Topic: The real bitcoin value (Read 4480 times)

I posted an idea similar to this a few times...rather than use the dollar or any inflated fiat currency, make up a new unit of account that is indexed to some basket of basic goods (I suggested indexing basic foods you'd find at a grocery store that one would need to survive for a day).  1 or 10 of these could roughly equate to what the average person would need to feed themselves for a day.  You could base your pricing on this unit but use bitcoins or anything else for actual payment.  This unit would also have utility for contracts (loans could be made in terms of this unit (but settled with bitcoins) to avoid the risks that bitcoin volatility poses to such contracts).

Shipping starts at 3.66BTC.  I am working on a guest checkout process.  In the meanwhile, if you would like to order without creating an account, I'd be glad to put a parcel together for you.  I've already had one customer order via email. 

Bitmunchies is an awesome idea, however, I'd really like to be able to find out the shipping costs without creating an account.

Please let us know how this experiment goes.

I guess it is not appreciated. Restored to original.

What's with the retarded thread title BioMike?

Yes, I was thinking in the same lines this morning (that it would go best through a payment processor).

Did just a quick calculation based on products that are offered on various sites.
On basis of 11 products I get the following:

1 BTC = 1.42EUR or 2.10USD

For some things it is linked to the MtGox market price, for some things I had to guess the price in USD or EUR. But I think this should give an indication.

Easiest for merchants would be for the payment processing provider to do any conversions needed.

A widget where the merchant specifies the type and amount of currency the merchant wants.

All details of what the customer gives to the processing-provider is between the customer and the processing provider.

For the merchant the only effect a customer's choice of payment method/currency has is the customer's perception of the price. The higher the overhead or customer-perception of overhead the processing-provider places on the conversion of the customer's chosen currency / payment-method into the merchant's chosen currency the worse the prices are likely to appear to the customer.

On the other hand the more obscure the currency or method the customer wants to use the less likely it probably is that other merchants can be bought from via such a method or currency.

From a merchant perspective the best payment method to use is probably the one that gives the customer the largest range of options, so the merchant doesn't have to implement many different interfaces.

Presumably in the competition among payment-processing providers how wide a range of options they can offer to customers and to merchants and how little overhead their service imposes on prices as seen by customers are two of their major selling points?

This approach lets the currency trading and speculating be done by the payment processing service.

It also frees merchants from worry about the price of coins or rupees or whatever the customer chooses to pay with changing during the transaction. The payment processor will pay the merchant the price the merchant set in the currency the merchant set. Whether they accept sexual favours or icecream cones or lottery tickets or dollars or bitcoins or whatever from the customer isn't' really the merchant's problem worry or concern except insofar as it might influence the customer's perception of the price as being high or low or good or competitive or uncompetitive.

-MarkM-

Looking a bit at how the thread is going, my comments:

I never said that I wanted to fix the price (I know that is not wise to do), only stabilize it a bit to get the fluctuations out (the merchants decide what the price is, not what the speculators think it should be. I don't think that the immediate selling is an option, if you sell at a high and the price drops directly after that, you get a loss. Looking at market depth and moving averages might help, but if you did that with the drop on Sunday, you will still make a loss.

With a few merchants here. Let me ask the question:

Lets say that the current calculated price would be 2.8USD for the whole month (guaranteed sell at that price, only available for merchants). Would you change your prices for goods to reflect that rate (and adjust them every month to the new price)? No requirement to sell them to the party offering at that price if the BTC markets offer more.

Did you catch the price on those carrots? 45BTC for a bunch?

Carrots being the first item wasn't a coincidence, was it?

I have thought about this a lot over the past week or two, while preparing bitmunchies for launch.  Honestly, I think you're all over analyzing this.  Even at the total present market value of $18-20m, this is still in hobby land.  Sure, there are probably some unrealized millionaires somewhere around here.  With as many people as are using bitcoin, it spreads out pretty damn thin.

I think bitcoins are a fascinating commodity.  I'd like to accumulate a few, and play with them.  I don't mean that in a callow sense.  I love economics and programming, so I wrote the code to open a shop that will trade in a unique market.  For the business to work, I need to be able to be able to convert most of my revenue into USD within a week.  I've carefully researched the available demand, and I think it is safe to risk a week's revenue at the prices I've set.  That would be the worst case scenario, and it isn't too hard to compensate for the risk.  Hopefully, I'll slowly make back the relatively modest investment I've made in bitmunchies.  I intend to split the profits between USD and BTC.

That being said, I intend to hold half the profits in BTC.  I don't expect that I'll sell them any time soon.

I ran a small business for years and I don't see bitcoins as that daunting. Yes, one could follow the currently volatile market and adjust prices accordingly, or one could do what retail businesses have always done - watch your competitors' prices and patterns in your sales. If sales suddenly drop, I know that either someone else is offering a greater value (which, of course, may or may not be only a perceived increase), or other economic factors are influencing the demand. Either way, a successful business adjusts as necessary or rides out the slump.

Businesses like to stick to their core competencies.  If they were experts at trading currency, they'd do that.



This is a good idea too, having options in place, then switching the exchange rate at various times when you run out could work.

Most businesses nowadays that operate in multiple currencies (including retailers e.g. Carrefour, Tesco, Wal-Mart, H&M, etc.) trade currency derivatives (generally futures & options).

BTC/USD futures may need to be developed as a feature in getting merchants to accept BTC payments.  If your expenses are in USD you can still keep a fixed BTC price if you have an agreement to exchange up to 1000 BTC for USD at US$3/BTC on 31 May.

I can't offer any insight into the nuts and bolts of the framework, but I think the ability to measure arbitrary averages vs a "payout now" amt would be a huge selling point.


I really don't think we can make this assumption.  Merchants want to make money. If playing the bitcoin market can provide a way to do that, even minimally, I think there would be a large market for it.

Probably the best strategy for a merchant to use when it comes to accepting bitcoin (assuming that their main cost inputs are in another currency, which at least for now is probably a safe assumption):

* Figure out what your USD/EUR/GBP/gold/whatever cost on the sale is.
* Convert enough BTC to the other currency to cover that cost so you can pay your bills
* Keep the rest (the profit or some approximation thereof) in BTC, selling a fixed number of BTC (or possibly a fixed percentage of your BTC balance) every so often at market prices or asking just above

(there may be tax advantages involved in this scheme that I won't elaborate on...)

As and if the BTC economy grows to where merchants can pay for more of their costs in BTC, then the importance of the exchange rate in setting prices will shrink.

One possible test for whether merchants are "true believers" in bitcoin is the extent to which their prices track the exchange rate.  If their prices are exactly matching the exchange rate then I'd suggest that that's evidence that they're converting BTC into USD etc. immediately (and thus, I'd argue not really believers in bitcoin).  While I don't think that it's reasonable to expect merchants to trade at a loss to show devotion (which is potentially the case if a constant BTC price is demanded of a merchant whose costs are largely not in BTC), one thing that I think would establish bona fides is pricing within the following framework.

* Set a sort of minimum USD... price that you'd accept (hopefully something above your fully-computed USD... cost)
* Convert that price continuously (if you'd like) to BTC at the current rates
* Add a fixed BTC profit-margin to that price

E.g. for an item that you wouldn't accept less than US$30 for and want a 10BTC profit, at a USD/BTC rate of 3, you would charge BTC20.  If the rate goes to 5, then you charge BTC16; if it's 0.50, then you charge BTC70.

The merchant is effectively buying BTC low and selling BTC high... the USD price when the rate is 3 is 60, a rate of 5 is a price of US$80 and a rate of 0.50 gives a price of US$35.  It would be reasonable to expect that you'd have more sales when the rate is low than high and thus accumulate BTC when BTC are cheap... combine with a plan to sell a fixed quantity or percentage every so often and you'd be net-buying when BTC were cheap and net-selling when they were expensive.  It may also result in times where you get a better price by buying in BTC or in USD depending on the exchange rate which may also affect demand for and thus (ceteris paribus) the price of BTC, generally in a moderating direction.  Further exchange rate stability will also help acceptance (by both consumers and producers) of BTC, I would think.

And that's as far I would personally like to follow the idea. Fixing prices really does not work. However, if one were to calculate the price of bitcoins using the method described above, it might yield a useful metric for measuring the health of the economy. It would certainly yield a much smoother chart than the one at Mt. Gox.

I've actually been thinking for a while about implementing this idea using Bidding Pond sales. Glad to see that others are thinking of doing the same.

If I were to start a GitHub project for this and if I were to provide a server to host it, how many of you would be interested in contributing? Would you all be cool if we built the core in Django, or would you prefer a PHP framework of some sort?

The only measurement of value for a thing is what another person is willing to pay for the thing.

If people are paying $3 for a Bitcoin, then Bitcoins are worth $3. If, the next day, people are only willing to pay $0.50 for one Bitcoin, then Bitcoins are worth only $0.50.

Fixing prices never works. Ever. Graves all around the world are filled with people who died to prove that. Have some respect.

I've been thinking a lot about this, the fundamental values of btc and how to manage profit margins for the small business using bitcoin.  I'm glad to see others are as well.

cheers

I'm guessing most merchants don't want to get into a currency speculation/trading game.  Otherwise they'd be currency speculators rather than merchants.