I've gone over this in a video before
http://www.youtube.com/watch?v=N1r7Fcm4pwA
Topic: Why Bitcoin is not a currency and has no backing (yet?) - page 2. (Read 2618 times)
you cant arbitrarily set a currencies exact worth, they don't even do that in a planned economy AFAIK.
you can try to do math, last figure i herd was USD56T in the world total, so USD56T/BCX21=2666666.66USD per BCX. it would be more now because 21M don't exist.
or you can try the arduous task of dividing the entire worlds GDP by 21million
or [insert other arbitrary calculation here]
you can try to do math, last figure i herd was USD56T in the world total, so USD56T/BCX21=2666666.66USD per BCX. it would be more now because 21M don't exist.
or you can try the arduous task of dividing the entire worlds GDP by 21million
or [insert other arbitrary calculation here]
Limited supply and stable price...
Just like
Oil and water...
That DON'T mix.
Just like
Oil and water...
That DON'T mix.
I think the best candidate to establish the value of bitcoin is some rigorous mathematics and some system to establish an agreement on thus value.
What do I mean?
The thing worth the most in society is time, or the time consumed to produce a good. This is true for every commodity as well be it gold, real-estate, stocks or something else. As with bitcoin there are several factors which must be considered.
At first there is mining, the producing of hardware takes resources, energy and labor. The latter 2 take labor to be prospected, mined, refined, the power plants have to be built and run which require resources and more labor.
If we follow this part recursively we get to a point where we can estimate the total amount of human labor involved in the production of one bitcoin.
Second there is the labor involved in the goods and services offered for bitcoin.
If we apply the same kind of process to it we can multiply the amount of hours with the amount of hour spent on generating all bitcoins who exist to time.
The resulting unit is hour²
More later I have to figure out how to relate this figure to some "salary"
What do I mean?
The thing worth the most in society is time, or the time consumed to produce a good. This is true for every commodity as well be it gold, real-estate, stocks or something else. As with bitcoin there are several factors which must be considered.
At first there is mining, the producing of hardware takes resources, energy and labor. The latter 2 take labor to be prospected, mined, refined, the power plants have to be built and run which require resources and more labor.
If we follow this part recursively we get to a point where we can estimate the total amount of human labor involved in the production of one bitcoin.
Second there is the labor involved in the goods and services offered for bitcoin.
If we apply the same kind of process to it we can multiply the amount of hours with the amount of hour spent on generating all bitcoins who exist to time.
The resulting unit is hour²
More later I have to figure out how to relate this figure to some "salary"
You're spouting silliness. The difficulty of producing a thing does not dictate it's "value." We could easily calculate the man-hours required for creating an baseball-size ball of chewed gum, say it's 450 man-hours? Call this X. We could also easily calculate the cost of the raw input gum material. Call this Y. If we combine X and Y with some fancy math formula, will it yield any results upon which we can base the "fair" market price of the chewed ball of gum?
Pricing is determined by supply and demand, period. Cost of production influences the supply side, but is fully irrelevant for the demand side. For this reason, it is a very poor determinant of price and basing Bitcoin pricing on such a fallacy would be pointless.
The market price of all things float in relation to each other, this is not a unique phenomenon to Bitcoin. But, everyone notices this with Bitcoins because they are highly volatile. Volatility will fall long term, until it starts becoming reasonable to price goods at set BTC prices, irrespective of the dollar. That point is years away, regardless of how successful Bitcoin is.
What is perhaps more interesting, is that at some point Bitcoins will in fact become more stable and predictable than USD (for a number of reasons). Then, people may start pricing in dollars based on the BTC price. This is pretty far in the future, of course =)
What is perhaps more interesting, is that at some point Bitcoins will in fact become more stable and predictable than USD (for a number of reasons). Then, people may start pricing in dollars based on the BTC price. This is pretty far in the future, of course =)
I think the best candidate to establish the value of bitcoin is some rigorous mathematics and some system to establish an agreement on thus value.
What do I mean?
The thing worth the most in society is time, or the time consumed to produce a good. This is true for every commodity as well be it gold, real-estate, stocks or something else. As with bitcoin there are several factors which must be considered.
At first there is mining, the producing of hardware takes resources, energy and labor. The latter 2 take labor to be prospected, mined, refined, the power plants have to be built and run which require resources and more labor.
If we follow this part recursively we get to a point where we can estimate the total amount of human labor involved in the production of one bitcoin.
Second there is the labor involved in the goods and services offered for bitcoin.
If we apply the same kind of process to it we can multiply the amount of hours with the amount of hour spent on generating all bitcoins who exist to time.
The resulting unit is hour²
More later I have to figure out how to relate this figure to some "salary"
What do I mean?
The thing worth the most in society is time, or the time consumed to produce a good. This is true for every commodity as well be it gold, real-estate, stocks or something else. As with bitcoin there are several factors which must be considered.
At first there is mining, the producing of hardware takes resources, energy and labor. The latter 2 take labor to be prospected, mined, refined, the power plants have to be built and run which require resources and more labor.
If we follow this part recursively we get to a point where we can estimate the total amount of human labor involved in the production of one bitcoin.
Second there is the labor involved in the goods and services offered for bitcoin.
If we apply the same kind of process to it we can multiply the amount of hours with the amount of hour spent on generating all bitcoins who exist to time.
The resulting unit is hour²
More later I have to figure out how to relate this figure to some "salary"
Price stabilization is key in BTC adoption, but artificially setting the price won't work. The market has to dictate the price.
I think a popular, mainstream BTC-only service will help stabilize the price. We need to work on creating valuable products/services that can't be purchased with USD.
I don’t think price stabilization is possible at all in the near future (it only will be once Bitcoins are worth a lot), and I don’t consider the example I gave "artificial price setting". It’s just an incentive for using Bitcoins, and if it is done enough, then the market will arbitrage the exchange rate if it falls too low.I think a popular, mainstream BTC-only service will help stabilize the price. We need to work on creating valuable products/services that can't be purchased with USD.
I agree that all it takes is such a service, a "killer app" we are searching for. Silk Road in my opinion is one, though it can’t really provide price backing.
If we could achieve a sort of community agreement on a certain base price and have it for lots of things in demand, we could indeed have true backing for Bitcoin, as currency arbitrage will occur and influence the exchange rate.
Price stabilization is key in BTC adoption, but artificially setting the price won't work. The market has to dictate the price.
I think a popular, mainstream BTC-only service will help stabilize the price. We need to work on creating valuable products/services that can't be purchased with USD.
Currently, almost all shops and services tie their Bitcoin prices 24/7 to an exchange rate which changes every second.
By doing this, the consumer cannot know how much a product generally costs in Bitcoins. He has no sense what a Bitcoin is at least minimally "worth". It results in what is a major problem with Bitcoin: it is not a unit of account. Merely a payment system or a Dollar proxy.
Today, I have noticed that on what.cd, a private torrent tracker accepting Bitcoins for donations, it is cheaper to acquire a Bitcoin to be a donator than it is to pay with 5€. It is currently cheaper by more than 40%! Now everyone has an incentive to buy Bitcoins to pay with it.
Imagine if everybody did that. Of course this is not feasible with most products/services, but there are examples in which it is possible due to low marginal cost. Or, if you have a monopoly and lots of demands for your product, you can simply make the other payment methods a bit more expensive.
If we could achieve a sort of community agreement on a certain base price and have it for lots of things in demand, we could indeed have true backing for Bitcoin, as currency arbitrage will occur and influence the exchange rate.
Thoughts?
By doing this, the consumer cannot know how much a product generally costs in Bitcoins. He has no sense what a Bitcoin is at least minimally "worth". It results in what is a major problem with Bitcoin: it is not a unit of account. Merely a payment system or a Dollar proxy.
Today, I have noticed that on what.cd, a private torrent tracker accepting Bitcoins for donations, it is cheaper to acquire a Bitcoin to be a donator than it is to pay with 5€. It is currently cheaper by more than 40%! Now everyone has an incentive to buy Bitcoins to pay with it.
Imagine if everybody did that. Of course this is not feasible with most products/services, but there are examples in which it is possible due to low marginal cost. Or, if you have a monopoly and lots of demands for your product, you can simply make the other payment methods a bit more expensive.
If we could achieve a sort of community agreement on a certain base price and have it for lots of things in demand, we could indeed have true backing for Bitcoin, as currency arbitrage will occur and influence the exchange rate.
Thoughts?
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