The article just supposes that Bitcoin is the next big thing and then it portrays where we might be in terms of adoption if indeed the supposition is right.
But I would rather want to know why people are adopting Bitcoin and what they are exchanging it for. That way I could truely understand the Bitcoin economy and whether it is actually the next big thing or not.
I don't want to be a harsh critic but I always get my hopes up for nothing with these kind of articles.
I went to a Subway in Allentown and bought subs with bitcoin last week. Scan QR code, send amount with a (in fiat) .5 cents confirmation fee to get it accepted quickly, done. No signing paper, no pinning codes, no 5% vendor transaction fees for using a piece of plastic.
I've bought humble bundies, reddit gold, wordpress themes, and an sd card from a bitcoin auction site with bitcoin. I regularly tip people on reddit with /u/bitcointip and its simple syntax. I donate to various open source projects in bitcoin because I just copy paste their address and send a few USD worth in seconds.
This isn't an attack on your response, because yours is a realistic answer to the question.
However, I find it difficult to believe these things warrant the massive increase that bitcoin has seen the past few weeks. Open source projects, indie games and one sub shop do not a currency make.
That said, I am a believer in bitcoin and hold a few myself. I also exchange it for the things you speak of. But I desperately want to get from auction sites, humble bundles, reddit gold and wordpress themes to groceries, fuel and clothing. Then we might justify this market cap.
Interesting. Is this site legit? Considering the ridiculous and opaque pricing scheme of airline tickets, I've always looked at sites like Kayak and now cheapair with some skepticism (preferring the old standards of expedia and orbitz). However, there's really no reason to believe that expedia has some magic that cheapair and kayak couldn't also harness.
Folks are already using bitcoin for international commerce and remittances where they were underserved by banks and services like Western Union or PayPal.
Bitcoin only needs to be useful for one kind of transaction for it to be enormously valuable. Once it is useful for some class of transactions it will be more valuable for other kinds of transactions. This is a classic network effect.
The particular kind of transaction where I am convinced it will take off is international commerce. There are lots of potential transactions that are simply not happening because of the hassles of moving money around between currencies and banking/government regimes. There are lots of other transactions happening that are slow and expensive for the same reason. So bitcoin is providing value there, both by making existing transactions cheaper and making other transactions possible. I'm specifically thinking of capital and labor in currently underserved markets that can now more easily be exchanged where they were not before.
Then there are whole classes of transactions that bitcoin makes possible that were not possible before. For example, right now one could write a bot that receives and spends bitcoin to provide some service and not have to get any permission from a bank or government to do so. What kind of cool weird services are going to come from that?
These are technologies that predate written records (did I mention writing as another example?) yet they all remain use and are actually fundamental in our daily lives. I am not going to claim that fiat currency will be so enduring, but I see no reason to assume that it will be replaced by anything short of a post-scarcity age.
Fire is not just about heating your home. Fire is used for cooking, it is used to generate electrical power, it is used in vehicles of various kinds (cars, airplanes, ships, rockets, etc.), it is used in various chemical and industrial processes, and there are hundreds of other uses.
Knives are not just weapons, and if you think forks can replace knives then you have never actually cooked anything more complicated than instant ramen. Go to your favorite restaurant's kitchen, and you will see lots of knives, specialized for various purposes. Knives are among the most useful tools ever invented. Quite a few people (myself included) carry a pocket knife or multitool (which almost always includes a knife) everywhere. There are a lot of situations in life that call for cutting things.
"I'll give you the wheel only because I'm still waiting for my hovercar"
Your hovercar will probably have wheels, unless you think there will be no need to cool any of those high-tech components (or that the cooling will be accomplished without any fans -- I doubt it). Even if we had a world of hovercars, there would be wheels all over the place, in various machines both in our homes and in factories and other industrial settings.
I don't know where you live, but the central heating in my house has a fire in it. That's how the water heats up! And for more localized heating, the heat given off by some kind of flame also seems to be commonly preferred to that from an electric "fire".
Fires are also better for everyday domestic cooking, whether due to basic usability (in the case of a hob) or warm-up time (in the case of a grill or oven).
Passing electricity through bits of metal until they heat up is fine, but I don't appear to be unique in my feeling that simply setting stuff aflame works better. So all in all, I don't see the humble fire going anywhere.
(Lest you think I'm a stick-in-the-mud, do note that I fully approve of the use of electric light over candles.)
He means to distinguish it from currencies that have value by government fiat. You cannot require businesses to take bitcoin like the US government requires them to take cash.
> You cannot require businesses to take bitcoin like the US government requires them to take cash.
How exactly does the US government require businesses to take cash? I briefly looked into the state of the law concerning this, and there were two lessons that people discussing it take pains to pound into the reader:
1. Those places that say "we will not accept $20 bills" are on completely safe ground, legally.
2. The text "this note is legal tender for all debts, public and private" on US paper currency was added for historical reasons and has no legal meaning.
The definition and use of the word fiat is interesting, in Latin it means "let it be done".
You could say that the creator of Bitcoin decreed that it had value (I'm not sure I would agree), but it's still different from government backed money because nobody is forced to use Bitcoin (to pay taxes for example).
It certainly seems that within the Bitcoin community the word fiat now means government backed money, I suspect if Bitcoin becomes more successful it may end up redefining the word.
So, in the historic situation in which a farmer's business is all conducted in copper (or in kind) and taxes are assessed in silver, would you consider silver a fiat currency?
A fiat currency is fiat because it gives you no claim to anything. A pound of silver gives you a claim to a pound of silver. A US dollar used to give you a claim to a certain weight of gold. Today the price of gold is uncontrolled.
(Side note: owing to the special nature of facio/fio, using "fiat" doesn't necessarily require an agent. The verb is indeed the passive form of "facio" [do/make], but it's also the standard way to express [happen/occur].)
...or if the law requires certain payments to be made (taxes, fines, etc.), provides legal protections for creditors when people default on their debts, and gives courts the legal power to require one person to pay another. This is what drives the demand for fiat currencies, and as long as the supply remains limited the currency will have value.
If you and I draw up a contract denominated in Bitcoin (or anything, really), and you default, the courts will protect me and require you to pay, in the form specified by the contract. Courts already have the power to require one person to pay another in any form; US courts routinely enforce judgments in foreign currency.
It's true that US taxes get paid in US dollars, but, as I point out in another comment, that fails to distinguish "fiat currency" from metallic weights, which are universally considered "not fiat currency". So I'll put the question to you as well: if your taxes were assessed in silver, would that make silver, to you, a fiat currency?
> as long as the supply remains limited the currency will have value.
A technicality: e.g. Zimbabwe's money lost 100% of its value (it was abandoned by the population) long before an infinite quantity was available. I don't really disagree with the idea here, but the phrasing isn't right.
EDIT:
I might also point out that the Somali shilling (a paper currency) is widely used in transactions despite not being backed by any law or government at all. Since anyone can print them, they tend to trade at a value roughly equal to the cost of printing.
"So I'll put the question to you as well: if your taxes were assessed in silver, would that make silver, to you, a fiat currency?"
I would argue yes, because:
(1) Under such a system, silver would be used as currency because people would need to acquire enough to pay their taxes (and other metals e.g. gold, platinum, copper would not be used as currency).
(2) You would be hard-pressed to find a market where silver (by weight, not by "face value") is used as currency in today's world. Once upon a time silver was used as currency, and I would say that it is no coincidence that back then silver was a way to pay taxes (among other things).
As for people saying that metal-based currencies are not fiat currencies, the subtle assumption hiding in there is that there is some other source of demand for metals that has nothing to do with the law. I am not a huge fan of this sort of idea, because to me it looks like this:
Step 1: Metals have certain properties that are useful for currencies to have.
Step 2: ???
Step 3: People use metals as currency (profit, at least if you can dig up some metal).
Are you wondering what step 2 might be? Step 2 is the reason people use particular metals rather than wampum, geodes, or Somali shillings. Step 2 is usually ignored in these discussions, but it should not be. To bring things full circle, let's turn your question about silver around: if the government allowed taxes to be paid with wampum, would wampum be a fiat currency? If your answer is "yes" then the real question is, "What differentiates wampum from silver?" If your answer is "no" then the real question is, "What differentiates wampum from dollar bills?"
I agree that the argument that metals have intrinsic monetary value is rather strained. I tend to believe that the "metal has inherent value" mindset comes from the fact that you can take it anywhere in the world and you'll still be able to trade it for goods and services, which is not true of government-issued notes. That will also be the difference between silver and wampum, but it's entirely empirical; there's no theory that explains why one is inherently different from the other.
> Under such a system, silver would be used as currency because people would need to acquire enough to pay their taxes (and other metals e.g. gold, platinum, copper would not be used as currency).
This is false. Read some history.
> Once upon a time silver was used as currency, and I would say that it is no coincidence that back then silver was a way to pay taxes (among other things).
The history of Chinese taxation (and currency) is quite interesting. I'm only minorly informed, but here are some things that seem relevant:
In what I'll call "phase 1" of the chinese economy, farmers conducted transactions in copper, merchants conducted transactions in silver, and taxes were assessed in kind (grain). This led to major logistical issues in collecting taxes; there was a point where the government announced a tax increase because the ships were arriving at the capital empty. (After a successful effort at reforming delivery, the increase was canceled!)
In "phase 2", farmers still used copper, and merchants still used silver, but taxes were assessed in silver. This was an enormous boon to the logistics of collection, but occasionally beggared farmers when the exchange rate swung against them.
At some point in all this, the government started issuing paper notes. (Notably, these were very common as "reciprocal gifts" to trade missions.) Merchants in the capital would accept these, but silver was far and away the dominant medium of exchange.
It all suggests to me that silver was a way to pay taxes for the same reasons that it was used as a currency, but not because the government needed to have silver available to spend; clearly it didn't. Instead, silver was fairly dense (in terms of buying power per unit volume) and didn't spoil like grain does.
I'm not clear on what you think the difference is between using silver by weight and using silver by face value. The whole idea of a mint is that coins have a standard weight. (Also potentially of interest: over the whole period I've described, China minted copper coins, but never silver ones. This didn't stop silver from being the metal of large-scale commerce and tax collection.)
I think you are leaving out a few details about the history of currency in China, like the fact that the metal coins were minted by the government, and that at different times there were different governments minting coins (from different kinds of metals). You are also ignoring the fact that the metal coins from China were also being used as currency in neighboring countries, and so even when the Chinese government stopped minting (or banned) older currencies it took time for those currencies to fall out of circulation. To put it another way, Chinese farmers did not decide to use copper on their own; copper was chosen by a government in certain rural regions.
"I'm not clear on what you think the difference is between using silver by weight and using silver by face value"
The face value of a coin does not need to track the market value of the metal used to make the coin. Typically it is advantageous for the face value to be higher than the value of the metal (otherwise people will just melt down the metal); it could happen the other way, e.g. what happened with US pennies. "Face value" only makes sense with fiat currency, which is why I drew the distinction.
"The whole idea of a mint is that coins have a standard weight"
This is not true of modern coins; all the really matters with modern coins is their face value, which can have nothing to do with their weight. It is not uncommon for a smaller coin to have a larger face value than a larger coin. Relating the physical measurements of a coin with its face value is convenient but not at all necessary in a fiat currency. The US has dollar coins with different weights and dimensions, all with a face value of one dollar, and the value of those coins is independent of the market value of the metals they are made from.
> at different times there were different governments minting coins (from different kinds of metals).
Copper, bronze, and iron (depending on location). But not silver, even when taxes were required to be paid in silver. You've taken the position that the medium of tax payment will necessarily be used as a currency, but this isn't true.
What distinguishes the farmers, with their tax obligations in silver and their business in minted copper (or iron), from the merchants with their tax obligations in silver and their business in unminted silver? It can't be the tax obligations. I've taken the position that the distinction is in the amount of value they generally handled; silver was worth more than copper and used for large transactions.
> "Face value" only makes sense with fiat currency, which is why I drew the distinction.
This is actually untrue; clipping a minted coin creates a discrepancy between its face value (which it has, since it's minted) and its value by weight. Forging an adulterated coin does the same. Clipping only makes sense for "non-fiat" coins; it would be pointless to clip a fiat coin as they are not made from precious metals. The value of a traditional, minted coin of precious metal was entirely in the weight; the minting was a QA program.
Anyway, I don't think a fiat currency can be said to "use silver" in any sense, which is why I was confused at your distinction between using silver by weight or face value. The GBP is named the "pound sterling", but that's just a name. I guess in my mind, if we use $10 of platinum to mint commemorative not-intended-for-use $500 coins, the use of platinum is more of a coincidence than an actual use of metal-based currency.
I'm holding some bitcoin, but I'm still not sure whether I'm speculating or if I'm in for the long run.
Sure, the Chinese are plowing huge sums of surplus cash into BTC, but where can it go? If the US, EU, and China decide tomorrow to freeze out bitcoin exchanges (like the US has already pretty much done), then where does that value go? Does it sit in BTC until adoption hits critical mass? How do you reach critical mass if you can't get in and out of fiat during the transition?
All it takes at this point is for China to decide on the socialist side of the fence and seize btcchina. All that Yuan hasn't really left the country and I'm sure Beijing will make damn sure it never does.
Please tell me you are being sarcastic. You are asking how legit a speculation about the astronomical rising price of bitcoin on a bitcoin .com website, with a graph that accurately pinpoints our location in time at the foot of a giant mountain of $$$$$, predicts the downfall of normal money, has no scientific sources.
Consider all "you should buy bitcoin now" to be bait from gamblers who want to maximize their speculative outcome. Bitcoin is nothing but speculation. And right now it is in a ridiculous bubble.
Do you think the price of bitcoins will rise over the next x years? What value of money y could you lose and be able to shrug it off?
Buy $y of bitcoins, and write yourself a guarantee that you'll sell it in today + x years.
Value for me a while ago of y was $1,500 and x was five years, and I buy $150 a month every month on the same day, with a get-out clause at a specific valuation.
Since you are apparently very used to people doing things for you, you might want to look at online wallet services[1] that hold your money. You might think that it is less safe to do things that way, and you are right, but it is no less safe than giving your cash to the bank.
EDIT: Sorry for being rude; last night was a long night. What I'm really trying to say is that, by running wallet software locally, you are opting yourself in to a few responsibilities that go beyond just storing your own money. If all you want is the ability to store your bitcoins, there are already services that will provide you that ability with no fuss.
People are critical of these services, but the poster you're replying to is correct: bitcoin is not ready for prime time. As much as the bitcoin faithful would like to deny it, bitcoin will not be widely adopted until there is a financial services industry around it. The necessity of credit, the convenience of easy payment, the security of your money in a bank, it's just too tempting for people to walk away from. Nevermind that there is still a massive part of the first world population that can't program their clock, much less download a bitcoin wallet. And the fact that Internet infrastructure is still limited worldwide. Try paying with bitcoin on your phone in some more remote parts of Montana.
I just don't think the snark is necessary here. I'm pretty technically savvy and I found the wallet setup process to be... unintuitive. For example, transactions didn't show up until I told my wallet to sync back to before I created it because Multibit doesn't sync by default to a sane time.
Also, it's demonstrably less safe to give your Bitcoin wallet to a site than to give your cash to a bank. To imply that the security and insurance of these sites is comparable to banks is laughable -- you frequently hear about sites getting hacked and losing all of their BTC.
Of course, banks have other problems (depending especially on how you view the Fed), but disingenuous claims like this do nothing to help Bitcoin.
PS3 and Xbox1 were released in the last month. Both download all their software and updates and over the internet! The future is fine, you just happened to pick the one month where there's been too much of it at once for the internet to cope.
But I would rather want to know why people are adopting Bitcoin and what they are exchanging it for. That way I could truely understand the Bitcoin economy and whether it is actually the next big thing or not.
I don't want to be a harsh critic but I always get my hopes up for nothing with these kind of articles.