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Bitcoin

Value of Bitcoin "Crashes" 709

Posted by Unknown Lamer from the smells-like-real-currency dept.
souravzzz writes with an update on the state of Bitcoin. Quoting the Ars Technica article: "Bitcoin, the world's first peer-to-peer digital currency, fell below $3 on Monday. That represents a 90 percent fall since the currency hit its peak in early June." That's still three times its value in April 2011.
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Value of Bitcoin "Crashes" More

Value of Bitcoin "Crashes"

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  • Bitcoin (Score:5, Insightful)

    by TechLA ( 2482532 ) on Wednesday October 19, 2011 @08:37AM (#37761450)
    People keep saying that BitCoin will have it's value as long as people keep using it and that you're not supposed to get rich by mining. But that isn't even the problem. I transferred some cash to BitCoins and back on Friday and it was paid out to me on Sunday. By the time I got the transfer, it had lost almost half of its value. Now imagine if that would constantly happen with your real money. It wasn't much, but I sure as hell aren't going to use it again. This is why PayPal and other ecurrencies are fixed to real world value - they are stable (as far as it can be), and BitCoin can't ever get as stable as real world currencies (yes I know they aren't that stable, but that just means even bigger problems with BitCoin)

    • Re:Bitcoin (Score:5, Insightful)

      by Smallpond ( 221300 ) on Wednesday October 19, 2011 @08:40AM (#37761494) Homepage Journal

      You may have lost money on it, but somebody gained. Currency speculation has been around a long time. Most currencies aren't as volatile because there is a government making a monetary policy to control it. Bitcoin is a real opportunity for speculators.

      • Re:Bitcoin (Score:4, Insightful)

        by Goaway ( 82658 ) on Wednesday October 19, 2011 @08:42AM (#37761520) Homepage

        Oh, that's nice. I can give my money to speculators! Let me get right on that.

        • Re:Bitcoin (Score:5, Informative)

          by MareLooke ( 1003332 ) on Wednesday October 19, 2011 @08:55AM (#37761686) Homepage
          You are most likely already doing that already anyway. What do you think your bank does with your money?

          • Gives me a return and guarentees my money will be available?

            • Re: (Score:2)

              by Surt ( 22457 )

              They don't actually guarantee that your money will be available. And neither does the FDIC. The FDIC sort of promises you can get some of your money back, eventually, but how long eventually is, and whether or not your money has any worth if they have to go on a printing spree ...

              • Re: (Score:3)

                by egamma ( 572162 )

                They don't actually guarantee that your money will be available. And neither does the FDIC. The FDIC sort of promises you can get some of your money back, eventually, but how long eventually is, and whether or not your money has any worth if they have to go on a printing spree ...

                The FDIC can't go on a printing spree. I'm not sure if you're not familiar with the FDIC, or if you simply didn't provide the subject for your "they". It should read:

                "The FDIC guarantees your bank deposits, but does not guarantee that the Federal Government that the FDIC is not a part of won't print money"

              • Re:Bitcoin (Score:5, Insightful)

                by murdocj ( 543661 ) on Wednesday October 19, 2011 @10:38AM (#37762980)

                In other news, there are no "sure things" in this world. If Vladimir Putin goes nuts and unleashes Russia's nukes, clean water and non-radioactive food is going to be a worth a whole lot more than dollars, bitcoins, or gold. In the meantime, comparing Bitcoin losing half it's value in 2 days to the chance that you won't get your federally insured deposit money back is absurd.

              • Re: (Score:3)

                by swalve ( 1980968 )
                The point of the FDIC is to stop bank runs. They do this by stepping in before the bank goes tits up, before anyone even knows the bank is in trouble, and cleaning shit up. This is why they do it on Friday afternoons. The come in, clean house, and then on Monday they say "don't worry everyone, your money is here, don't panic". If memory serves, they have never had to pay a claim. They spend their money preventing claims from being necessary.
          • Exactly how is this different than taking my money to the riverboat and laying it down on blackjack?

          • Re: (Score:2)

            by Lumpy ( 12016 )

            "What do you think your bank does with your money?"

            Rolling around naked in it laughing like maniacs...

        • The real problem IMHO is that hackers have pissed in the punch by writing trojans to steal them and are using armies of botnets to mine them.

          So now bitcoins are derisively aggregated with everything else nefarious that black hats are up to.

          One may as well try to deal in booze during prohibition.

          • Actually, that's how my family made its money when it moved here: bootlegging during prohibition. They did very well for themselves. But, bitcoin, that's just a tax on people who suck at macroeconomics.

            • Assuming you understand macroeconomics...How so? I am honestly wondering. I don't know much about economics but many of the people who think bitcoin is a good idea actually seem to have a very good grasp of macroeconomics.

          • Re:Bitcoin (Score:4, Informative)

            by TheRaven64 ( 641858 ) on Wednesday October 19, 2011 @09:17AM (#37761920) Journal

            No, the real problem is that bitcoin is not backed by anything. Old currencies were backed by a precious metal. If you had one Pound Sterling, then the Bank of England would give you one pound of sterling silver. Modern fiat currencies are backed by a promise from the government that they will accept them in payment of taxes. Bitcoin was backed by some pointless computation.

            If a bitcoin had been a promise to do some computation work in the future, then it may have had some value, because people need computational work done. For example, something like Amazon's compute cloud could potentially back a currency, because the service of running a VM for some number of CPU seconds is fungible and - importantly - people actually want it. No one wants the work that is done to generate a bitcoin, so the coin itself is worthless. Its value is based entirely on the premise that other people will want it in the future, but that's just a pyramid scheme.

            • Re:Bitcoin (Score:5, Informative)

              by iamthelaw ( 784705 ) on Wednesday October 19, 2011 @10:33AM (#37762920)

              Let's be clear here -- no currency is backed by anything, ever. Sure, "old currencies" were backed by a precious metal. What was that backed by? The answer to "why do currencies have value" is that _nobody knows_. The different schools of economics all have different theories, but macroeconomics is not, despite what people say, a science.

              The theory backing bitcoins is largely based on the (non-mainstream) ideas of Austrian economics; which claim that currencies have value almost entirely because they are scarce, fungible, and useless. That is, their value as an exchange medium far exceeds their value as physical objects. Incidentally, Austrian economics is pretty much the only school of economics to openly acknowledge that it is not a scientific theory.

              Fiat money qualifies easily -- nobody is burning dollars for heat or using them for wallpaper, and the scarcity is guaranteed by the issuing government (although easily abused, and sometimes catastrophically, which is why Austrian's tend not to like fiat currencies).

              Gold qualifies with caveats; it's clearly "money", but it suffers from portability and verifiability problems unless it's minted into a form that is hard to reproduce (the old-old-school approach) or vouchers are issued that can be redeemed for stored gold (the newer-old-school approach). The vouchers then become money in their own right, since their scarcity is tied to the scarcity of the underlying metal, and they're just as fungible and useless. But almost universally, governments (and unscrupulous banks, and sometimes even scrupulous banks) abuse the fact that the holder of a voucher can't see the gold to steal the gold; effectively disconnecting the scarcity of the two. Same goes for silver, though less dramatic.

              It's surprisingly hard to come up with examples of things that are scarce, fungible, and useless that are have not been used as currencies. Even things that violate one of these things is often used as money in a barter sense or in the short term (i.e. cigarettes in prison, wampum among east-coast Native Americans, Facebook game fun-dollars, baseball cards, or the Iraqi Swiss Dinar).

              So this is what Bitcoins are -- they are nothing but pure scarcity, fungibility, and uselessness. The portability is nice, except that transactions are tricky (since there's no real "receipt" mechanism -- verifying that a customer has paid his bill requires funky gymnastics), all use of it is dependent on the accessibility of the internet, and the scarcity is conditional on there being sufficient computing power applied to the problem. But aside from those, it really should work. And the fact that they are worth anything at all (that people are willing to buy them at any non-zero price) is a big deal.

              In terms of price stability, this is a complicated phenomenon; Austrian's generally do not consider price increases to be the same as inflation (a purely semantic distinction). What causes price changes are complicated, and can not be reduced to a simple rule, because at any moment, technological progress and other myriad phenomenon are messing with prices that affect, to a small extent, everyone in the supply chain of every business in the world, and that effect get compounded over time. The most visible form of this is the supply chain of money itself, through the mechanisms of banking and credit.

              So why is the Bitcoin value so volatile? (Now we're in the realm of pure speculation on my part) Because there's no supply chain to keep prices stable. No supply chain of any sort; a restaurant that accepts bitcoins can not buy silverware, or food, or paper cups, or cash register tape, or POS systems, or pay rent in Bitcoins. There are no mechanisms for loaning bitcoins; in either direction -- there are no banks that will pay you to lend them your bitcoins, and no banks that will assess your trustworthiness and income and lend you the money lent to them. So the price floats, while people try to figure out how to provide baseline services (like web hosting), s

              • So why is the Bitcoin value so volatile? (Now we're in the realm of pure speculation on my part) Because there's no supply chain to keep prices stable. No supply chain of any sort; a restaurant that accepts bitcoins can not buy silverware, or food, or paper cups, or cash register tape, or POS systems, or pay rent in Bitcoins.

                Also, there is no critically necessary good which can only be purchased by bitcoins. If it bought you protection from, say, hackers, in a way that no other currency could, it would have a standard amount of value.

                Imagine in the ancient past, before currency was quite standardized, but feudal governments are willing to trade your loyalty for protection from wild animals, bandits, and the like. Part of "your loyalty", naturally, is taxes, which must be of standardized value. If you don't pay a given amount

        • Oh, that's nice. I can give my money to speculators! Let me get right on that.

          Can anyone explain the purpose of "speculators"? When I ask "What do speculators produce?" the answer seems to always be, "Speculators produce liquidity in the market."

          That sounds suspiciously like when my mom used to say "Because I said so."

          • Re:Bitcoin (Score:5, Informative)

            by fridaynightsmoke ( 1589903 ) on Wednesday October 19, 2011 @09:38AM (#37762216) Homepage

            Oh, that's nice. I can give my money to speculators! Let me get right on that.

            Can anyone explain the purpose of "speculators"? When I ask "What do speculators produce?" the answer seems to always be, "Speculators produce liquidity in the market."

            That sounds suspiciously like when my mom used to say "Because I said so."

            When speculators are right, they even out price fluctuations by buying when they believe a commodity is unreasonably cheap, and selling when it's expensive. The act of buying makes the 'cheap' price more expensive by taking some of the commodity off the market, and conversely selling when expensive makes the commodity cheaper at that time. In non-price terms, speculators soak up surpluses when they exist, and add extra supply in times of shortage.

            When speculators are wrong or generally stupid, all hell breaks loose. Careless/stupid speculators buy in a rising market, driving the price up faster, then all sell at the same time when they realise that prices can go down as well as up, causing and then bursting a classic bubble.

            • It's not just stupid speculators that cause bubbles.

              People trying to manipulate the market can do the same thing.

              The difference is that they know damn well what they are doing.

            • Re:Bitcoin (Score:5, Interesting)

              by networkBoy ( 774728 ) on Wednesday October 19, 2011 @10:33AM (#37762924) Journal

              Speculators are a capacitor. Storing charge when the voltage is above the mean level, dumping charge when below.
              Market manipulators are an external power supply, forcing the mean level up then down.
              If speculators have more resources than the manipulators, the manipulation will fail, otherwise it succeeds.
              -nB

      • How big a fall is depends on where you measure it.
        It is volatile. THere's a difference between something that is volatile and something the either crashes or always goes up.

        I'm pretty sure there are serious problems with bit coins model that lacks a central bank or reserve system (though as some have pointed out it' not impossible a country could adopt it as a currency and provide a reserve system. That would make no sense for a major country, but for a banana republic that did not trust it's own leadership

        • Re: (Score:2)

          by vlm ( 69642 )

          I'm pretty sure there are serious problems with bit coins model that lacks a central bank or reserve system

          How would you implement a centralized control system on top of a system specifically designed to be decentralized?

      • Re: (Score:3)

        by TechLA ( 2482532 )
        To be honest, it's really a paradise for those who want to short sell and gain money on crashing the market. Bitcoinica [bitcoinica.com] seems to be one such platform which allows short selling with 1:50 or higher leverage. I guess it's a good opportunity to make some quick cash, but along the way actual Bitcoin users will get fucked over and Bitcoin's value just keeps going lower and lower. I guess the developers didn't really plan for that.

        • the real problem is the level of adoption and liquidity. In the history of money, the crash of money ( and the rise ) is always based on the availability of liquidity. the more people that adopt the currency, the less likelihood that there will be a crash of the currency, because the currency will have a perceived value.

          to you a historical example of liquidity : If you recall, in the temple where jesus flipped the tables, it was all money changers. another example was the Knights Templers usage of letters o

    • Money IRL is backed by debt, a promise to honor the debt by a central bank. Currency has some stability because people have fairly reasonable expectations that a government will pay back its debt, but it's not 100% trustworthy (just look at Greece).

      The problem with Bitcoin is that it's not tied to an index (e.g. 1 bitcoin = 1 US dollar) nor is it backed by anyone.

      • Money IRL is also backed by the fact that people must obtain money in order to settle government debts (e.g. taxes). Bitcoin still fails under this theory, since no government will accept Bitcoin as a tax payment.

      • No. Government bonds are backed by a promise to honor the debt. Money is just money, if you have a $5 note it will be worth $5 tomorrow and that's all you can say. it might buy half as much stuff tomorrow as today if you happen to be experiencing hyper inflation. The only promise involved is that the government will use its powers of force to make creditors accept that currency for debt payments and that the government itself will accept payments to it in that currency.

        There's an expectation that the govern

    • Re: (Score:3)

      by cyn1c77 ( 928549 )

      People keep saying that BitCoin will have it's value as long as people keep using it and that you're not supposed to get rich by mining. But that isn't even the problem. I transferred some cash to BitCoins and back on Friday and it was paid out to me on Sunday. By the time I got the transfer, it had lost almost half of its value. Now imagine if that would constantly happen with your real money.

      Ummm, that does happen with your real money. Have you looked at the stock markets and the international exchange rates lately?!

    • I transferred some cash to BitCoins and back on Friday and it was paid out to me on Sunday. By the time I got the transfer, it had lost almost half of its value. Now imagine if that would constantly happen with your real money.

      That happens with real money too, you know. There's this wonderful thing called hyperinflation, which if left unchecked leads to money with preposterous values printed on it. An example would be Zimbabwe dollar, which had bills worth several million dollars. It became so bad a couple of years ago that the days the 100.000.000 dollar bill was first printed, the 200.000.000 dollar bill was announced. They abandoned their currency that year and currently trade in foreign currency if I'm not mistaken. I know Zi

    • Re: (Score:2, Insightful)

      by operagost ( 62405 )

      On September 16, 1992, Black Wednesday, Soros's fund sold short more than $10 billion in pounds,[20] profiting from the UK government's reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency.

      Finally, the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound, earning Soros an estimated $1.1 billion. He was dubbed "the man who broke the Bank of England".[25] In 1997, the UK Treasury estimat

  • Eerily resembles the Nasdaq chart from 99 through '02

  • Speculation (Score:3)

    by Hentes ( 2461350 ) on Wednesday October 19, 2011 @08:40AM (#37761490)

    The majority of bitcoins is in the hands of a handful who cash in large quantities from time to time thus crashing the market.

    • Re: (Score:2)

      by vlm ( 69642 )

      The majority of bitcoins is in the hands of a handful who cash in large quantities from time to time thus crashing the market.

      This is very insightful, from someone who is obviously also in the BTC economy as I am. I'm getting disillusioned with BTC because we're creating a new set of 1%ers, these being the guys with server farms full of GPU cards. I love the idea of BTC, but I'm completely uninterested in making those guys billionaires.

      The other inherent problem, is the protocol design tries pretty hard to make the rate of BTC production mostly constant over time. The problem is people are hoarding BTC "to eventually get rich"

      • So you want your decentralised and anonymous system to vary the payout based on how many transactions are processed?
        I think I found a flaw in the plan.

      • Re: (Score:2, Insightful)

        by Zironic ( 1112127 )

        Best one out there? Handwritten IOU notes and shiny sea shells are both more stable and more useful currencies for actual use.

        Bitcoin objectively worse as a currency then any other in current use.

    • Re:Speculation (Score:5, Insightful)

      by timholman ( 71886 ) on Wednesday October 19, 2011 @10:40AM (#37763008)

      The majority of bitcoins is in the hands of a handful who cash in large quantities from time to time thus crashing the market.

      Excellent point, and in fact Bitcoin may be one of the cleverest moneymaking scams in recent memory.

      No one knows who Satoshi Nakamoto, the purported creator of the Bitcoin protocol, really is. Assuming Bitcoin ever achieved widespread adoption, he and a handful of early adopters would become the richest people on earth by default. When I pointed this out to a Bitcoin "true believer", his response was along the lines of "Well, he's a genius and deserves it." Yes, but if in fact "Mr. Nakamoto" is simply a syndicate of very clever scammers, then we would effectively be turning over a huge portion of the world's wealth to a criminal enterprise. No government is EVER going to allow that to happen.

      No cryptographic currency is ever going to gain any traction if it makes early adopters obscenely wealthy just by default. Consequently, the only way anyone will ever make money from Bitcoin is via speculation. The people pushing Bitcoin are appealing to the same mentality (and lack of logic) you see with believers in gold currency. Given the long history of scams involving precious metals, there is clearly no lack of potential victims willing to throw away their money.

      I assume the early Bitcoin adopters are cashing in before the entire house of cards collapses. If that was Satoshi Nakamoto's intent from the start, then my hat is off to him for committing what is essentially the perfect crime.

      • Re: (Score:3)

        by jdavidb ( 449077 )

        To correct this, I think the next generation of digital currency should reward miners with only transaction fees. Or else have a much sharper dropoff in the reward.

        It would be simple now to recompile bitcoin to give no payoff in transactions other than transaction fees, or to make the dropoff much sharper, and start a new block chain. I am betting that someone will attempt this at some point.

        The initial problem that "mining" was attempting to solve was proliferation of currency: how do you get bitcoins in

  • Winner: ATI (Score:5, Insightful)

    by bengoerz ( 581218 ) on Wednesday October 19, 2011 @08:42AM (#37761522)
    And the winner of this whole experiment ends up being ATI, who sold a bunch of GPUs to doe-eyed bitcoin miners.

  • Bitcoin Crashes,,, (Score:4, Funny)

    by Oswald McWeany ( 2428506 ) on Wednesday October 19, 2011 @08:42AM (#37761524)

    Bitcoin crashes after CmdrTaco leaves Slashdot.

    I don't think that is just a coincidence.

  • Crash? More like correction. (Score:4, Insightful)

    by Cainam ( 10838 ) on Wednesday October 19, 2011 @08:44AM (#37761554) Homepage

    It seems more like a correction to me. The idea that a BTC was worth $20 or more seemed too good to be true, probably because it was.

    I think BitCoin is a great concept, but it needs more of a real economy and less currency speculation. I suspect that will come once the hype dies down. Maybe now that the value has gone down, that'll happen soon.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Sorry, but Bitcoin is only good for speculators.

      A real currency needs to be widely used, and largely stable. High volatility is going to chase away anyone who intends to use them for actual currency.

      • Re: (Score:2)

        by slim ( 1652 )

        It occurs to me that if services existed that allowed us to trade faster, the current volatility wouldn't matter as much.

        That is, a poster here complains that it took him 2 days to trade some BC for dollars, during which time they halved in dollar value. If he had been able to make the trade near-instantaneously, he would have suffered little, if any of that fall. So what's stopping that from happening?

        Then it occurs to me, that if trading was faster, the bubbles and crashes would happen more quickly. I'm n

    • Re:Crash? More like correction. (Score:5, Insightful)

      by betterunixthanunix ( 980855 ) on Wednesday October 19, 2011 @09:08AM (#37761800)

      I think BitCoin is a great concept

      Except that decentralized digital cash is inherently flawed, since the tokens will always grow linearly in the number of transactions they are used for. In other digital cash systems, this problem is solved by having an issuing authority (bank, government, etc.) that accepts old tokens and issues fresh tokens. In the case of Bitcoin, no such authority exists, so the tokens are just going to keep getting bigger, and eventually they will be too large to be useful.

      Not that the technical problems are going to be what kills Bitcoin. In terms of economics, Bitcoin has a shaky basis to begin with: people only accept Bitcoin because they believe that they can exchange their Bitcoin tokens for some other currency. Eventually people need to make that exchange, in order to pay their taxes, but there is no similar need to obtain Bitcoin tokens. The gap in demand is not really filled by Bitcoin's utility as a digital cash system, which is questionable to begin with because of the technical limitations on Bitcoin.

      Even if somehow that did not become a problem, there is the fact that Bitcoin is an inherently deflationary currency. This creates problems with hoarding (which we are already seeing), and makes it harder to repay loans (loans are crucial to a functioning economy, despite what those "occupy" protesters tell you).

      In short, the odds are against Bitcoin being successful. Really, more traditional cryptocurrency is needed, where a bank issues tokens but the tokens can still be transferred anonymously. Sadly, Bitcoin's failure will make it even harder to start a digital cash bank, since everyone will associate digital cash with Bitcoin and think that all digital cash systems suffer the same problems.

      • Re: (Score:3, Informative)

        by Zibbo ( 2176270 )

        I think BitCoin is a great concept

        Except that decentralized digital cash is inherently flawed, since the tokens will always grow linearly in the number of transactions they are used for. In other digital cash systems, this problem is solved by having an issuing authority (bank, government, etc.) that accepts old tokens and issues fresh tokens. In the case of Bitcoin, no such authority exists, so the tokens are just going to keep getting bigger, and eventually they will be too large to be useful.

        What? I think you may have misunderstood some aspects of Bitcoin. You can easily divide and combine bitcoins in any way you want. You can combine one thousand 0.001 bitcoins to a single bitcoin, or do the same in reverse and divide. The smallest possible unit is 0.00000001 BTC.

        Bitcoin is not perfect, but this is NOT one of it's problems.

  • Time to invest in tulip bulbs... (Score:5, Funny)

    by Layzej ( 1976930 ) on Wednesday October 19, 2011 @08:46AM (#37761570)
    I'm moving all of my cash to tulip bulbs. They're due for a comeback ;)

    • Daffodils are a better investment.

      Unless you take the time to dig up your tulip bulbs each year- the number of tulips each consecutive year goes down.

      Daffodils on the other hand increase the size of their investment- you plant 10 this year- you'll have 15 next year.

      Muscari bulbs would be better yet. You plant one this year- you'll have 12 trillion of them next year... they're like the tribbles of the bulb-world.

  • Valuable lesson in currency... (Score:5, Insightful)

    by RyuuzakiTetsuya ( 195424 ) <taiki@coxDEBIAN.net minus distro> on Wednesday October 19, 2011 @08:47AM (#37761586)

    All currencies are fiat. No matter what they're backed by. Currencies have to exist inside of a strong ecosystem that encourages their trading rather than hoarding.

    • Gold is not fiat since gold have other uses than money. A currency consisting of gold coins where the value is the gold content would not be fiat. The same can be said for other commodities. (Not all commodities are created equal. I would not recommend an apple currency. They tend to rot and lose value. If you try to divide an apple it will rot even faster. The supply of apples can easily be inflated by farming them. It would still technically be hard money)

      • Thats exactly correct. For a good description of the properties of money, check out the following link:

        http://www.marketoracle.co.uk/Article10370.html [marketoracle.co.uk]

      • Re:Valuable lesson in currency... (Score:5, Insightful)

        by laron ( 102608 ) on Wednesday October 19, 2011 @09:27AM (#37762050)

        Gold was already valuable before it was actually useful. If a large fraction of the value of gold was based on it's technical uses, the gold price should be more stable IMHO. The gold price is more based on a circular logic: It's valuable because everyone thinks so.

        • Re:Valuable lesson in currency... (Score:4, Informative)

          by thelexx ( 237096 ) on Wednesday October 19, 2011 @10:42AM (#37763036)

          "The gold price is more based on a circular logic: It's valuable because everyone thinks so."

          Incorrect. It's called intrinsic value and gold has it. It's hard to dig up and there's not much of it. It never deteriorates (silver does) and is easy to work/subdivide (platinum isn't). It is also highly portable and easily storable (vs oil, wheat, etc). Aristotle laid it out pretty well when he wrote that something used as money should have the following properties: Durable, Portable, Divisible, Intrinsic Value

          Those are the reasons gold has retained it's status for thousands of years, and continues to do so today. See my sig for confirmation even from one of our modern economic 'masterminds'. I would suggest that somewhere around nothing has changed concerning the status of gold since he said that. The fact that it looks nice and can be worn is just a bonus that influences the weak minded.

    • Re: (Score:2, Informative)

      by betterunixthanunix ( 980855 )
      I think someone needs to look up the definition of "fiat." Bitcoin is not a fiat currency since there is no government or law involved.

  • The point of currency in general isn't as a store of value, but as a way to facilitate transactions. Currencies are traded as a proxy for trading "stock" in a particular country's economy. When Japan does well and the USA does poorly, the dollar gets weaker against the yen. Bitcoin doesn't represent any country, so trading it seems even stranger. But until and unless there are merchants who accept Bitcoin for purchases, it doesn't seem like the system itself has much value, since as I said, the reason f

    • And it cannot do that if from day to day it is worth large amounts different.
      Currency only works if people have faith in it and no one with any sense would have faith in a currency that has no solid value.

  • Ah man, I was really hoping to unload all my flooz and beenz bucks into this too. I've really got to stop investing in currency based on commercials.

    Anyone know if e-gold accepts flooz? Come on man, Whoopi's good for it.

  • Probably "Occupy Wallstreet" (Score:4, Funny)

    by Greyfox ( 87712 ) on Wednesday October 19, 2011 @08:59AM (#37761720) Homepage Journal
    Those guys take bitcoins. Probably one of them bought a twinkie, or something.

  • Well, duh. (It surprises me that I'm unable to find anyone else posting this comment.)

  • Time to burn down some forests (Score:3)

    by Quila ( 201335 ) on Wednesday October 19, 2011 @09:07AM (#37761792)

    Get the value back up, you know.

  • bitcoin is not money, its payment method (Score:3)

    by notany ( 528696 ) on Wednesday October 19, 2011 @09:08AM (#37761806) Journal

    Classical properties of money are: medium of exchange, unit of account and store of value.

    Very few, if any, goods in bitcoin economy are sold using bitcoins as unit of account. Paying with bitcoin may be option, but goods are priced in other currency. Bitcoin prices are periodically adjusted to match price in other currency. Bitcoin clearly is not way to store value. Most people use it to speculate. Apart from limited use in paying small amounts of drugs for personal use etc. in local settings, bitcoin is not preferred medium of exchange. Because bitcoin is not used like money, it is not money. Currently bitcoin is just way to make payments (similar to debit or credit card) and speculative hobby for some.

    Even very shaky third world currencies have some stability because people constantly need to buy them to pay taxes and fees. Only way I can see bitcoins becoming viable currency if some network communities or services would only accept bitcoins as payment. That would tie the value of bitcoin into something that has tangible value.

    • Though there is no reason for services to do that. Locking your livelihood to something that can lose 9/10ths of its value in a few months is a guaranteed way to go bankrupt.

      And in the end you have to transfer your money from coins to legal tender to pay taxes.

  • Economic Experiment (Score:4, Insightful)

    by DaMattster ( 977781 ) on Wednesday October 19, 2011 @09:14AM (#37761892)
    Bitcoin is kind of an interesting experiment in economics. Its founders started out with a relatively simple premise by asking the quintessential question: Why is a central clearing house or central regulation is necessary? Unfortunately, they ended up (re-)learning a valuable reason as to why our forefathers realized a need for some centralization and regulation. Our forefathers realized that monetary centralization provides currency stabilization. When the United States was young with newly won independence from Britain, each state minted its own currency and this was a debacle. How would one determine how much New Jersey dollars would one get in trade for, say, Connecticut dollars? Bitcoin's founders also re-learned the difficult concept of valuation. Last summer, Bitcoin essentially bubbled because, for a short time, its followers had a strong, collective emotional belief that bitcoins have real value. The moment this emotional belief foundation is placed into doubt or shattered, the value comes down. With the storm of server, desktop, and web application intrusions resulting in the theft of Bitcoins, the latent problems with the currency model were suddenly propelled into the main stream. Its users became frightened and distrustful. It is more than just supply and demand economics but believing that the medium that you are using for trade is intrinsically worth something (when, in actuality it has no real value.) Finally, centralization helps mitigate criminality and makes it easier for a victim to recover stolen funds.

  • ...And nothing of value was lost. (Score:5, Insightful)

    by Kaenneth ( 82978 ) on Wednesday October 19, 2011 @09:19AM (#37761942) Journal

    Seriously, what did you expect?

  • A small Bitcoin success (Score:5, Interesting)

    by Teppy ( 105859 ) on Wednesday October 19, 2011 @09:25AM (#37762010) Homepage
    Our new game, "Dragon's Tale," functions exclusively in Bitcoins. It's a gambling MMORPG based on the same technology as our previous game, "A Tale in the Desert." Choosing Bitcoins means that I never have to worry about PayPal freezing my account, or about $25 chargeback fees, or making Mastercard a 2.5% partner in my business.

    When we started Dragon's Tale, Bitcoins were worth 5 cents, and people played for 100's at a time. When Bitcoins were $30, people played for fractions of a coin. Now that Bitcoins are $2.00 or whatever, they may spend a Bitcoin or two on a play session.

    The point is that the exchange rate to dollars is irrelevant - players play at the level they're comfortable with, and our revenue (viewed in dollars) has been increasing steadily.

    • Re: (Score:3, Insightful)

      by Anonymous Coward

      So in other words, you run an illegal online casino hidden under the guise of a game.

      Interesting.

  • Ah, Slashdot (Score:4, Funny)

    by Siberwulf ( 921893 ) on Wednesday October 19, 2011 @10:55AM (#37763246)
    Come for the tech, stay for the fiscal policy lectures.

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