Topic: Bitcoin - the first cryptographic commodity, NOT currency (Read 1992 times)

Bitcoin - it's the first cryptographic commodity, NOT currency:

Bitcoin is a great concept and I'm mining away, but it functions like a cryptographic commodity, not a currency . . . I also think it's the greatest idea since sliced bread.

The volatility problem of BitCoin is a serious one.. until the market calms down to the point where coins have a relatively fixed value or appreciate at a relatively sane rate it is completely impractical to use this as a currency, much better as a medium of exchange

There's 26 characters in the alphabet, so that gives us 52 characters upper + lower case. Then add in 0-9 which totals 62 characters for any place in the address. The address is 34 characters long. Thus, we have 62 possibilities on 34 places, or 62^34 different possibilities of addresses (8.7*10^60). In other words, they aren't going to run out, and the chances of having two identical addresses are practically 0, even if there are billions of billions (10^18) of addresses in the wild which will take practically infinity to create (even at 1 billion addresses per second, it would take 30 years).

The workaround is the currently accepted method of making sure that the sender is the right person, and from a technical standpoint it will work for as long as BTC is around.

Bitcoin - it's the first cryptographic commodity, NOT currency:

Bitcoin is a great concept and I'm mining away, but it functions like a cryptographic commodity, not a currency, since it holds all of the properties of a commodity:

1. Like a commodity, a finite quantity of bitcoins can be mined, similar to gold or oil being generated at a fixed rate.  Bitcoin's value is in part derived from scarcity.

2. Like a commodity, price is a derivative of inherent value and unique properties possessed by said commodity.  Bitcoin's inherent value is the incredible ability to produce untraceable (assuming the user is competent), irrevocable exchanges of possession, digitally, and, of course, the underlying value of all bitcoins in circulation is BOTH a function of the power requirement needed to generate the next block and the billions of dollars' worth of computing power (increasing exponentially over time) that would theoretically be needed to 'break' the block chain.

e.g, price per bitcoin is roughly = [value of untraceability + (cost of killing the entire block chain + power requirement to win coins from guessing the next block)]

By comparision, oil's value is
its industrial usefulness - you can manufacture gas or plastic out of it, for example; the value of beans comes from their edibility and high nutritional value.  And, of course, you can build things out of wood.  Bitcoin's value and unique properties are no different - they can be swapped between two locations discretely.

3. Also, like a commodity, bitcoin is virtually indestructible (assuming the user is competent and takes basic steps to back up their wallet, split their assets amongst multiple wallets, etc).

4. Commodity valuations are typically deflationary when measured against any circulated money, e.g. the price of oil or gold increases over time, just like bitcoin.  Also, like commodities, bitcoin price goes through bubble valuation phases.

5. The rate at which someone can make a valid, verifiable transaction is too slow for bitcoin to function in modern-day commerce.  I can buy a cup of coffee with some spare change in just a few seconds, and the transaction is verifiable within a couple of seconds.  Bitcoin is really not verifiable until a few blocks have been generated, and nobody is going to wait in line 10-20 minutes per customer (assuming people are storing little wallets on cards one day).  The block generation rate would have to be under 5 seconds for bitcoin to be usable in physical commerce and at least be usable like paper money.

6. While bitcoin is poorly-suited as a medium of exchange for physical commerce (point 5), it's also bad in and of itself as a medium of exchange for large transactions, since its anonymity means it's easy for buyer or seller to scam one another without a solid executed written contract, or solid third party mediator, both of which nullify the benefits of anonymity provided by bitcoin.

To summarize, bitcoin derives its value from commodity-like properties, and is a fairly poor medium of exchange in physical or e-commerce.  It makes much more sense to me to call it a commodity.  It's the first crypto-gold in existence.

I also think it's the greatest idea since sliced bread.

Good point, I straight away assumed the received address meant the 'senders' address, rather it is just the address those BTC were at previously.
The workaround you said is a viable idea, however I'm not sure what the theoretical limit of number of unique addresses per machine is, but I suppose for transactions like these they probably own many computers.

Mh.. is gold a currency or a commodity?

The workaround you said is a viable idea, however I'm not sure what the theoretical limit of number of unique addresses
Depends only on storage space and can easily be a billion.

The workaround you said is a viable idea, however I'm not sure what the theoretical limit of number of unique addresses per machine is, but I suppose for transactions like these they probably own many computers.

One basic problem is volatility, gold is worth half-again what it was worth a year-ago in terms of the dollar, and also real goods. With the Bitcoin, the volatility problem is far, far worse. The vast price swings day-to-day make it impractical to price goods or services in Bitcoins. It has been an astonishingly good investment for early adopters, a pretty-good speculative vehicle, but as a medium of exchange it has very very limited applications.

You can't verify that a specific person sent the money to you by matching addresses. That's just the way the system works. See this discussion: http://forum.bitcoin.org/?topic=2273.0

The workaround to this problem is that the recipient sets up a new receive address for every client. That way, when money shows up in the account, the recipient knows who it's from.

Another example, the government lets you pay your tax in BTC, and they make you disclose what address they expect to receive the BTC from, and they know exactly who you are as an individual. Now if they don't see the funds coming from the address you agreed to pay the tax, your in trouble. If you loose your wallet or whatever, a new address is associated with your identity. One flaw in this is that I read that it is only *nearly* impossible to have the same public address as someone else, implying there could be incorrect entries in regards to ambiguous ownership.

To summarize, bitcoin derives its value from commodity-like properties, and is a fairly poor medium of exchange in physical or e-commerce.  It makes much more sense to me to call it a commodity.  It's the first crypto-gold in existence.

Uhm bitcoins do have other uses outside the BTC market. You could use bitcoins simply as proof of a transaction for anything. You just correlate the bitcoin to one of the objects like say the assignment of a mortgage. The transaction data itself is what is useful.

5. The rate at which someone can make a valid, verifiable transaction is too slow for bitcoin to function in modern-day commerce.  I can buy a cup of coffee with some spare change in just a few seconds, and the transaction is verifiable within a couple of seconds.  Bitcoin is really not verifiable until a few blocks have been generated, and nobody is going to wait in line 10-20 minutes per customer (assuming people are storing little wallets on cards one day).  The block generation rate would have to be under 5 seconds for bitcoin to be usable in physical commerce and at least be usable like paper money.

6. While bitcoin is poorly-suited as a medium of exchange for physical commerce (point 5), it's also bad in and of itself as a medium of exchange for large transactions, since its anonymity means it's easy for buyer or seller to scam one another without a solid executed written contract, or solid third party mediator, both of which nullify the benefits of anonymity provided by bitcoin.