Bitcoin needs its own economy, not exchange rates.

BTConomist

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Quote from: ruski on July 16, 2011, 06:25:22 PM

I agree on one point - markets should be minimal escrow transactions and confirmed by the block chain, not full accounts that Mt Gox can reverse whenever it likes. However without a liquid market there is simply no way to determine BTC value. Gold can be traded for sheep. Fencing wire can be traded for francs. And Bitcoins can be traded for US dollars.

Yes, liquidity is important, but false (or perceived liquidity, which the market makers tend to create/maintain) is very dangerous, especially for a young currency that yet to prove its advantages/applicability as a secure and relatively stable medium of exchange. Who's to say that the reason why USD/BTC exchange rates have been hovering around $13-$14 this past week is NOT the result of the exchanges simply massaging their database numbers to create the appearance that demand for BTC is on a par with supply?

ruski

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I agree on one point - markets should be minimal escrow transactions and confirmed by the block chain, not full accounts that Mt Gox can reverse whenever it likes. However without a liquid market there is simply no way to determine BTC value. Gold can be traded for sheep. Fencing wire can be traded for francs. And Bitcoins can be traded for US dollars.

BTConomist

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Quote from: macharborguy on July 16, 2011, 05:01:08 PM

I agree until there is enough drive and acceptance from merchants bitcoin will always be leaning on other forms of currency.

Why would any "established" merchant welcome the idea of taking payments in BTC when it's exchange rate is constantly being manipulated by "unregulated" market makers, whose sole purpose is to make profits from the herd mentality of clients (traders/miners)? Taking payments in well established fiat currencies is safer from the merchant's perspective.

BTConomist

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Quote from: macharborguy on July 16, 2011, 05:01:08 PM

the problem is that retail usage of BitCoins has not yet gotten anywhere close to a useful level, so people will use BitCoins to get a useful currency in the meantime.

True, the retail usage is still in its infancy. Nevertheless, why go to market makers for a quote... Why not just send bitcoins directly to someone who has something you want (e.g. dollars, bananas, etc.)? What value do market makers bring to bitcoin economy?

Morebitcoinsplease

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Quote from: macharborguy on July 16, 2011, 05:01:08 PM

the problem is that retail usage of BitCoins has not yet gotten anywhere close to a useful level, so people will use BitCoins to get a useful currency in the meantime.

Unlike Linden Dollars which were very usable within the area of SecondLife for nearly everything in-world, including renting a Sim within the world.

I agree until there is enough drive and acceptance from merchants bitcoin will always be leaning on other forms of currency.

macharborguy

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the problem is that retail usage of BitCoins has not yet gotten anywhere close to a useful level, so people will use BitCoins to get a useful currency in the meantime.

Unlike Linden Dollars which were very usable within the area of SecondLife for nearly everything in-world, including renting a Sim within the world.

BTConomist

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tl;dr: let the merchants decide what BTC is worth, not the market makers (e.g. MtGox, TradeHill, etc.)

I’m not saying that buying fiat currencies is a bad idea. All I’m saying is that each purchase of a fiat currency should be—in the very spirit of bitcoin—handled as a purchase (confirmed by the bitcoin block chain), not as a trading transaction in some BTC exchange’s private (read: hidden from scrutiny) database. Who cares what you want to buy with your bitcoins? In fact, that’s the whole point of bitcoins anyway—to be able to buy anything you want without having to worry about some 3rd party invalidating your transactions.

But what useful purpose do the market makers have in the bitcoin economy? Do you really think that USD/BTC exchange rates on Mt.Gox reflect the bitcoin supply and demand trends? Keep dreaming!!!

Topic: Bitcoin needs its own economy, not exchange rates. (Read 949 times)