Topic: What happens when.. (Read 204 times)

He'd known already that the valuation of bitcoin depends on supply and demand. If both parties agree to a stipulated price point, a sale would have been made, thus marking that price point as the value of the goods exchange.


It does, again it's supply and demand. On paper, the less coins there are in circulation, the more valuable a certain something gets provided that demand is present for it.


Then they'll go to jail? The repercussions of not being able to pay back loans should be pretty straightforward to anyone borrowing some money. Be it fiat or bitcoin, the borrowers are subject to terms stipulated by the person who loaned them. Should these terms be broken to the expense of the creditor, then the borrower should know that the creditor can take legal action against them.

all explanations from mister @ mk4, mister @NeuroticFish, mister @DannyHamilton, mister @stompix, really represent your curiosity about Bitcoin from various points of view of their knowledge.
I believe you just need to read it carefully and make your own conclusions about what you understand as a whole. without diminishing my respect for them, I thank you. it gave me new insights at the same time.

as a beginner i am very happy with the topics covered in this thread.

You would somewhat expect that the "violent" swings of Bitcoin are down to two reasons, one that you mentioned, its infancy compared to more stable currencies, but also a second option worth considering is that Bitcoin despite having a finite amount, is currently still generating Bitcoin, and due to the way they are generated, mined in blocks they are mined frequently, but also in chunks. So, instead of it having a steady flow of 1s, 2s or whatever it adjusts based on the difficulty, which in itself can create economic waves.

This isn't necessarily a bad thing, and its the reason why day traders love the currency, but this is probably a contributing factor as well as the general outside view of Bitcoin, which due to its infancy, and complexity is probably influenced by news more than we would like to think.

The price is simply determined by demand and supply. If demand outweighs supply, the price goes up and vice versa.

I think the soda seller could price the soda in both bitcoin and dollar , and have the soda price in bitcoin  adjust automatically to always equal or reflect the $1 whenever Bitcoin price changes/fluctuates

In regards to the 2nd Point, ofcourse, it will greatly increase the price as long there is high demand for the bitcoins while it remain scarce, decentralized and transparent. In my opinion, without transparency and decentralization, the price could be suppressed by companies while they issue fake bitcoins on centralized platforms

Your dad should stop seeing Bitcoin as a currency and more like a fantastic stock nobody has control over. If you had the option to pay for a soda can using stocks, the same principle would apply: at any given time, the stock price could make your $1 be worth $0.98, right?

On the other hand, USD loses and gains value as well. Although USD is "stable" as in 1 USD will always be equal to 1 USD, your $1 bill from today might not be able to cover the price of a soda can within a week if inflation affects the USD so much a can becomes worth more than a buck.

If massive corps start investing in BTC the same way Tesla did, what happens is Bitcoin probably becomes a reserve asset for bad times. And at that point, Gold will easily be left behind since Bitcoin has math-proven legitimacy, cheap txs compared to moving tons of gold and could be transferred in an instant from here to anywhere else around the globe.

"I was saying how its good to have a currency that is backed up and can't just mine or print more for whatever reason" I don't really get the logic behind the answer you listed to this questions from your dad but I can guaranty you that if you are really here to have answer to this question you must have a quality time to do some research in this forum. Search threads for beginners you will see plenty at your disposer.

It's the same thing with the value of the USD, I won't get into the long story of the purchasing power declining but when you go with 3$ at the gas station and the gallon is suddenly 3.5$, what do you do? Yes, nobody will deny that bitcoin is indeed more volatile than a fiat currency, but it's also a currency that is still in its infancy and heavily traded, if somebody would go back in time and look at the price swings we had in the early days judging by those the coin would have do be dead 400 times already, but it's not, as the price goes up and real adoption kicks in with real users, and not just people playing on binance with their smartphones, those swings will start to become irrelevant.


Of course, it's demand and offer.
Fewer bitcoins for sale, more demand from buyers, the price will go up as in any normal free economy.
But, you're talking about BTC prices, right? In this scenario, there is no other way than up until every last coin gets acquired by somebody who has paid a few quintillions for them.

If you're referring to the prices of goods, no it doesn't matter.
Has the price of soda increased because the bank of China has bought 200 tons of gold? Nope!


And, how is that different than any other failed loan that happened over the last millennium?
There are going to be defaults in the future bitcoin or not, those have happened all the time, with gold, fiat, bitcoin, probably even with stone, I'm quite sure that at least on time in history a stupid caveman broke all his spears, loan some from a friend and broke those too ending in debt.

You can't be fully protected of those unless you take collateralize loans that can be easily liquidated to pay your debt. Of course, it means first that you must have collateral in the first place so why would you take a loan, so this is not for eveyone seeking one but in the end is the only way to avoid a default.

Who determines the value of ANYTHING?  Value is ALWAYS determined by agreement between a supplier and a recipient.  A supplier of a thing determines how much of something else they are willing to accept in exchange for that thing.  The recipient of the thing determines how much of something else they are willing to give to the supplier of the thing that they want.  If the supplier and recipient are in agreement, then the value is determined.  If they are not in agreement, then the exchange does not occur and the market value is not established.

This is how stocks work, this is how gold works, this is how crude oil and other commodities work. This is how the world works.

Companies called "exchanges" provide a convenient way for buyers (recipients) and sellers (suppliers) to find each other and make offers of exchange.  These exchanges match up offers that are in agreement and facilitate the exchange of Bitcoin for other forms of currency.  Those exchanges are what determines thee value.

Bitcoin is NOT a stock.  Here's a similar "hypothetical" transaction.  You have the equivalent of $1 worth of Euros in your wallet.  You walk into a store in France to purchase a soda. Then the exchange rate between U.S. dollars and Euros changes and the Euros you are holding are now only worth 0.9 Euros.  You still have the same amount of Euros in your wallet, and the merchant hasn't altered their posted price yet.  You get to buy the soda.  Just think of Bitcoins as Euros?

Here's another way the transaction can work...  The merchant has an electronic system that updates the Bitcoin price of each item every minute so that the item is always $1 worth of bitcoins. You pay with $1 worth of bitcoins, and the merchant uses a service that instantly exchanges those bitcocins for dollars at the current market price and provides the merchant with U.S. dollars in their account.


As less and less bitcoin were available to be exchanged in the market, assuming that demand for bitcoins stayed the same, the exchange rate would change.  You would have to give more value (ex: dollars) for the same amount of bitcoins.  As such, people would pay less bitcoins to the big corps for the same products or services. It would become harder and harder for those "big corps" to acquire significant amounts of bitcoins. Meanwhile, those individuals that are already holding would see the value of their bitcoins increase.  They'd be able to acquire more "stuff" (money, cars, houses, food, entertainment, clothing, etc) for the bitcoins that they have.  The "big corps" would eventually run out of cash and credit.  At that time they'd HAVE to pay their bills and suppliers with Bitcoin OR they'd have to sell some of their bitcoin on exchanges to acquire more cash. Either way, that bitcoin would make it's way back into the market stabilizing the price.



Lending always involves risk.  If you don't trust someone to pay back the bitcoins that you lend them, then you need to either NOT lend them the bitcoins OR make sure that you have enough value in collateral to protect you from any forfeiture on the loan.


However, what does lending have to do with bitcoin?  Lending is something that you CAN do with bitcoin, just like you can lend cars, or property, or money, or most anything else. But bitcoin exists without needing any type of lending.  You started out with 2 questions about Bitcoin itself, but then oddly ended with an unrelated general question about the risks of lending stuff with inadequate collateral?



I'm happy to answer questions as you think of them.  Beyond that I'm sure someone here can recommend some good books.  I hear "The Bitcoin Standard" recommended frequently.

Why you think in USD when you talk about Bitcoin?
1 BTC = 1 BTC. If the soda price will be in BTC, that's what you'll pay.

If you get third party in equation, then the third party will get his fees and the associated risks. In your case, the shop selling soda will have a payment processor that will show you a price in Bitcoin and will give the shop 1$ no matter the Bitcoin price goes up or down. Or, if the shop accepts directly Bitcoin, then the shop will have to also take the risks.

But again, it's apples and oranges what you were talking about. 1 BTC = 1 BTC.


1 BTC = 100000000 satoshi.
So the 4M coins remaining is 400 000 000 000 000, plenty for the "circulation" needs.
But you're right, it's still a finite supply and it seems to be a very good investment vehicle. And yes, the more entities buy Bitcoin, the more the Bitcoin price will rise, overall. At least for quite a while.
This makes your 1$ soda be cheaper every day* if you buy with Bitcoin  
(Of course, the price also falls some days, DYOR before investing).


I don't understand what you mean. People can invest smart and can invest bad, no matter it's Bitcoin, it's gold, it's stocks, art or whatever.
You may have to re-word and rewrite this in a clearer way.


"Bitcoin" is a wide topic. For now I see you are interested in it only as investment and I don't know good sites on that.
But this forum is a pretty good place you can ask and get useful answers, just make sure you ask clearly  

Supply and demand. No offense to your dad, but he should easily easily know this answer.

As for the fluctuating value, well, while the value of other currencies frequently fluctuate as well(just far less violently), bitcoin fluctuates a lot with varying sizes of price movements because it being 11 years old is still really really young. It will take potentially multiple decades for something to be decently stable enough.

First off, it will take a HUGE amount of money to own 17 million.

Second, yes, it should increase the price because of the low circulation assuming that demand stays high enough.

If I understand correctly, this is a loan problem, not necessarily a Bitcoin problem.

My general recommendation for beginners:

• If you prefer videos: https://www.youtube.com/playlist?list=PLPQwGV1aLnTuN6kdNWlElfr2tzigB9Nnj
• If you prefer articles: https://www.coindesk.com/learn
• If you prefer books: https://theinternetofmoney.info/

First off I love the idea of a currency that is decentralized and I'm invested in a diverse amount of alt coins.
 
I did have a 'discussion' with my dad (he is pretty smart with economics and tax laws). I was saying how its good to have a currency that is backed up and can't just mine or print more for whatever reason. He did have some points that made me want to find out where to find the answers.

1st point he made was who determines the value of bitcoin? As of now the price changes every second. Hypnotically you have the equivalent of $1 in your account you want to buy a soda with it but then the stock drops a little your 1 dollar is now $.98?

Can't buy that soda that will effect business owners in a negative way..

2nd point was what happens if many of the big corps start holding bitcoin but continue to pay bills with their cash/ credit methods and lets say these big corps manage to collect 17m Bitcoins out of the 21m.. With those remaining 4m coins actually in circulation won't that increase the prices in some way?

3rd point he made was many people are not financially smart what happens when a person fails at paying back a personal loan they obtained? the coins where spent to idk pay off an electric bill. Said borrower fails to pay back but now the people/persons that lent the coins have lost their investments. Yes investing is a risk but without investors putting up their assets loans will cease or have outrages interest rates to guarantee they make.

Where can I read more on Bitcoin to further my knowledge?

Thanks,

Risky B