cryptocurrency and the whole Bitcoin concept is the thing of the future... BTC seems like a very solid wager.
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Bitcoin has already had its share of massive spikes. Back when it was over $30 USD per BTC mining was very profitable indeed, and after that peak it faded back down to a couple of dollars (methinks someone who got in on bitcoins early and had bulk coin decided to cash out).
Bitcoin is the only cryptocurrency that can survive.
Have you not investigated any of it's spin off competing crypto currencies, like litecoin? Some of these other coins solve the 51% problem that bitcoin has. Also you cannot switch dedicated bitcoin mining hardware (FPGAs and ASICs, which is what all the serious miners use) to mine litecoin (some of the other coins use the same crypt algo as bitcoin though). Choosing a new "proof of work" part is easy, just use a well established cryptographic function that you can adjust difficulty for arbitrarily. Litecoin uses scrypt for instance (more CPU friendly than bitcoins algorithm).
You can mine litecoin today and it's about on par with profitability as mining bitcoins on GPUs, it just needs more market capitalization like bitcoin has before its value can really increase.
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You make it sound like I was stating an absolute -- I was just relaying an argument that I found fascinating when I initially found it :) That's all. I do think there's quite a bit of merit to the argument, but as you've just pointed out, it's not quite as definitive as it may appear at first glance. I hadn't actually looked into Litecoin at all, but after reading the first two sentences describing its proof of work, I guess somebody found an alternate proof of work that BTC mining hardware can't just take control of. I'm really not so sure though... from what I understand (which is literally what I just said I read), the memory requirements are nothing more than a speedup, not an actual requirement of the algorithm. You can just compute the value at RAM address XYZ when necessary instead of fetching it, and basically make the memory requirement completely vanish.
That's actually exactly the same situation as you find with Bitcoins. It's possible to have every single possibility computed and stored in memory, and to just look up which one solves a block. It's preposterous to think you could do that with bitcoin mining, of course, but it's the same thing with both litecoins and bitcoins is what I mean. Bitcoin miners have to compute it because they don't have the resources necessary to hold all possibilities. Litecoins are different -- you can store all the possibilities of that step of the algorithm without always having to compute it, but you can still compute it if you want. The devil is in the details, I suppose: I'm not familiar enough with either algorithm to know why they're more dissimilar than they appear. I think it's a bit of a bad sign for Litecoin though that Wikipedia deleted their entry... hrm.
The $30 to $2 crash was because of the high profile hacks (e.g. MtGox) at the time, wasn't it? I don't see how anybody dumping any amount of coins could see it plummet the way it did *and* stay down so low for so long, but I'm no economist.
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I think there are multiple reasons for the bitcoin spike. Yes the Mt Gox debacle had a little impact (which was reversed), but the bulk of the value from the peak had dissapeared before that happened.
I think there was a bit of a bitcoin "pump and dump", i.e. someone with a lot of bitcoins talked up their investment prospects, then sold off at the peak. People have done it many times with penny stocks (which bitcoins pretty much were at one stage). Combine that with the fact that you have constant inflation of US dollars (and all world currencies) which leads to overinvestment bubbles (like housing, dot coms, of course bitcoin bubble is tiny compared to these) and there's pretty much all you need for significant bubble. The very early adopters of bitcoin hold quite a sizable chunk of all bitcoins too.
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if the value is droping a lot lets us all know so that we can buy cheap bitcoins!!! xD
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Even to a certain extent, Gold has no intrinsic value. We don't need gold for our own survival. It's only valuable in a post-scarcity economy as a novelty (and with some manufacturing uses).
Gold does have intrinsic value, even if it were to go out of fashion for jewelry, and other reserves would be available for currency systems. A fairly large amount of gold is used in industry, particularly electronics, and there doesn't seem to be much of a replacement available as its use continues even with record gold prices.
As for bitcoin: I see its major drawback in the very slow transaction speed. For that reason alone it can be surpassed by another cryptocurrency that does have the possibility of fast verification. Simply put, bitcoin cannot be used to pay for your groceries unless you were willing to wait an hour or more for the transaction to clear, a system that clears within seconds could. Also, that could be used for online purchases with a smaller lag between ordering the payment and the payee receiving final confirmation of the transaction, yielding a faster process.
It is not impossible that bitcoin will overcome these limitations however, and if it does. will be here to stay. Decentralized systems need not be -this- slow: look at the dht implementation in bittorrent to get an idea. Surely its not instant, but at least that clears within the minute with its present user base, and can be faster when the user base grows.
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Even to a certain extent, Gold has no intrinsic value. We don't need gold for our own survival. It's only valuable in a post-scarcity economy as a novelty (and with some manufacturing uses).
Gold does have intrinsic value, even if it were to go out of fashion for jewelry, and other reserves would be available for currency systems. A fairly large amount of gold is used in industry, particularly electronics, and there doesn't seem to be much of a replacement available as its use continues even with record gold prices.
As for bitcoin: I see its major drawback in the very slow transaction speed. For that reason alone it can be surpassed by another cryptocurrency that does have the possibility of fast verification. Simply put, bitcoin cannot be used to pay for your groceries unless you were willing to wait an hour or more for the transaction to clear, a system that clears within seconds could. Also, that could be used for online purchases with a smaller lag between ordering the payment and the payee receiving final confirmation of the transaction, yielding a faster process.
It is not impossible that bitcoin will overcome these limitations however, and if it does. will be here to stay. Decentralized systems need not be -this- slow: look at the dht implementation in bittorrent to get an idea. Surely its not instant, but at least that clears within the minute with its present user base, and can be faster when the user base grows.
It's my understanding that the transfer can be detected almost instantly. If you run bitcoin-qt and watch as you send coins to an address in your wallet, it pops up with a little notification very quickly. The problem is that the transfer can't be even partially guaranteed until a miner solves a block, at which point they transmit that solution to the network and the transaction is forever immortalized in the blockchain within that new solved block. Or if it becomes an orphaned block, I'm not really sure how that works... but the basic concept is the same I think. The thing is that nobody wants to risk the transaction not being guaranteed with automated systems. That doesn't mean you *can't* risk it if you want to. Just that nobody else is willing to with automated payments when it could be exploited to bleed them dry in a very short period of time, likely before anybody even noticed what was happening.
The network auto-calibrates so that a block is solved once every 10 minutes, give or take. 3 verifications is considered pretty solid, so an average of 30 minutes to "almost" guarantee a transaction. That's not as high as 60, but your point is well taken. I suppose it could become a standard agreement anywhere that accepts bitcoins -- something scrawled next to the "bounced checks will be charged..." or something if they accept personal checks: "any transaction that is not ultimately confirmed will be charged a 5 BTC penalty on top of payment owed." Or something.
Of course with bitcoins the government can't take them away, so I'm not sure how you'd actually enforce that even in court... but I'm sure it would end up more desirable to just pay the damn people than hold on to the coins.
Now that I think about it... this is exactly the reason credit scores exist. Visa (or whatever) is vouching for you when you use your credit card. Same thing could work for bitcoins really.
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That does not solve the problem that it takes quite some time for a BTC transaction to be finite and approved.
Surely you can trust the client if you so desire - you can trust someone paying in cash without looking at the banknotes too.
Bitcoin needs something quick that can be more or less relied upon. Confirmation within a minute with 99.9% cetraintaly would surely help acceptance.
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SR is definitely the biggest thing that happened to bitcoin. A lot of bitcoin proponents like to play it down but SR is where most of the commerce in bitcoin is being done.
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No doubt about that - millions worth of btc pass here every month, leading to very active trade all over the place.
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Ben, even the USD currency has no "intrinsic value" other than that other people are willing to continue trading it for things of tangible value to individuals in the economy. Unless you consider the whims of the Federal reserve intrinsic value.
Thats not true.
The intrinsic value of the USD or any other currency is that your government requires you to pay your taxes in that currency.
Gold is valuable, but you cant pay your taxes in it, you have to convert it to USD. That creates a perpetual demand for USD and thus gives it perminate value.
If you dont acquire USD fast enough, your own government will take away your home, car, business etc or throw you in jail. So you need USD (assuming your American) to survive. So yes they do have an intrinsic value because you need them to live in your society.
Even though people are taught that money is simply a means if exchange, the fact that you are required, by law, to pay your taxes in a set currency means that currency is in perpetual demand, i.e. it would require a change in law for you to not need that currency.
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I don't think I agree with you. Now please understand I have no economics background whatsoever, so perhaps this is econ 101 stuff... but the only value to the US dollar is that the government's weight is behind it. Until the 50s or 60s or whenever, one dollar bill stood for a certain amount of gold. I mean you could literally walk into a bank (or wherever) and demand that they give you the gold in exchange for your dollars. The paper notes were just an "IOU" standing in for gold. Then we converted to a fiat ("faith") based currency.
The faith part is faith in the government. It doesn't matter if they want your taxes in USD. You don't owe any taxes unless you make USD -- so you don't need it to survive. I mean you can, technically, survive in parts of America with no house and no civilization -- as long as it doesn't get too cold, you can sleep in caves and eat squirrels. I doubt more than 3 people live that way, but you can still do it.
The government does not take away your possessions. The people you owe money to take them away, and they're empowered to by the government (courts, status quo credit systems, etc., etc.). The banks and lenders I mean. If you own your car, no one can legally take it away from you. If you own your house, no one can legally take that either. If you've finished paying off your mortgage and car loan, they are *yours*. You will never have to pay another penny to anyone, and no one can take them. I'm not sure why you suggest otherwise...?
If you still owe on them, then yes. If you stop paying, you will lose all of your prior payments *and* the property. That's part of the paperwork you sign. Don't like it? Don't sign it. Unfortunately, it's how everyone does business, and it's the only deal you're likely to get... so there's that. But still, it's an agreement you've entered into, not one you were forced in to.
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I don't think I agree with you. Now please understand I have no economics background whatsoever, so perhaps this is econ 101 stuff... but the only value to the US dollar is that the government's weight is behind it. Until the 50s or 60s or whenever, one dollar bill stood for a certain amount of gold. I mean you could literally walk into a bank (or wherever) and demand that they give you the gold in exchange for your dollars. The paper notes were just an "IOU" standing in for gold. Then we converted to a fiat ("faith") based currency.
The faith part is faith in the government. It doesn't matter if they want your taxes in USD. You don't owe any taxes unless you make USD -- so you don't need it to survive. I mean you can, technically, survive in parts of America with no house and no civilization -- as long as it doesn't get too cold, you can sleep in caves and eat squirrels. I doubt more than 3 people live that way, but you can still do it.
The government does not take away your possessions. The people you owe money to take them away, and they're empowered to by the government (courts, status quo credit systems, etc., etc.). The banks and lenders I mean. If you own your car, no one can legally take it away from you. If you own your house, no one can legally take that either. If you've finished paying off your mortgage and car loan, they are *yours*. You will never have to pay another penny to anyone, and no one can take them. I'm not sure why you suggest otherwise...?
If you still owe on them, then yes. If you stop paying, you will lose all of your prior payments *and* the property. That's part of the paperwork you sign. Don't like it? Don't sign it. Unfortunately, it's how everyone does business, and it's the only deal you're likely to get... so there's that. But still, it's an agreement you've entered into, not one you were forced in to.
Ill try and make this very simple.
If you own "stuff" then you have to play taxes.
You have to play those taxes to your state in your states currency.
If you dont pay those taxes then your "stuff" can be taken from you or you can be put in jail.
Therefore you have to regularly obtain your states currency. Therefore that currency takes on an intrinsic value.
We can look at in the opposite way if you like.
Pick a good, any good that you think has an intrinsic value.
Got one?
Now imagine that the state passes a law making that good so illegal that anyone caught with it will be shot on sight.
What happens to that goods intrinsic value?
Does it stay the same or does it go up or down?
I think you have to conclude that the effect of that law is to lower the intrinsic value of that good.
Therefore laws passed by the state have an effect on intrinsic value.
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... what *are* you talking about? I own my car. I paid for it in full. I pay nothing to anyone except the insurance company, gas companies, and repair shop. I'm sorry, but either you don't live in America, or you're defining "intrinsic value," differently than I do.
Are you talking about if you don't pay, they take things? Well yes. They take them and sell them if you owe them money. Then they keep the money -- you could do the same if you like, but that's... different. I mean they tax what you make. You use the roads you drive to work on. You use the infrastructure the government is responsible for maintaining. So you pay taxes. Now I'm sure nobody agrees with everything their taxes are spent -- forget it. I feel like you're trying to make two points at once, so I'm responding to two points at once. Let's just skip that one.
If you have no income, they take nothing and ask for nothing. Infact they *give* you a few hundred dollars, sometimes. They do not take anything if you make nothing. You're making a blanket statement that says otherwise, and I believe that you're mistaken -- give me an example if you think I'm the one who's wrong?
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Im not going to try and explain this further.
Laws effect intrinsic value.
You either understand that or you dont.
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We just need amazon.com to start taking bitcoin :).
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Im not going to try and explain this further.
Laws effect intrinsic value.
You either understand that or you dont.
... yep. Great example. Thanks for sharing that big ol' brain of yours with us peons.
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Im not going to try and explain this further.
Laws effect intrinsic value.
You either understand that or you dont.
... yep. Great example. Thanks for sharing that big ol' brain of yours with us peons.
I already explained how taxation laws give a fiat currency an intrinsic value.
Then I showed how a law could be used to remove a goods intrinsic value.
I really dont know what more you need.
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... what *are* you talking about? I own my car. I paid for it in full. I pay nothing to anyone except the insurance company, gas companies, and repair shop. I'm sorry, but either you don't live in America, or you're defining "intrinsic value," differently than I do.
Lets just zap you over to another jurisdiction, such as Holland (or most other european jurisdictions):
Owning a car means you are required to pay road taxes for that car. If you do not pay these taxes, government will seize your property to sell it at auction until the required amount of taxes are paid. If they cannot be paid, they will impound the vehicle. This is, in the end and after legal process, enforced by police that are allowed to use violence against you to get the governments wishes fulfilled.
Lets say you got a car worth $10.000, and road tax (based on its weight) is $60 a month (a common scenario here). This taxation reduces the $10.000 car to an object worth $10.000 with a $720 annual tax burden. If you keep that car around for 10 years, you'll pay $7200 in taxes on it, while it also deteriorates in value over that time.
But even if it required no fuel, no maintenance, and its value would not decline, that car would be a tax burden larger than its value over the course of 15 years or so. Over that time frame it would be a negative value asset (i.e. a debt) if you just own it and not even use it.
The only way to avoid the tax is to remove the car from the vehicle registry, which means you cannot drive it on any public road, rendering it worthless since it has no practical use anymore. Some car collectors with a large piece of private land opt for this, but it's not practical as you cannot even drive it to a supermarket unless that happens to be on a plot adjacent to your land with a road between them present.
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We just need amazon.com to start taking bitcoin :).
I'm with corngrower on this subject...
8)
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I'm not a technical expert onb bitcoins inner workings. It does feel slow to me though, doing a transaction properly takes a few hours, rendering the system useless for on the go payments for now.
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... what *are* you talking about? I own my car. I paid for it in full. I pay nothing to anyone except the insurance company, gas companies, and repair shop. I'm sorry, but either you don't live in America, or you're defining "intrinsic value," differently than I do.
Lets just zap you over to another jurisdiction, such as Holland (or most other european jurisdictions):
Owning a car means you are required to pay road taxes for that car. If you do not pay these taxes, government will seize your property to sell it at auction until the required amount of taxes are paid. If they cannot be paid, they will impound the vehicle. This is, in the end and after legal process, enforced by police that are allowed to use violence against you to get the governments wishes fulfilled.
Lets say you got a car worth $10.000, and road tax (based on its weight) is $60 a month (a common scenario here). This taxation reduces the $10.000 car to an object worth $10.000 with a $720 annual tax burden. If you keep that car around for 10 years, you'll pay $7200 in taxes on it, while it also deteriorates in value over that time.
But even if it required no fuel, no maintenance, and its value would not decline, that car would be a tax burden larger than its value over the course of 15 years or so. Over that time frame it would be a negative value asset (i.e. a debt) if you just own it and not even use it.
The only way to avoid the tax is to remove the car from the vehicle registry, which means you cannot drive it on any public road, rendering it worthless since it has no practical use anymore. Some car collectors with a large piece of private land opt for this, but it's not practical as you cannot even drive it to a supermarket unless that happens to be on a plot adjacent to your land with a road between them present.
After skimming some of these posts again, I'll admit that I totally forgot about vehicle registration. But that doesn't really result in anyone taking away my property, it just means I can't legally use the car anymore.
The whole intrinsic worth thing isn't what I was objecting to, by the way. It was the statement about property being confiscated. I don't really have an opinion on intrinsic worth of objects; I never really pondered it much. I lean toward disagreeing with laws establishing it, but that's just me being honest -- I'm not saying I'm right and that I should be agreed with.
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A few days ago I had 230$ worth of bitcoins, now theyve gone up to 250.
It seems to be going higher over time, will it eventually crash?
I'm thinking of investing a couple of grand
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A few days ago I had 230$ worth of bitcoins, now theyve gone up to 250.
It seems to be going higher over time, will it eventually crash?
I'm thinking of investing a couple of grand
I think it is a good idea. What is your time preference? Are you willing to sit on that investment for a couple of years, without worrying about daily fluctuations? If so, do it.
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Bitcoins are here to stay, right now they are traded more like a commodity and less like an actual currency. But when they stabilize, at whatever price that may be, then it will be more like a currency If not before then, then definitely once they hit their overall amount of 21m.
I have great faith in the BTC, truly
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Ben, even the USD currency has no "intrinsic value" other than that other people are willing to continue trading it for things of tangible value to individuals in the economy. Unless you consider the whims of the Federal reserve intrinsic value.
The intrinsic value of the USD or any other currency is that your government requires you to pay your taxes in that currency.
I would not call that "intrinsic value" I'd call that fiat value.
Sure, the government will blast your door off its hinges with plastic explosives and a steel battering ram, shoot your children, shoot your wife, brother, sister, sister's baby, sister's boyfriend, and you, take all of your possessions, and then rape the corpses if you don't pay your taxes, but that isn't the same as there being a real market demand for a fiat currency, and certainly is not the same as any actual market confidence in the currency.
It's like saying that IOUs have intrinsic value because if you don't show up at the office with enough IOUs, they come over to your house and break the legs of your youngest daughter.
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Its a rather complex story with how a currency like the USD is backed. The FED does have some reserves of gold and forgeign currency, which would determine some minimum value for the us dollar. The fait system has caused this backing to be very marginal however. Perhaps the FED as $0.01 worth of gold in store for every dollar bill printed, it could even be less. But however low it is, it is a nonzero value.
With the USD there is a big catch however. US foreign debts are all taken in USD amounts, so the US federal bank could simply (and legally) print whatever amount of dollar bills are required to settle that debt. This would result in a severe decline of the dollar against foreign currencies, but it would settle the debt as agreed upon. If the debt would have been agreed upon in ounces of gold or some other tangible commodity, the us would be bankrupt by now.
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Ben, even the USD currency has no "intrinsic value" other than that other people are willing to continue trading it for things of tangible value to individuals in the economy. Unless you consider the whims of the Federal reserve intrinsic value.
Thats not true.
The intrinsic value of the USD or any other currency is that your government requires you to pay your taxes in that currency.
Gold is valuable, but you cant pay your taxes in it, you have to convert it to USD. That creates a perpetual demand for USD and thus gives it perminate value.
If you dont acquire USD fast enough, your own government will take away your home, car, business etc or throw you in jail. So you need USD (assuming your American) to survive. So yes they do have an intrinsic value because you need them to live in your society.
Even though people are taught that money is simply a means if exchange, the fact that you are required, by law, to pay your taxes in a set currency means that currency is in perpetual demand, i.e. it would require a change in law for you to not need that currency.
USD has a value the same as bitcoin does, its value is in how much FAITH people have in it, when people lose faith in dollars they sell them and buy other currencies or other holds of value devaluing it. It has no intrinsic value other than the paper its printed on and that is pretty much worthless
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It's just the ability to print extra money that undermines the value of the dollar though.
Without it, everyone in the world would be able to convert their dollar bills into assets within the us. Obviously there are instruments to circumvent the risk of money printing however, such as currency futures.
Given that, when the dollar drops, it would still be possible for those that hold dollar options to obtain something of value, such as nationalized companies, land, natural resources and such.
With bitcoins this option is not available so far - there are no options traded for bitcoin versus dollars, euro, gold, or anything else.
On the other hand, bitcoin is no longer a fringe currency either. The total value of all bitcoins available today is well over 200 million us dollars. Compared to the amount of us dollars on the market this is insignificant, but its the gdp of a small country by now.
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I agree that the value of a currency has a lot to do with faith, however, other factors are involved, for example:
Lets say there are only two currencies (countries) available:
(a) costs 0a to print 1a
(b) cost 0.01b to print 1b
Both countries are identical, except that country (a) has found a cheaper way to print money.
The exchange rate would favor (a).
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[/quote]USD has a value the same as bitcoin does, its value is in how much FAITH people have in it, when people lose faith in dollars they sell them and buy other currencies or other holds of value devaluing it. It has no intrinsic value other than the paper its printed on and that is pretty much worthless
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+1
A currency or BTC just like all stocks & commodities on the worlds markets are all valued by the faith or trust in it. If the trust fails so does the commodity.
I read an article a couple of weeks ago about a wildlife nut that wrote a fake letter and gave it to the press saying that the bank was not going to extend their finance. The mining company lost over $100M because the investors got scared and no longer trusted the product.
With BTC, I am really interested to see how it goes. There are so many factors that are going to make prices fluctuate (especially with 70% of BTC never being traded). If 5-10% of these coins suddenly come to market, or SR gets closed down etc, prices will plummet.
If BTC becomes more socially acceptable and a investment commodity, prices will Sky Rocket
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USD has a value the same as bitcoin does, its value is in how much FAITH people have in it, when people lose faith in dollars they sell them and buy other currencies or other holds of value devaluing it. It has no intrinsic value other than the paper its printed on and that is pretty much worthless
Thats not quite right.
If people loose faith in bitcoins then the value of the bitcoin drops and people stop using them.
If people loose faith in the USD then the value of the USD drops but people are still required to pay their taxes, by law, in USD and therefore people cannot stop using them.