Culain Posted November 22, 2013 Posted November 22, 2013 I'm personally still on the edge of buying a Bitcoin, a part of my curiosity wants me to invest in it, but another part scares me (mostly because I am quite short on funds). I've watched Stefan's videos on it and I we can all see the potential. But Peter Schiff believes otherwise; His basic argument is that Bitcoin will implode because most people are buying and trying to hoard it just to make profit instead of actually using it. It's also scary to start into because the price is getting so high already and there's little in the market to spend it on. A lot of peoples' daily living goes into taxes, the government doesn't accept bitcoin as a valid means to pay for those taxes. Thoughts?
Wesley Posted November 22, 2013 Posted November 22, 2013 The price being high doesn't matter. The price could go 1000x its current value. Everyone would just deal in mBTC or uBTC and everything would be normal. BTC is infinitely divisible, so the price of 1 BTC really doesn't matter at all. There is a very large market for bitcoin and it is constantly increasing. It will only get more. Lots of people buy stuff with bitcoin. Having coin in order to save also is not a negative or look down on a currency. It is very important to be able to save and people may choose to do that. Put any small amount you can save into bitcoin. You do not need to move the amount you use for daily expenses (or mafia pay-offs) into savings. That is not what anyone is arguing you should do.
Bulbasaur Posted November 22, 2013 Posted November 22, 2013 He's correct that the price is still mostly driven by speculation so far, but the intrinsic value argument is nonsense. For one thing it's an oxymoron, because value is a subjective assessment (evaluation) which can't be intrinsic. What's intrinsic is utility, and bitcoin has intrinsic utility in a number of ways, including its ability to make and receive direct transfers without intermediaries; its decentralized nature insulating it from government interference; its finite supply protecting it from inflationary attrition; its potential for anonymity; its ability to circumvent the government barriers put up around international transfers of funds; and so on. If it has no "intrinsic value," how would it attract any speculators to begin with? People are recognizing its intrinsic utility and speculating on its practical utility, which is a function intrinsic utility, infrastructure, and consensus. Intrinsic utility is the seed which attracts the beginnings of consensus (speculation), which drives development of infrastructure, which itself drives further consensus, and this feedback continues until its practical utility is realized. The more practical it becomes to use bitcoin for everyday purposes, the more valuable it becomes. Keep in mind that gold's main utility for most people is its ability to hold value against the dollar. Gold doesn't have much utility when it comes to digital transfers, and in a digital economy bitcoin has much more utility than gold while also retaining most of the same qualities that make gold appealing as an investment. Of course bitcoin is still high risk since there's no telling how long this process will take, whether or not something novel and better will replace it, whether government actions somehow derail it, etc. His basic argument is that Bitcoin will implode because most people are buying and trying to hoard it just to make profit instead of actually using it. He has it backwards. Speculation and hoarding just drive up its price relative to the dollar. This is perfectly fine; they're taking on the burden of high risk for the chance of a large profit, and in the process increasing the incentive for entrepreneurs to enter the market, developing the requisite infrastructure which will make it more useful. This will progressively reduce volatility and strengthen its consensus value. Also, I may just by cynical, but I feel that someone like Peter Schiff should understand how specious the 'intrinsic value' argument is, and the advertisement for precious metals behind him suggests that he's not exactly impartial (bitcoin does, after all, pose a direct threat to the price of gold and silver as well as fiat).
Pepin Posted November 22, 2013 Posted November 22, 2013 I'm rather annoyed of my tepid and frustration trying to get involved. I was aware of bitcoin back when it was very cheap, and was interested in getting some, but gave up after not being able to get funds. This has happened a great number of times over the last two years and it was of course my fault. If I would have just gone with it and pushed past the technical hurdles I could have made a ton. I was about to buy some amount the other day, and then didn't, and now its at $730. Finally bought .01 tonight, not much, but I'm really aiming to get into this.
tasmlab Posted November 22, 2013 Posted November 22, 2013 He's correct that the price is still mostly driven by speculation so far, but the intrinsic value argument is nonsense. For one thing it's an oxymoron, because value is a subjective assessment (evaluation) which can't be intrinsic. What's intrinsic is utility, and bitcoin has intrinsic utility in a number of ways, including its ability to make and receive direct transfers without intermediaries; its decentralized nature insulating it from government interference; its finite supply protecting it from inflationary attrition; its potential for anonymity; its ability to circumvent the government barriers put up around international transfers of funds; and so on. I think Schiff made most of those points, particularly if you make some assumptions on his statement that bitcoin represents some improvements over money and gold. I think the intrinsic value he is speaking off is gold's non-money use e.g., making jewelry for women, which bitcoin doesn't do well.
Bulbasaur Posted November 22, 2013 Posted November 22, 2013 Fair enough, but I'm still not convinced that in principle such a secondary non-money use is at all necessary. I can see how it might enable a monetary system to evolve from a barter society, but once the concept of money is well understood by almost everyone, I think it outgrows any need for an extraneous use. If a monetary system works really well as a monetary system (which involves many specific non-arbitrary criteria), a lack of other unrelated utility is an irrational reason to reject it. Nonetheless, it has become something of a superstition now. To me it seems similar to the idea that the prospect of objective morality collapses if a God is not overseeing it.
Josh F Posted November 22, 2013 Posted November 22, 2013 Just some basic economics though, there is no such thing as intrinsic value. So, gold doesn't have intrinsic value. This is why, famously, gold from Africa was worth its weight in salt. Like all things, its value is subjective. Additionally, the idea that gold was used for jewelry and then became money is false. The entire function of jewlery beyond a tribal society is the storage of wealth in the first place. That is to say, jewlery WAS money, and still is money! BitCoin might be in a bubble, I don't know. I personally think that speculators are going to drive a market incentive to improve upon services. The high prices have people like Pepin above, who don't have the money to invest but would likely be willing to provide a product or service in exchange for those bitcoins. It is only a matter of time before we have fivvers, ebays, kickstarters, etc all in bitcoin. oh and just to point out the most obvious thing here, Peter Schiff sells GOLD.
Rob_Ilir Posted November 22, 2013 Posted November 22, 2013 I think its a minarchist thing. A bit* of government* control is "value".
aeonicentity Posted November 22, 2013 Posted November 22, 2013 Gold lacks 'intrinsic value'. ask people deing of thirst if they'd rather have a pound of gold, or a pound of water.
AnarcoB Posted November 23, 2013 Posted November 23, 2013 I have a question. Bitcoin is exploding in price. Litecoin is cheap. There are several others out there as well. My question relates to the longterm price stability of cryptocurrencies. What makes Bitcoin worth $850 right now and Litecoin $9.80 if they essentially perform the identical function? I know they have pre-determined limits, but if there are many different ones to choose from, so what? Why would one maintain a higher price over another in the long run if they all do the exact same thing?
Wesley Posted November 24, 2013 Posted November 24, 2013 I have a question. Bitcoin is exploding in price. Litecoin is cheap. There are several others out there as well.My question relates to the longterm price stability of cryptocurrencies.What makes Bitcoin worth $850 right now and Litecoin $9.80 if they essentially perform the identical function? I know they have pre-determined limits, but if there are many different ones to choose from, so what? Why would one maintain a higher price over another in the long run if they all do the exact same thing? Bitcoin is well known and Litecoin is not. That is the only difference. In the long run, Litecoin will approach 1/4 the price of Bitcoin as its base is exactly the same. They do have different development teams, so it is possible that one will develop more/better features over another. However, having a nice chunk of your cryptocurrency in LTC and trading from BTC to LTC at a time when you think that BTC has reached its peak would be smart. It also provides a small amount of diversification, which can be good if one of the development teams does some weird things. Beyond that, there are maybe 10 other bitcoin-based cryptocurrencies with different advantages. In the long run people will probably inter-trade many of them with a handful emerging as commonly accepted as having the best features. This would be a potential area for speculation. You can do research and buy a couple units for literally nothing. Hopefully in 10 years it becomes at least a somewhat recognized unit and you can make many multiples of your investment. There is a lot of development in the area and it is very interesting to see the changes happen and where the different development teams think cryptocurrency should head toward. The only "altcoin" that I think is pretty guaranteed to grow in ratio to Bitcoin is Litecoin.
FreedomPhilosophy Posted November 25, 2013 Posted November 25, 2013 I'm personally still on the edge of buying a Bitcoin, a part of my curiosity wants me to invest in it, but another part scares me (mostly because I am quite short on funds). It seems unwise to risk what you may not be able to afford to lose. Timing is important, one needs to buy low but in such a volatile new market, getting in at a low is more likely to be by luck than skill.I do think that from a fundamental perspective bitcoin does represent a good investment opportunity for the medium and possibly long term because its value has probably yet to be fully realised.
Bulbasaur Posted November 25, 2013 Posted November 25, 2013 I have a question. Bitcoin is exploding in price. Litecoin is cheap. There are several others out there as well. My question relates to the longterm price stability of cryptocurrencies. What makes Bitcoin worth $850 right now and Litecoin $9.80 if they essentially perform the identical function? I know they have pre-determined limits, but if there are many different ones to choose from, so what? Why would one maintain a higher price over another in the long run if they all do the exact same thing? Bitcoin is well known and Litecoin is not. That is the only difference. In the long run, Litecoin will approach 1/4 the price of Bitcoin as its base is exactly the same. They do have different development teams, so it is possible that one will develop more/better features over another. However, having a nice chunk of your cryptocurrency in LTC and trading from BTC to LTC at a time when you think that BTC has reached its peak would be smart. It also provides a small amount of diversification, which can be good if one of the development teams does some weird things. Beyond that, there are maybe 10 other bitcoin-based cryptocurrencies with different advantages. In the long run people will probably inter-trade many of them with a handful emerging as commonly accepted as having the best features. This would be a potential area for speculation. You can do research and buy a couple units for literally nothing. Hopefully in 10 years it becomes at least a somewhat recognized unit and you can make many multiples of your investment. There is a lot of development in the area and it is very interesting to see the changes happen and where the different development teams think cryptocurrency should head toward. The only "altcoin" that I think is pretty guaranteed to grow in ratio to Bitcoin is Litecoin. This is a good question. There are an absurd number of functionally similar (if not identical) coins. There are a few reasons; the code is open source so it's not very difficult to make your own coin, and there are detailed guides telling you exactly what lines in the code you need to change. Some people may do it as an exercise in learning how to make a cryptocoin, others may do it hoping to create the early-bitcoin conditions when mining was easy, so that they can 'pump and dump' if they can actually find people willing to trade for them. But by now people are pretty cynical about new "shitcoins" (industry term) that don't bring anything new to the table. As to what makes bitcoin "worth" so much more than litecoin and the others, it's just supply and demand. Bitcoin is mature enough that the mining supply has dried up, whereas the demand continues to grow as it gains more media attention and more startups and businesses start getting involved with it. Public interest and consensus are important for a currency to be valuable, and Bitcoin has a big first-to-market advantage in that regard. Litecoin has basically second-to-market advantage over the rest. Higher market capitalization indicates more interest in the coin, which attracts more interest, and so creates a positive feedback. It's not necessarily true that litecoin price will approach 1/4 that of Bitcoin though, because price depends on demand as well as supply. Future demand for litecoin is pretty tough to predict at this point. There are other small differences besides the total number of coins which might influence this, for example I usually hear that litecoin has an advantage of faster transaction confirmations. The mining algorithm is also different, so mining of litecoins without special equipment is still viable. These aspects could influence how the demand for litecoin evolves, as well as whether businesses and startups get involved with litecoin. But it may never gain the kind of consensus and utility it needs to succeed (and the same could be said for bitcoin as well). There are some unique altcoins that might be worth looking into, and may still be viable for mining without special equipment (at least, if you're optimistic about eventual price gains on the order of what we've seen with bitcoin). Primecoin uses a proof-of-work that searches for new prime numbers. I suspect that won't be important enough for most people to matter much, though. Peercoin uses a proof-of-stake/proof-of-work hybrid system, which means the overall network is energy-efficient compared to the proof-of-work coins, and you get rewarded with new coins just for holding coins over time. Protoshares are weird and hard to explain, but they are related to projects involving "distributed autonomous corporations" such as a distributed decentralized bank (http://invictus-innovations.com/i-dac/ for more on that). Namecoin is a project attempting to create an alternative distributed DNS system. These are the more interesting ones that I know of, and I think it's no coincidence that for the most part these have the largest market capitalizations (http://coinmarketcap.com/).
Wesley Posted November 25, 2013 Posted November 25, 2013 http://dealbook.nytimes.com/2013/11/24/in-bitcoins-orbit-rival-virtual-currencies-vie-for-acceptance/?_r=0 Here is a New York Times article released last night on altcoins.
marian001 Posted November 27, 2013 Posted November 27, 2013 What Peter Schiff is suggesting is issuance of digital currency backed by gold. It is not very well know feature, but Bitcoin is actually capable of handling backing of currency with anything you like. It's called 'colored coins' and it is kind of a currency within currency. You take some satoshis and store them in a specific wallet. Then you announce your commitment to back each satoshi in that wallet by e.g. 1 ounce of gold. Then you can sell your satoshis from that wallet for whatever price unrelated to the price of 1 Bitcoin - most likely you'll be offering a price close to the price of 1 ounce of gold :-). Of course you then need to keep your promise in case somebody comes with your satoshis claiming his gold. People will most likely choose trusted parties for this type of transactions... This is amazing concept which will make Bitcoin's utility even greater.
Wesley Posted November 27, 2013 Posted November 27, 2013 What Peter Schiff is suggesting is issuance of digital currency backed by gold. It is not very well know feature, but Bitcoin is actually capable of handling backing of currency with anything you like. It's called 'colored coins' and it is kind of a currency within currency. You take some satoshis and store them in a specific wallet. Then you announce your commitment to back each satoshi in that wallet by e.g. 1 ounce of gold. Then you can sell your satoshis from that wallet for whatever price unrelated to the price of 1 Bitcoin - most likely you'll be offering a price close to the price of 1 ounce of gold :-). Of course you then need to keep your promise in case somebody comes with your satoshis claiming his gold. People will most likely choose trusted parties for this type of transactions... This is amazing concept which will make Bitcoin's utility even greater. That is an interesting concept and I would like to see it implemented. The problem with gold-backed electronic currencies is there needs to be that central exchange of gold. That central exchange then can easily be shut down. I cannot think of how a true P2P gold-backed currency would work. This way would essentially be an individual issuing gold certificates in the form of bitcoins, which even if someone is trusted I do not think it would be a very popular method. Maybe I am wrong.
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