Topic: Bitcoin is a commodity, not a cryptocurrency. (Read 2947 times)
Read this. http://www.afn.org/~govern/why.html
Gold,petroleum= second power of war.
Currency=nation debt
Bitcoin= liberty
Gold,petroleum= second power of war.
Currency=nation debt
Bitcoin= liberty
And the roller coaster is now fed again. 
I agree, bitcoin is a commodity. People do not generally write contracts payable in bitcoin, because the price of bitcoin is too volatile. Also, they are not enforceable when there is a legal tender law, except as commodity contracts where the bitcoin is being delivered, not paid.
However, there is one thing which cannot be bought except with bitcoin: the right to record something in the blockchain. There are many uses for this aside from recording bitcoin transactions, and so long at the blockchain is being maintained, the transaction fee required to make an entry sets the value of that fee no less than the value of the entry. So bitcoin is a currency when it comes to buying certain goods and services which exist on or as part of the internet, such as blockchain entries, server hosting, VPN services, etc. It would also be serve nicely to pay peer-to-peer distributed storage nodes for storage services. And in cases where the seller cannot afford to do business if he must take chargeback risk.
One thing which bitcoin lacks is fractional reserve banking. This is another argument that bitcoin is not a currency. But as a commodity, it could in theory serve to back a currency, so that bitcoin would be the thing (like gold coins) the bank coughs up from its reserves when you withdraw funds from your account. If you like gold-backed currency, you should like bitcoin-backed currency.
A tiny fraction of all USD exist as paper currency.
A large fraction of all USD are created by commercial banks when they lend money they don't have, debiting the loan to their "assets", crediting the new cash to the borrower's checking account in the same bank (so the ledger balances), and then counting it as money they "have," and calling the borrower a "depositor." In exchange for the right to create money, banks must ensure that their loans are repaid (which destroys the money).
If the borrower then writes checks or withdraws cash, he is acting as a depositor claiming his deposits, and the bank pays the amount from its reserves.
Once each day, the banks determine how much reserve cash they need, some fraction of their total obligations (deposits and borrowing from other banks or the Fed). If they have too much reserves, they offer it to other banks at the interbank rate. If they have too little, they borrow from other banks, or if that fails, they borrow at the Fed discount window. (The Fed is the "lender of last resort," always ready to prevent bank runs).
The Fed debits the bank's promise to pay to "assets", and credits the cash created and paid to the bank to "liabilities," and the Fed's ledger balances. That also creates some money, but only the part the bank isn't allowed to create by itself. (The bank creates say 90% of the loan, and if no other banks have funds to lend, borrows 10% from the Fed, which the Fed creates. Funds repaid to the Fed are destroyed, by crediting the redeemed promise to pay to assets, and debiting the cash destroyed to liabilities).
In order to make the best profit, if they can get deposits for a lower price than the interbank rate (including interest and expenses), they advertise for depositors. But they don't actually need depositors bringing existing USD into the bank, unless the discount/interbank rate rises too high.
Presently (since 2008), the discount/interbank rates are essentially zero. The money supply has gone through the roof. It all stays in the banks, since businesses cannot exhibit a way to make money on borrowed funds, because they have no customers, because the customers have no money to buy things with. So the banks do not approve loans. Also the banks have no need to lend the funds because they are essentially free.
Therefore, in order to ensure that Treasury bondholders can get their own cash out by selling the bonds at the price they expected when they bought the bonds, the Fed has been buying Treasury bonds on the open market, debiting the bonds to their "assets" and creating money by crediting the created money to their "liabilities," so the ledger balances.
But there is no price inflation to speak of (i.e., less than 3%), except in cases where the value of the thing being purchased has increased due to external factors.
One early reason (i.e., in 2008) people didn't have money to spend (before they became unemployed because their employers couldn't sell goods to people with no money) is that they had and still have large debts to pay off.
But should this abnormal state of high unemployment and low consumer spending end, and the banks start lending, the Fed will raise the discount rate, and banks will have to charge more interest in order to pay for the funds they borrow to meet their reserve requirements, so as old loans get repaid (which destroys money, reducing the supply), the banks will only offer new loans (create new money) to businesses that can afford the higher rates, so the money supply and price inflation will remain under control.
However, there is one thing which cannot be bought except with bitcoin: the right to record something in the blockchain. There are many uses for this aside from recording bitcoin transactions, and so long at the blockchain is being maintained, the transaction fee required to make an entry sets the value of that fee no less than the value of the entry. So bitcoin is a currency when it comes to buying certain goods and services which exist on or as part of the internet, such as blockchain entries, server hosting, VPN services, etc. It would also be serve nicely to pay peer-to-peer distributed storage nodes for storage services. And in cases where the seller cannot afford to do business if he must take chargeback risk.
One thing which bitcoin lacks is fractional reserve banking. This is another argument that bitcoin is not a currency. But as a commodity, it could in theory serve to back a currency, so that bitcoin would be the thing (like gold coins) the bank coughs up from its reserves when you withdraw funds from your account. If you like gold-backed currency, you should like bitcoin-backed currency.
A tiny fraction of all USD exist as paper currency.
A large fraction of all USD are created by commercial banks when they lend money they don't have, debiting the loan to their "assets", crediting the new cash to the borrower's checking account in the same bank (so the ledger balances), and then counting it as money they "have," and calling the borrower a "depositor." In exchange for the right to create money, banks must ensure that their loans are repaid (which destroys the money).
If the borrower then writes checks or withdraws cash, he is acting as a depositor claiming his deposits, and the bank pays the amount from its reserves.
Once each day, the banks determine how much reserve cash they need, some fraction of their total obligations (deposits and borrowing from other banks or the Fed). If they have too much reserves, they offer it to other banks at the interbank rate. If they have too little, they borrow from other banks, or if that fails, they borrow at the Fed discount window. (The Fed is the "lender of last resort," always ready to prevent bank runs).
The Fed debits the bank's promise to pay to "assets", and credits the cash created and paid to the bank to "liabilities," and the Fed's ledger balances. That also creates some money, but only the part the bank isn't allowed to create by itself. (The bank creates say 90% of the loan, and if no other banks have funds to lend, borrows 10% from the Fed, which the Fed creates. Funds repaid to the Fed are destroyed, by crediting the redeemed promise to pay to assets, and debiting the cash destroyed to liabilities).
In order to make the best profit, if they can get deposits for a lower price than the interbank rate (including interest and expenses), they advertise for depositors. But they don't actually need depositors bringing existing USD into the bank, unless the discount/interbank rate rises too high.
Presently (since 2008), the discount/interbank rates are essentially zero. The money supply has gone through the roof. It all stays in the banks, since businesses cannot exhibit a way to make money on borrowed funds, because they have no customers, because the customers have no money to buy things with. So the banks do not approve loans. Also the banks have no need to lend the funds because they are essentially free.
Therefore, in order to ensure that Treasury bondholders can get their own cash out by selling the bonds at the price they expected when they bought the bonds, the Fed has been buying Treasury bonds on the open market, debiting the bonds to their "assets" and creating money by crediting the created money to their "liabilities," so the ledger balances.
But there is no price inflation to speak of (i.e., less than 3%), except in cases where the value of the thing being purchased has increased due to external factors.
One early reason (i.e., in 2008) people didn't have money to spend (before they became unemployed because their employers couldn't sell goods to people with no money) is that they had and still have large debts to pay off.
But should this abnormal state of high unemployment and low consumer spending end, and the banks start lending, the Fed will raise the discount rate, and banks will have to charge more interest in order to pay for the funds they borrow to meet their reserve requirements, so as old loans get repaid (which destroys money, reducing the supply), the banks will only offer new loans (create new money) to businesses that can afford the higher rates, so the money supply and price inflation will remain under control.
See, as of the current time's why inflation happens --
1) Price of critical for survival things (like food, energy, water, etc...) increase.
2) People demand for a higher salary, the salary increases slowly.
3) Forex prices drop cause the money in circulation increases <-------- inflation.
So it all starts with 1), in response to 1) the monetary authority of the country increases the money supply to give partial relief to the people.
This's the classic model. In Bitcoin model (assuming Bitcoin is the de-facto currency, which has more value than the national currency), the salaries will never increase cause the no. of Bitcoins is limited; putting pressure on the people to survive at a higher cost of living.
1) Price of critical for survival things (like food, energy, water, etc...) increase.
2) People demand for a higher salary, the salary increases slowly.
3) Forex prices drop cause the money in circulation increases <-------- inflation.
So it all starts with 1), in response to 1) the monetary authority of the country increases the money supply to give partial relief to the people.
This's the classic model. In Bitcoin model (assuming Bitcoin is the de-facto currency, which has more value than the national currency), the salaries will never increase cause the no. of Bitcoins is limited; putting pressure on the people to survive at a higher cost of living.
A cryptocurrency should not be seen as an investment or something to hold on to for decades, there should be a little bit of inflation, cause that way people will not hold on to it like investment; instead they'll use it to buy investments like shares and gold -- which is something to be seen as an investment.
What does it matter if a cryptocurrency should be an investment or not? Are you saying that a cryptocurrency cannot be an investment? China holds $1.317 trillion and they have been holding dollars for decades. Are they not investing in dollars? Are dollars not a currency?
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The intention of an investment is to buy at a lower price and sell it at a higher price; that's the intention of China.
USD is not a currency in China, USD is an investment (Forex) in countries other than the US.
Quote from: hjbuell
Bear in mind that I'm not insulting you. Nor do I blame you or anyone else who doesn't understand the economic concepts behind Bitcoins (or any other name you want to give the concept). World governments have taught the worst sort of economics to everyone for the last hundred years, and it's been proven time and time again that they don't work. Because of this, even most regulators and politicians don't have a firm grasp of real world economics. One look at inflation should be enough to establish that. If that didn't work, you could look at the complete BS that trickle down economics are. Just... if you look, stay away from that weird part of YouTube and all of those freak 'end of the world' conspiracy BS sites.
People always had the option of fossil fuels and various other commodities. But that didn't happen.
The national currency works.
Quote from: hjbuell
Alternatively you could read the post I wrote below and have a look at what 3% inflation does to fiat currencies like the one you're using every day to buy your food - and likely either saving or planing to save for when you retire. If you thought a million dollars was a lot of money, have a look at what happens to a million dollars by the time you retire. It isn't pretty. Most people don't understand inflation at all. They live in a fantasy land where a guy can rob a million dollars from a bank, and then get out 20 years later and still have a million dollars. That just isn't how the system works. Here's the post on retirement: http://www.financegirl.co.uk/take-control-of-your-retirement/
Quote from: dE_logics
A cryptocurrency should not be seen as an investment or something to hold on to for decades, there should be a little bit of inflation, cause that way people will not hold on to it like investment; instead they'll use it to buy investments like shares and gold -- which is something to be seen as an investment.
Bitcoin is a different thing to different people. To the average consumer, it is a way of sending your aunt up north money without having to deal with bankers or fees, or alternatively a way of buying drinks without having to fiddle through change. To the investor, it is a commodity which can be used to get rich, sometimes quickly. To the cryptographer, it is a fascinating application of their science. To the economist, it is a fascinating and unique concept to observe. To the anarchist, it is freedom from the state and spying. It is because of how Bitcoin can be so many things to so many people that gives it its power.
It does not suit the average consumer. It's prices varies too much.
Quote from: delogics.blogspot.com/2013/12/the-ultimatebest-cyrptocurrency.html
The currency should try to reduce the factors it's price depends on in the technical front so as to reduce the variables on which it's price depends on.
External factors will always vary the price of any cryptocurrency regardless of the technicals. External factors also includes initial demands of a new coin.
External factors will always vary the price of any cryptocurrency regardless of the technicals. External factors also includes initial demands of a new coin.
Technical front = mining process.
Cryptocurrencies are not commodities. It's designed to be spent and a medium to receive payments from. If a cryptocurrency is not that, it looses it's purpose.
Bitcoin is "designed to be spent and a medium to receive payments from". Do you disagree? Bitcoin is a cryptocurrency by your definition.
A cryptocurrency should not be seen as an investment or something to hold on to for decades, there should be a little bit of inflation, cause that way people will not hold on to it like investment; instead they'll use it to buy investments like shares and gold -- which is something to be seen as an investment.
What does it matter if a cryptocurrency should be an investment or not? Are you saying that a cryptocurrency cannot be an investment? China holds $1.317 trillion and they have been holding dollars for decades. Are they not investing in dollars? Are dollars not a currency?
I think what you really mean to write is that Bitcoin is not money because a defining characteristic of money is that it can be used as a "unit of account". Bitcoin is still too volatile to be used as a unit of account, so it is not money.
That is a common criticism of the idea of Bitcoin as money and it is a strong argument. My position is that the volatility is temporary and that even if it cannot be considered money now, it will be considered to be money in the future. Furthermore, whether or not Bitcoin qualifies as money in the strictest sense (it is also disqualified by Mises' Regression Theorem) is not really that important -- it's just a definition.
So I take the bull by the horns and post this in a forum where 100% people are convinced and believe without reason that Bitcoin is the ultimate form of currency. Inflation model is much better than Bitcoin's. Here's why --
Cryptocurrencies are not commodities. It's designed to be spent and a medium to receive payments from. If a cryptocurrency is not that, it looses it's purpose.
A cryptocurrency should not be seen as an investment or something to hold on to for decades, there should be a little bit of inflation, cause that way people will not hold on to it like investment; instead they'll use it to buy investments like shares and gold -- which is something to be seen as an investment.
Even real currencies have an inflation problem and it's usually quiet a lot. Actually it depends on the country. But do people have problem with that?
If they did not like their current currency, they always had options. They whould've chosen fossil fuels anytime (who's value will always increase); the reason why they didn't is cause the inflation of national currency is negligible for them cause they use the national currency to spend, rather than invest and hold.
Cryptocurrencies are not commodities. It's designed to be spent and a medium to receive payments from. If a cryptocurrency is not that, it looses it's purpose.
A cryptocurrency should not be seen as an investment or something to hold on to for decades, there should be a little bit of inflation, cause that way people will not hold on to it like investment; instead they'll use it to buy investments like shares and gold -- which is something to be seen as an investment.
Even real currencies have an inflation problem and it's usually quiet a lot. Actually it depends on the country. But do people have problem with that?
If they did not like their current currency, they always had options. They whould've chosen fossil fuels anytime (who's value will always increase); the reason why they didn't is cause the inflation of national currency is negligible for them cause they use the national currency to spend, rather than invest and hold.
This is very true.
A real crypto-currency that can be used by businesses that don't want to become day traders is desperately needed.
We need a currency that discourages speculation, one that is seen as a safe haven, one that has a small amount of inflation to encourage spending rather than hoarding.
We need some real economists to work out a formula for the number of coins to be mined, this is a big problem. We need a currency that works like a currency rather than a commodity to speculate on.
I think we need a currency with a low percentage transaction fee & then have the number of coins minted linked to that fee, so that supply follows demand for the currency, but I'm looking for ideas. Need people with a background in macro economics to help.
I'm looking for other people with ideas & knowledge to help out, people who want to donate their time towards a currency that isn't a get rich quick scam & can be widely used by normal businesses.
While there are many countries treating Bitcoins as a commodity, the actual enforcement of that treatment will be difficult at best to regulate, and only works in principle when there are significant upward swings in value. Conversely, any downward swing could be argued in those countries as a business loss - demonstrating the ignorance of regulators on the topic, and resulting in significant revenue losses.
As concerns your position on the matter, you miss the point of Bitcoins entirely, and are way off the mark on inflation. I actually don't even know where to start with most of your arguments, as they're all so far off base.
Bear in mind that I'm not insulting you. Nor do I blame you or anyone else who doesn't understand the economic concepts behind Bitcoins (or any other name you want to give the concept). World governments have taught the worst sort of economics to everyone for the last hundred years, and it's been proven time and time again that they don't work. Because of this, even most regulators and politicians don't have a firm grasp of real world economics. One look at inflation should be enough to establish that. If that didn't work, you could look at the complete BS that trickle down economics are. Just... if you look, stay away from that weird part of YouTube and all of those freak 'end of the world' conspiracy BS sites.
Here are some interesting facts that I bet you weren't aware of, which I hope will help you take a different look at all things financial.
Did you know that the US Federal Reserve loaned out more than $16 trillion well before the fake 'US default' last year? I'm willing to bet, rather than being aware of that, you were in the camp of people who were misled into believing the US was really going to default on a fiat currency based debt. Here's the link if you don't believe me - run the numbers yourself: http://www.scribd.com/doc/60553686/GAO-Fed-Investigation#outer_page_144
Alternatively you could read the post I wrote below and have a look at what 3% inflation does to fiat currencies like the one you're using every day to buy your food - and likely either saving or planing to save for when you retire. If you thought a million dollars was a lot of money, have a look at what happens to a million dollars by the time you retire. It isn't pretty. Most people don't understand inflation at all. They live in a fantasy land where a guy can rob a million dollars from a bank, and then get out 20 years later and still have a million dollars. That just isn't how the system works. Here's the post on retirement: http://www.financegirl.co.uk/take-control-of-your-retirement/
So, while I admire your courage to post what you believed to be a very controversial opinion here, it's actually an opinion that is way off the mark, and entirely based in the fantasy we're all taught to believe is economics.
Bitcoin, just like the internet all those years ago, is making waves in the way people think and do financial things. More importantly, it's causing enough young heads and young minds to notice - and hopefully they'll make some changes. Even economists are starting to take note, with some of them questioning decades of institution that simply isn't sustainable these days.
We've moved from the industrial age and into the information age. Isn't it time we had a currency and method of payment that was keeping pace with that change?
Feel free to visit my website and any social media if you want to follow my thoughts on the topics. I'm going to be writing more on Bitcoins in the coming weeks and months.
As concerns your position on the matter, you miss the point of Bitcoins entirely, and are way off the mark on inflation. I actually don't even know where to start with most of your arguments, as they're all so far off base.
Bear in mind that I'm not insulting you. Nor do I blame you or anyone else who doesn't understand the economic concepts behind Bitcoins (or any other name you want to give the concept). World governments have taught the worst sort of economics to everyone for the last hundred years, and it's been proven time and time again that they don't work. Because of this, even most regulators and politicians don't have a firm grasp of real world economics. One look at inflation should be enough to establish that. If that didn't work, you could look at the complete BS that trickle down economics are. Just... if you look, stay away from that weird part of YouTube and all of those freak 'end of the world' conspiracy BS sites.
Here are some interesting facts that I bet you weren't aware of, which I hope will help you take a different look at all things financial.
Did you know that the US Federal Reserve loaned out more than $16 trillion well before the fake 'US default' last year? I'm willing to bet, rather than being aware of that, you were in the camp of people who were misled into believing the US was really going to default on a fiat currency based debt. Here's the link if you don't believe me - run the numbers yourself: http://www.scribd.com/doc/60553686/GAO-Fed-Investigation#outer_page_144
Alternatively you could read the post I wrote below and have a look at what 3% inflation does to fiat currencies like the one you're using every day to buy your food - and likely either saving or planing to save for when you retire. If you thought a million dollars was a lot of money, have a look at what happens to a million dollars by the time you retire. It isn't pretty. Most people don't understand inflation at all. They live in a fantasy land where a guy can rob a million dollars from a bank, and then get out 20 years later and still have a million dollars. That just isn't how the system works. Here's the post on retirement: http://www.financegirl.co.uk/take-control-of-your-retirement/
So, while I admire your courage to post what you believed to be a very controversial opinion here, it's actually an opinion that is way off the mark, and entirely based in the fantasy we're all taught to believe is economics.
Bitcoin, just like the internet all those years ago, is making waves in the way people think and do financial things. More importantly, it's causing enough young heads and young minds to notice - and hopefully they'll make some changes. Even economists are starting to take note, with some of them questioning decades of institution that simply isn't sustainable these days.
We've moved from the industrial age and into the information age. Isn't it time we had a currency and method of payment that was keeping pace with that change?
Feel free to visit my website and any social media if you want to follow my thoughts on the topics. I'm going to be writing more on Bitcoins in the coming weeks and months.
Bitcoin is a different thing to different people. To the average consumer, it is a way of sending your aunt up north money without having to deal with bankers or fees, or alternatively a way of buying drinks without having to fiddle through change. To the investor, it is a commodity which can be used to get rich, sometimes quickly. To the cryptographer, it is a fascinating application of their science. To the economist, it is a fascinating and unique concept to observe. To the anarchist, it is freedom from the state and spying. It is because of how Bitcoin can be so many things to so many people that gives it its power.
So I take the bull by the horns and post this in a forum where 100% people are convinced and believe without reason that Bitcoin is the ultimate form of currency. Inflation model is much better than Bitcoin's. Here's why --
Cryptocurrencies are not commodities. It's designed to be spent and a medium to receive payments from. If a cryptocurrency is not that, it looses it's purpose.
A cryptocurrency should not be seen as an investment or something to hold on to for decades, there should be a little bit of inflation, cause that way people will not hold on to it like investment; instead they'll use it to buy investments like shares and gold -- which is something to be seen as an investment.
Even real currencies have an inflation problem and it's usually quiet a lot. Actually it depends on the country. But do people have problem with that?
If they did not like their current currency, they always had options. They whould've chosen fossil fuels anytime (who's value will always increase); the reason why they didn't is cause the inflation of national currency is negligible for them cause they use the national currency to spend, rather than invest and hold.
Cryptocurrencies are not commodities. It's designed to be spent and a medium to receive payments from. If a cryptocurrency is not that, it looses it's purpose.
A cryptocurrency should not be seen as an investment or something to hold on to for decades, there should be a little bit of inflation, cause that way people will not hold on to it like investment; instead they'll use it to buy investments like shares and gold -- which is something to be seen as an investment.
Even real currencies have an inflation problem and it's usually quiet a lot. Actually it depends on the country. But do people have problem with that?
If they did not like their current currency, they always had options. They whould've chosen fossil fuels anytime (who's value will always increase); the reason why they didn't is cause the inflation of national currency is negligible for them cause they use the national currency to spend, rather than invest and hold.
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