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Yamato

Can Bitcoin Replace the Dollar?

90 posts in this topic

Will the Govt lose control over its fiat currency to other fiat currencies introduced by the marketplace?

Dr. Ron Paul is interviewed on Fox Business to give his take:

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There is a lot of money to be made in currency exchanges so I don't think one particular form of currency will replace another totally unless the populace stops placing value in it. And anything can be currency for that matter. Gold, stocks and bonds, taxi cab medallions, bit coins, and even pokemon cards. Heck the game "Everquest" had a larger real life economy than Bosnia during the Bosnian war. Trade a magic sword in a video game for $20 cash or more.

If you think about it, all currency is fiat. The only thing that gives it value is what the populace thinks. And of course the more currencies, the more variance, and more chance for profit.

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I don't see bitcoin replacing the dollar due to the fact that their is a finite amount. There will never be more than 21 million bitcoins in existence. Maybe a similar type of currency will be able to replace the dollar in the future, but I don't think it will be bitcoin.

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There is a lot of money to be made in currency exchanges

Really? I would not recommend it; it is a zero-sum game and the speculators always lose.

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I don't see bitcoin replacing the dollar due to the fact that their is a finite amount. There will never be more than 21 million bitcoins in existence. Maybe a similar type of currency will be able to replace the dollar in the future, but I don't think it will be bitcoin.

The idea of limiting the amount in existence is to avoid inflation. What has happened looks like deflation.

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The idea of limiting the amount in existence is to avoid inflation. What has happened looks like deflation.

I understand that. But half of the bitcoins that will ever be made are already spoken for, and many of them are being hoarded. How many Americans have a bitcoin? Maybe 5%? This leaves absolutely no chance for wealth distribution.

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Really? I would not recommend it; it is a zero-sum game and the speculators always lose.

Exactly, it is another means to get wealth from the spectators or those that need to have the alternate currency to complete transactions. I did not mean it as a means for an individual to make money, but as a means for profit for a system or institution.

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I understand that. But half of the bitcoins that will ever be made are already spoken for, and many of them are being hoarded. How many Americans have a bitcoin? Maybe 5%? This leaves absolutely no chance for wealth distribution.

But that is why bitcoins are broken down into 8 decimal places. The smallest bitcoin unit is called a satoshi. There will be 2,100,000,000,000,000 or 2.1 QUADRILLION satoshi's ultimately created. Considering that currently the total amount of wealth in the entire world is estimated to be $231 Trillion dollars, there is theoretically more than enough bitcoin to go around.

Also I should note that unused bits are available in the protocol fields that could be used to denote even smaller subdivisions. So while a satoshi right now is the smallest bitcoin unit, it can go even smaller in the future if it becomes necessary.

Remember, 1 bitcoin is an arbitrary number. It can be broken down into 8 decimal places, the smallest bitcoin value is 10^-8 bitcoin or 1 satoshi. Just because today we talk in terms of bitcoin, does not mean that a few years from now we won't be talking in terms of milli-bitcoin or even satoshi's. Of course in order for that to happen the value of one bitcoin would have to go astronomically higher :P. Since I am part of the 5% who owns bitcoin, I can only hope!

Edited by Einsteinium
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Brilliant idea, replace an unstable currency for a purely speculative one... sounds like your gold idea a year ago...

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Brilliant idea, replace an unstable currency for a purely speculative one... sounds like your gold idea a year ago...

Care to eleborate?

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Care to eleborate?

who backs bitcoin and with what? The dollar at least is backed by the US of A, for whatever that might be worth.

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who backs bitcoin and with what? The dollar at least is backed by the US of A, for whatever that might be worth.

The dollar is not backed by anything. How is the USA backing the dollar? With what? Not with gold, not with silver, with nothing. Just the 'full faith and credit of the USA"- in other words, 'because you trust the USA'

Bitcoin is similar, but instead of it being backed by a single countries governmental promise, it is backed by all the users of the bitcoin community who trade bitcoin daily. What is gold backed by? The fact that people consider gold to be valuable. What is the dollar backed by? The fact that people consider the dollar to have value. What is bitcoin backed by? The fact that people consider bitcoin to have value.

However, the dollar is manipulated by the govt. They can create more dollars out of thin air whenever they wish.

Gold? Is physical, only so much of it exists in the world, however new mines can open, old ones can close, unpredictably effecting its value over time.

Bitcoin? Not physical, but does require time and effort to create. Increase in supply is controlled by math, and is totally predictable. You can say with a lot of certainty how many bitcoins will exist 10 years from now, much more certainty than with Gold, and the dollar? Forget about trying to predict that. Bitcoin is an entirely different animal, sharing properties of Gold and fiat currency, but being in a category all to its own. Will it replace the dollar? Probably not, will it change the world of finance the same way the internet changed the world of consumer marketing? It is very likely.

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The dollar is not backed by anything. How is the USA backing the dollar? With what? Not with gold, not with silver, with nothing. Just the 'full faith and credit of the USA"- in other words, 'because you trust the USA'

Bitcoin is similar, but instead of it being backed by a single countries governmental promise, it is backed by all the users of the bitcoin community who trade bitcoin daily. What is gold backed by? The fact that people consider gold to be valuable. What is the dollar backed by? The fact that people consider the dollar to have value. What is bitcoin backed by? The fact that people consider bitcoin to have value.

However, the dollar is manipulated by the govt. They can create more dollars out of thin air whenever they wish.

Gold? Is physical, only so much of it exists in the world, however new mines can open, old ones can close, unpredictably effecting its value over time.

Bitcoin? Not physical, but does require time and effort to create. Increase in supply is controlled by math, and is totally predictable. You can say with a lot of certainty how many bitcoins will exist 10 years from now, much more certainty than with Gold, and the dollar? Forget about trying to predict that. Bitcoin is an entirely different animal, sharing properties of Gold and fiat currency, but being in a category all to its own. Will it replace the dollar? Probably not, will it change the world of finance the same way the internet changed the world of consumer marketing? It is very likely.

The USA backs the dollar with its ability to purchase anything with it. Once the USA stops backing the dollar you cannot even use it as toilet paper (too coarse and you will end up with a green ar$e).

Bitcoin, being backed by nothing but currencies that need government backing, right now is nothing but a sucker trap, just as gold was 2 years ago. All those who jump on the waggon now will loose a lot of money in the future... which might not be so far away.

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The USA backs the dollar with its ability to purchase anything with it. Once the USA stops backing the dollar you cannot even use it as toilet paper (too coarse and you will end up with a green ar$e).

Bitcoin, being backed by nothing but currencies that need government backing, right now is nothing but a sucker trap, just as gold was 2 years ago. All those who jump on the waggon now will loose a lot of money in the future... which might not be so far away.

Bitcoin is not backed by currencies. Bitcoin is governed by the laws of supply and demand. So long as there is a demand for bitcoin and a limited supply, they will be worth something. Basic economics 101. Even if the government were to declare the dollar worthless, bitcoin, so long as there was still demand for it and a limited supply, would still be worth something. At that point, its worth would no longer be calculated in equivalent dollars, but something else of value. Like gold or Euro's, animal fur, spices.... lots of things have been used as currency in world history, only to be eventually replaced by more universally accepted forms of currency. Bitcoin, having no tie to any single government, has the potential to become more universally accepted than the dollar. Not that it will, but it has the potential.

Of course, there is risk, there is always risk. There is risk in owning dollars, there is greater risk of owning bitcoin. But with greater risk, comes the potential for greater reward. Such is the world.

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Bitcoin is not backed by currencies. Bitcoin is governed by the laws of supply and demand. So long as there is a demand for bitcoin and a limited supply, they will be worth something. Basic economics 101. Even if the government were to declare the dollar worthless, bitcoin, so long as there was still demand for it and a limited supply, would still be worth something. At that point, its worth would no longer be calculated in equivalent dollars, but something else of value. Like gold or Euro's, animal fur, spices.... lots of things have been used as currency in world history, only to be eventually replaced by more universally accepted forms of currency. Bitcoin, having no tie to any single government, has the potential to become more universally accepted than the dollar. Not that it will, but it has the potential.

Of course, there is risk, there is always risk. There is risk in owning dollars, there is greater risk of owning bitcoin. But with greater risk, comes the potential for greater reward. Such is the world.

I have some horse manure from a 4 colored horse, very rare... will that be worth something in the future too? I'll sell it to you for half the price of your bitcoins. And as long as those bitcoins are traded in real currency they are backed (in value) by that currency else they are valueless.

What gives bitcoins value is those currencies, nothing else. Currencies are at least backed by the need of the issuing governments to enable trade. And that includes a dollar.

But I like the value of bitcoins, still had some from the time they started and gave some away for free when they created them. I am just converting them into cases of wine... by means of dollars, of course. Surely will not convert any wine into bitcoins.

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I have some horse manure from a 4 colored horse, very rare... will that be worth something in the future too? I'll sell it to you for half the price of your bitcoins. And as long as those bitcoins are traded in real currency they are backed (in value) by that currency else they are valueless.

What gives bitcoins value is those currencies, nothing else. Currencies are at least backed by the need of the issuing governments to enable trade. And that includes a dollar.

But I like the value of bitcoins, still had some from the time they started and gave some away for free when they created them. I am just converting them into cases of wine... by means of dollars, of course. Surely will not convert any wine into bitcoins.

If people want your horse manure (there is demand) and it is rare (limited supply) then absolutely yes, your rare horse manure will be valuable. Sorry, but you are absolutely wrong. Currency does not give value to anything, currency is merely a measure of value for something. For example, currency does not give value to a car, people give value to the car because of the economics law of supply and demand. Currency is merely a measure of value, not value itself. The value of bitcoin is measured in currency, currency does not give value to bitcoin no more than it gives value to the car I mentioned earlier.

How can currency give value to anything? Currency has no mind of its own, currency does not go out and decide to give value to something. PEOPLE give value to things, people decide how much currency something is worth. People give value to bitcoin. I agree that if people stop thinking bitcoin has value, it will become worthless. But so will anything! If people decide tomorrow that gold is worthless, then it will be so, gold will become worthless. The market is made up of people, people give value and people take it away. People give value to bitcoin, that value is measured in currency, but it could be measured in wine as you mentioned. Either you are deliberately ignoring the fundamentals of economics in order to try to make a point, or you are just utterly ignorant of well understood basic economics.

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The thing I personally don't like about bitcoin is I can't put it in a piggy bank and trust it will stay there. It is digital, so I would if heavily into bitcoin want multiple backups and probably a physical printout just in case. Also, I can't buy things with it in person instantly like I can with cash. It takes on average 10 minutes for one confirmation. As a merchant the volatility would scare me, I just watched bitcoin have a mini crash today. The high on Btc-e was $869 and the low today $660 and it looks like China is still testing the 4,000 Yuan wall.

Edited by Razer

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If people want your horse manure (there is demand) and it is rare (limited supply) then absolutely yes, your rare horse manure will be valuable. Sorry, but you are absolutely wrong. Currency does not give value to anything, currency is merely a measure of value for something. For example, currency does not give value to a car, people give value to the car because of the economics law of supply and demand. Currency is merely a measure of value, not value itself. The value of bitcoin is measured in currency, currency does not give value to bitcoin no more than it gives value to the car I mentioned earlier.

How can currency give value to anything? Currency has no mind of its own, currency does not go out and decide to give value to something. PEOPLE give value to things, people decide how much currency something is worth. People give value to bitcoin. I agree that if people stop thinking bitcoin has value, it will become worthless. But so will anything! If people decide tomorrow that gold is worthless, then it will be so, gold will become worthless. The market is made up of people, people give value and people take it away. People give value to bitcoin, that value is measured in currency, but it could be measured in wine as you mentioned. Either you are deliberately ignoring the fundamentals of economics in order to try to make a point, or you are just utterly ignorant of well understood basic economics.

Let me put it easier for you: go to the store with your bitcoin and try to buy a quart of milk.

As long as that bitcoin cannot be used for anything but to buy a currency with it, and all commodities are traded in that currency at all levels it is but a commodity.

A currency is an object you can buy any commodity for.

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Let me put it easier for you: go to the store with your bitcoin and try to buy a quart of milk.

As long as that bitcoin cannot be used for anything but to buy a currency with it, and all commodities are traded in that currency at all levels it is but a commodity.

A currency is an object you can buy any commodity for.

Bitcoin is only just starting to become accepted. Here is a list of places that already accept bitcoin as currency : https://www.spendbitcoins.com/places/

We were not arguing if Bitcoin was a currency or not, you were saying that bitcoin only has value because of currency. That is not true, bitcoin has value because of supply and demand, people want it, there is limited supply, so thus it has value. That value is measured in currency because, well, that is how we measure the value of things in our Economy. I agree, it does not fit the definition of a currency, but it does have value, and it will continue to have value so long as people want it and there is a limited supply.

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Let me put it easier for you: go to the store with your bitcoin and try to buy a quart of milk.

As long as that bitcoin cannot be used for anything but to buy a currency with it, and all commodities are traded in that currency at all levels it is but a commodity.

A currency is an object you can buy any commodity for.

That's where you are mistaken.... you can use Bitcoin for transactions at several vendors. https://www.spendbitcoins.com/places/

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That's where you are mistaken.... you can use Bitcoin for transactions at several vendors. https://www.spendbitcoins.com/places/

I can use paypal too... and an Amex card... that does not give any of them a value where they trade in cash (or only take Visa).

As long as a dollar is legal tender they have to take it and give you a dollar's worth.

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I can use paypal too... and an Amex card... that does not give any of them a value where they trade in cash (or only take Visa).

As long as a dollar is legal tender they have to take it and give you a dollar's worth.

Nobody is arguing with you on that. So what is your point?

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China just broke through that 4000 Yuan wall.

tumblr_lw7qn58NxG1qii6tmo1_500.gif

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Nobody is arguing with you on that. So what is your point?

As long as you can only get currency for your bitcoin the bitcoin is backed by nothing but the currency that was paid into it. That is what I am saying... from the beginning by the way.

Where we come to the conclusion that a instrument backed by currency can never replace the currency backed by law.

Simple enough?

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As long as you can only get currency for your bitcoin the bitcoin is backed by nothing but the currency that was paid into it. That is what I am saying... from the beginning by the way.

Where we come to the conclusion that a instrument backed by currency can never replace the currency backed by law.

Simple enough?

But you are wrong, did you not see the website I posted that lists THOUSANDS of companies that accept bitcoin for payment? Bitcoin is NOT, for the last time, NOT backed by currency! The fact that you can exchange bitcoin for currency does not make it backed by currency. Let me give you an example, when the US was on the gold standard, each dollar was LEGALLY backed by an exact amount of physical gold. You could take your dollar, and bring it in and exchange it for that exact amount of gold and legally they HAD to give you the amount of gold listed on the dollar. Bitcoin is not backed by currency. If bitcoin were backed by currency- that would mean that each bitcoin would be legally tied to a specific physical amount of something, in your argument, dollars. Each bitcoin would have a 'face value' of an exact amount of dollars that it would be legally bound to. This would mean that bitcoin would have a legal floor, that it could never fall under in value.

If each bitcoin were backed by say, $50, that would mean that no matter what supply/demand did, one bitcoin would ALWAYS be worth $50 (or more). This is not the case. Bitcoin has no floor, nor a ceiling. Therefore it is NOT backed by currency. Its value is simply measured in currency, and you seem to be confusing measurement with backing. Two entirely different things. In this example, bitcoin could be worth MORE than the $50 backing, but not less.

Edited by Einsteinium
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