Tuesday, 12 December 2017

QoTD: A fair question [updated]



Q: Can you buy Tulip Bulbs with Bitcoin? I think so.


UPDATE:

[Hat tip Twitter: #TulipBitcoin]
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13 comments:

  1. Virtual anything is virtual nothing when it collapses while the stupid tulip buyers still had flowers (darned expensive though) at the end of the day. What I notice about Hong Kong is the amount of cash I see in use by locals and at bank counters. The little restaurants I eat at generally don't have Eftpos. I like it like that - it just feels like a better balance than our virtual cashless society.

    3:16

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  2. Bitcoin isn't a virtual nothing. It's a technology. What strikes me is that those who say it's a bubble never say what price is the right price. If the right price is zero, then why exactly? I haven't seen a convincing argument yet as to why it must necessarily fail as a currency.

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    1. "What strikes me is that those who say it's a bubble never say what price is the right price."

      And yet there's no calculation you can do either to show price to value. So there's that.

      "I haven't seen a convincing argument yet as to why it must necessarily fail as a currency."

      But it's barely being used as a currency. And any currency that is that severely deflationary is unlikely to be used by choice.

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    2. That is true, but it is also very early days. The industry is developing rapidly and continually aiming to become more user friendly. Only time will tell whether or not it gains widespread adoption. People haven't been saying it's going to pop and disappear since it was $30 a coin.

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    3. Peter, what do you mean by severely deflationary? I understand deflation to a contraction of the money supply.

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    4. Deflationary because, if you did view Bitcoin et al as a currency, then for the widget that not so long ago you would have been paying 100 Bitcoins (if you could find someone to take them in payment), you'll now be paying 1/100 of a Bitcoin.
      So if you consider BTC to be a currency, then prices as designated in BTC are falling disastrously.

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    5. That is transitory though. When its price level is found it will stabilise and the phenomenal price rise will halt. For those holding bitcoin the price rise is not disastrous. I can't see how it would be disastrous for people exchanging products for bitcoin either.

      I think the greatest risk is technological. If the network can't be made to handle ever greater traffic with ease then it will fall over. A lot of developers are constantly working on improvements.

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  3. In substance Bitcoin is no more "virtual" than our current cash, consisting of wads of paper with government ink on it that are being passed around the streets of Hong Kong - and arguably less so. That doesn't mean it's not overvalued (it probably is), but it at least seems supported by the blockchain technology that allows reliable exchanges that can't be tampered with by the state or anyone else. That technology, and the system Bitcoin has to utilise it can have a value in itself. I think you can can regard the price paid for a Bitcoin as effectively the fee for being able to participate in that medium of exchange. I don't understand it well enough, and so in my mind the jury is still out on the whole thing, but in the meantime I can accept that Bitcoin doesn't need to have gold sitting in a repository somewhere to have a real value.

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    1. "That doesn't mean it's not overvalued (it probably is),"

      I think its value will be determined by the job that people expect it to do. If people expected 21 million Bitcoins to replace the fiat dollars flowing through the economy, then it's price would need to be enormous relative to that fiat dollar. If it has a niche use, then its price could be quite small.

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    2. I think the truth lies somewhere between what you're saying, and those saying it has no value (because it's backed by nothing tangible). On the one hand I agree with you that it's value is derived from it's ability to replace fiat dollars, and that value is real. On the other hand I doubt most of the current investors are valuing it based on that, instead just seeing the upward trend and investing on the expectation the value will keep rising. There's always a reckoning in the long turn when reality asserts itself, but in the short term the price can become very detached from real value.

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    3. I think it can only rise as high as it has because investors believe it can succeed as a currency. If it does succeed, then the current price is still a bargain and what you are seeing is not a bubble, but a transfer of wealth. The tulip price graph isn't evidence that Bitcoin is a bubble anymore than a Google price graph, which went equally sky-high as people adopted it, would be evidence that it isn't a bubble. A strong argument that shows how and why it cannot succeed as a currency is what is needed to show that it is bubble that will inevitably pop.

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  4. I think this is the strongest argument yet that I've read that predicts the failure of Bitcoin. I don't know if I agree or disagree with him, or why I should one way or the other. He seems to have a different view of what money is than Murray Rothbard does, who I have always taken to be correct.

    https://www.bullionvault.com/gold-news/bitcoin-gold-money-120720174?utm_campaign=20171215-f&utm_source=emailCampaign&utm_medium=email&utm_content=

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  5. The power of blockchain. It should excite any liberty lover.

    https://blog.enigma.co/why-enigmas-privacy-protocol-will-power-our-decentralized-future-aedb8c9ee2f6

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