See the following article for problems with bitcoin:
http://www.cbc.ca/news/business/bitcoin-currency-pricing-speculation-1.4380026
Quote
You'd have to be crazy to spend $82 million for two pizzas.
But according to bitcoin lore, on May 22, 2010, Laszlo Hanyecz became the first person to buy real physical goods with the sparkling new cryptocurrency when he paid 10,000 bitcoins for two Domino's pizzas.
When Hanyecz bought his pizzas, a bitcoin was worth a fraction of a cent. As bitcoin crashes through new highs this week — a single bitcoin is worth just over $8,200 Cdn — that would make the pizzas cost $82 million.
If you're like most people, right now you're probably thinking about how rich you would be if only you had bought a few pizzas' worth of bitcoins a mere seven years ago and held onto them.
But while the cryptocurrency may seem like a success, that crazy multiplication in the value of the bitcoin has almost completely derailed its initial purpose. For all intents and purposes, a bitcoin has become the currency that's hard to spend.
In a wage economy, the purpose and value of money is twofold. One is as a store of value. In other words, if you do a day's work today you want to be able to save up the value of that work and spend it on weekend beer, a winter holiday or keep it for when you're old.
As a store of value, so far, bitcoins have fulfilled their currency-like function in spades.
But the other essential value of money is as a measure of pricing and exchange. This is where the bitcoin has fallen down.
The bitcoin and its virtual wallet was intended to replace currencies, but no one wants to be modern day Laszlo Hanyecz. Even more important, trying to price your goods or services in bitcoins is a fool's errand.
The only way to do it would be to have a parallel running tally of the value of bitcoin in "fiat money" so despised by bitcoin enthusiasts.
Some argue that cryptocurrencies are too fiat money, but the big advantage of loonies, or U.S. dollars or even gold is that they remain relatively stable compared to other prices in the economy.
If you have to convert from bitcoins to U.S. dollars to pizzas to know how much your money is worth, it is the U.S. dollar, not the bitcoin that is the measure of exchange. The bitcoins are merely a speculative investment
But according to bitcoin lore, on May 22, 2010, Laszlo Hanyecz became the first person to buy real physical goods with the sparkling new cryptocurrency when he paid 10,000 bitcoins for two Domino's pizzas.
When Hanyecz bought his pizzas, a bitcoin was worth a fraction of a cent. As bitcoin crashes through new highs this week — a single bitcoin is worth just over $8,200 Cdn — that would make the pizzas cost $82 million.
If you're like most people, right now you're probably thinking about how rich you would be if only you had bought a few pizzas' worth of bitcoins a mere seven years ago and held onto them.
But while the cryptocurrency may seem like a success, that crazy multiplication in the value of the bitcoin has almost completely derailed its initial purpose. For all intents and purposes, a bitcoin has become the currency that's hard to spend.
In a wage economy, the purpose and value of money is twofold. One is as a store of value. In other words, if you do a day's work today you want to be able to save up the value of that work and spend it on weekend beer, a winter holiday or keep it for when you're old.
As a store of value, so far, bitcoins have fulfilled their currency-like function in spades.
But the other essential value of money is as a measure of pricing and exchange. This is where the bitcoin has fallen down.
The bitcoin and its virtual wallet was intended to replace currencies, but no one wants to be modern day Laszlo Hanyecz. Even more important, trying to price your goods or services in bitcoins is a fool's errand.
The only way to do it would be to have a parallel running tally of the value of bitcoin in "fiat money" so despised by bitcoin enthusiasts.
Some argue that cryptocurrencies are too fiat money, but the big advantage of loonies, or U.S. dollars or even gold is that they remain relatively stable compared to other prices in the economy.
If you have to convert from bitcoins to U.S. dollars to pizzas to know how much your money is worth, it is the U.S. dollar, not the bitcoin that is the measure of exchange. The bitcoins are merely a speculative investment
