Topic: Bitcoin too valuable to spend (Read 7094 times)

Yes this is of course true. At one point however, the "bad" money will have become so bad, that merchants will refuse to accept it all together, requesting gold/silver/BTC instead. At that point in time, the "good" will have driven out the "bad"

I'm predicting the future here, but "bad" money is nothing but a paraphrase for worthless money, and history has shown that all fiats die in hyperinflation.
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This discussion should be moved to Economics.

That's no reason not to take bitcoins if they can negotiate a very minimal commission on exchanges and charge very slightly above fair market value. (But still less than it would typically cost you to convert your local currency to bitcoins and then use that to pay them.)

As a bonus, they can take any fraction of their profit in bitcoins bought slightly below market value. And they make a slight additional profit on the exchange rate for their costs. This only works if the market depth goes up though. They have to be able to exchange most of their income for their local currency without excessively moving the market.

That's the trouble - they don't prefer bitcoin currently, because their expenses are in USD or their local currency.

Bitcoin is a digital commodity, not a digital currency.  It will increase in value until someone comes up with a better version of or replacement of bitcoin, then the value will collapse.

+1

This was my original thought when pondering the question.

If it's too valuable for the consumer to spend then it's too valuable for the vendor not to accept.

You don't get this with gold because - although it has an equivalent value to the thing you're buying - it's physically impractical for the vendor to accept. For this reason, Gold is (now) a poor choice for barter and trade but an excellent store of value - hence the hoarding. That's not true of bitcoin.

If widget is worth 1 USD, 15 BTC and 1/1500 oz of Gold then the only thing that effects your choice of which to pay with is which one is more practical. USD has the upper hand in that respect and that's still true today and that's why we hoard bitcoin. Hopefully, it won't be true in the future.

JoelKatz is correct.
BubbleBoy is incorrect.

If Bitcoin gets big merchants who are not politically driven will accept both their local currency and Bitcoin, assuming the cost is low enough. There will probably also be companies doing automatic conversion, just like VISA and MasterCard does for practically any fiat today.

Bitcoins: Too valuable to accept anything else as payment.

Seriously, it's merchants who decide what to accept as payment. I'd buy steaks with my dirty socks if I could.

The OP is assuming that Bitcoin has survived its birth pains and now, a few years into the future, is a relatively stable deflating currency, and you can spend them widely and easily.

With this scenario in mind, the answer to the OP is: get paid in bitcoins.

+1

Two reasons: Fees and convenience

Metals purchases, from GoldMoney, costs from 2.5% (for gold) to 4.0% (for silver) to replenish any spending I might wish to do.  
Bitcoin costs, from Mt. Gox, 0.65% to replenish (Plus charges for adding funds, which are $0.25 with Dwolla, for example)

Cashing out USD funds from GoldMoney costs another 1% (minimum about $0.50, maximum about $5).  
Cashing out USD funds from Mt. Gox costs $0.25 (the Dwolla per-trx fee).

Because GoldMoney's purpose is high dollar investment, their systems are built to be very secure.  This also makes it inconvenient to use by the customer for spending, and inconvenient to use by the merchant for use in receiving payment.

Because of Bitcoin's P2P nature, convenience can range from easy to hard based on the level of security needed and on other factors (e.g. use of an e-wallet like MyBitcoin on one end to an offline "air gap" wallet on the high-security end.)

Bitcoin is an agile currency.  GoldMoney is not.  Gold and silver such as bullioin or junk silver is not.  

That doesn't mean Bitcoin should replace gold and silver, but it does mean that Bitcoin doesn't suffer the same propensity for hoarding.

If gold is so good for savings, why have any fiat currency at all? Why not save your money in gold from the very start right until you need the money and only then convert them into fiat? It would be stupid to have always inflating fiat currency when you can have always deflating gold/bitcoin, wouldn't it? The problem with gold lies in the conversion to/from fiat currency. It's either too costly or too cumbersome. If it was easy you would prefer to store all your money in gold, and only convert into fiat currency when you need to. In a trade though, you would prefer to pay with gold because converting isn't free and involves a third party.

Bitcoin, however, is not gold, in the sense that it's very easy to convert to and from fiat currencies. The problem with bitcoin is in the risk of having it. You don't know what the price of bitcoin will be tomorrow, whether it's going to be 2x its price today or 0. And until you do you'll want to store some of your money in bitcoin, while still keeping most of it in fiat currency, since you don't want to lose everything in one day because you were storing it in bitcoins, but you also don't want to be the loser that didn't invest into bitcoin early and become rich with little effort. In other words if one wishes to solve the hoarding problem of bitcoin, one needs to up the chances of bitcoin becoming mainstream. Built-in deflation has nothing to do with hoarding.

silk road does not accept dollars.

EDIT: Sorry, wrote this after reading OP without realizing this argument has already been made several times in this thread.


I don't know anything about goldmoney.com, but I do think the bitcoin design gives people reason to spend it rather than just hoard it.

For one thing, if you actually believe that it will generally be going up in value week on week (a good reason to hold on to as much as you can), then you would be wise to put your whole paycheck into bitcoin when you receive it. If you do this, then when you want to spend money at a merchant who accepts both fiat currency and bitcoin, then you will find it far easier to just spend your bitcoins than to transfer them back into fiat currency.

I think you reversed things mid-stream....yes, BTC is not being forced on anyone....but USD / EUR / etc *are* being forced on people (via Legal Tender laws).  Therefore this is why good money (like bitcoin / gold / silver) is being driven out of the market.

People will naturally choose to first spend all their 'bad money' in such situations and hoard the 'good' money. This is exactly what we see with regards to BTC.

Thanks to everyone who contributed to the thread.

I have a lot to think about, even though I'm not actually convinced either way. I agree with many of the arguments, both for and against, but I can't reconcile this with the general failure of gold backed digital currencies to resist hoarding, and why bitcoin will be immune to the same fate, since it shares a lot of similar properties. Hence the quote from the voucher-safe guy in the original post. I think something is missing from the model but I can't work out what it is. I'll get there eventually

Cheers

Yes, that's exactly what I'm saying. Think about it: Would you rather have 10 bitcoins today or 10 bitcoins next year? If you say 10 bitcoins next year, you're an idiot because 10 bitcoins today includes the right to have 10 bitcoins next year, plus the ability to spend 10 bitcoins before that should it be beneficial to do so. So everyone expecting a currency to deflate is impossible. It implies that the choice spend the currency rather than saving it is not just worthless (which is possible) but less than worthless (which is absurd).

Sure there is a pressure, but it moves everyone to a point where a bit of extra coin is worth as much as a bit of extra dollar to them.

If you are in a position where $15 is worth less to you than a coin, buy a coin. Then if $15 is still worth less to you than a coin, buy a coin. Keep going until you have so few dollars that dollars are just as precious to you as coins. Now you are ambivalent between spending dollars or coins. If you greatly prefer spending dollars to coins you are making a big mistake in your allocations.

Clearly I'm not an economist, but I don't buy your line. Your saying that theres a current price now, X, that will drive out all future inflationary pressures, including accounting for fiat inflation. This seems unlikely. And anyone who holds both BTC and USD knows this. Thuse, there is a hoarding presure.