Paypal alert!

[CNYCacher]

I'm reading about this and trying to figure out how bitcoin works - it's a bit troubling that you can't easily figure out how it becomes real money or goods. 

Anyone can mine bitcoins using their CPU time.  The rate at which this proves fruitful is controlled by the p2p-nature of the network in a decentralized way.  In this way there is a controlled level of inflation, and a low rate of growth in the money supply.  It become real goods the same way all fiat currency becomes real goods: it is scarce and you have to trade something to get it and can trade it for something.

For example:  there are service provides offering goods and services for bitcoins right now.  If a provider offers a service I want and accepts bitcoins as payment, then I am interested in acquiring bitcoins with which to purchase that service.  Whether I pay someone cash for them, or sell something I own to someone who has them, I can get more if I want them, and use them to buy other things.

Bitcoins are as much a real money as "paypal balance" is a real money.

[De Selby]

Wait a sec there - paypal is directly tradeable for the currency in which paypal denominates your balance, right?  That's one obvious difference from bitcoin.

Why would anyone accept my mined bitcoins for goods, when those goods can only easily be had through other currencies (like the ones paypal transfers)?

[Tallpine]

Actually I already setup with some of mycustomers this afternoon that we are going to be doing checks in the mail instead of paypal.

What an exciting new idea!  But do you think it will catch on...?   

[MicroBalrog]

Wait a sec there - paypal is directly tradeable for the currency in which paypal denominates your balance, right?  That's one obvious difference from bitcoin.

Why would anyone accept my mined bitcoins for goods, when those goods can only easily be had through other currencies (like the ones paypal transfers)?

You realize that this is how currencies worked before the concept of legal tender came to be, right? You had a gold coin or a silver bar and you traded it for stuff.

[CNYCacher]

Wait a sec there - paypal is directly tradeable for the currency in which paypal denominates your balance, right?  That's one obvious difference from bitcoin.

Why would anyone accept my mined bitcoins for goods, when those goods can only easily be had through other currencies (like the ones paypal transfers)?

For the same reason anyone would accept printed money?

Are you under the impression that you can just click "Mine" on the bitcoin app and make as much virtual money as you want?  Believe me, you can not.

[280plus]

Are you under the impression that you can just click "Mine" on the bitcoin app and make as much virtual money as you want?  Believe me, you can not.

I hate snags... 

[zahc]

I'm reading about this and trying to figure out how bitcoin works - it's a bit troubling that you can't easily figure out how it becomes real money or goods.  

It becomes "real" money at bitcoin exchanges. That's how people get off saying "bitcoins are worth $1.67 right now". That means right now, you can trade 100 bitcoins for $1.67 on the exchanges. You can see some markets here:

http://bitcoincharts.com/markets/

There's even a pseudo-anonymous exchange in Canada that exchanges bitcoins in $20 increments for $20 visa cash cards.

[De Selby]

You realize that this is how currencies worked before the concept of legal tender came to be, right? You had a gold coin or a silver bar and you traded it for stuff.

Yeah, and the broad acceptance of gold and silver as media of exchange is why they're useful.

Where's the value in bitcoins? 

[Tallpine]

Do eight bitcoins equal one bytecoin 

[CNYCacher]

Yeah, and the broad acceptance of gold and silver as media of exchange is why they're useful.

Where's the value in bitcoins? 

The value is in the fact that you can trade them for money, goods and services

[De Selby]

The value is in the fact that you can trade them for money, goods and services

Yeah, but that's only to the apparently minuscule number of people who accept them.  And those goods and services can't be obtained without other money.  It seems like this private currency depends, fundamentally, on national currencies. 

[CNYCacher]

Yeah, but that's only to the apparently minuscule number of people who accept them.  And those goods and services can't be obtained without other money.  It seems like this private currency depends, fundamentally, on national currencies. 

In that way it is identical to all other currencies.

[De Selby]

In that way it is identical to all other currencies.

? The dollar is accepted worldwide, by billions of people.  I don't think there's anywhere you can go and be refused a gold transaction.  Wouldn't that be a major dissimilarity?

[CNYCacher]

? The dollar is accepted worldwide, by billions of people.  I don't think there's anywhere you can go and be refused a gold transaction.  Wouldn't that be a major dissimilarity?

I was responding to the idea that it is dependent upon other currencies.

[De Selby]

I was responding to the idea that it is dependent upon other currencies.

Right, I see what you meant now.  It just looks to me like this is a currency that, well, isn't really a currency because it isn't accepted as a medium of exchange. 

My dad warned me when I was a kid not to take wooden nickels as payment.  I'm not sure that warning is any less applicable to bitcoin.

[CNYCacher]

Right, I see what you meant now.  It just looks to me like this is a currency that, well, isn't really a currency because it isn't accepted as a medium of exchange. 

My dad warned me when I was a kid not to take wooden nickels as payment.  I'm not sure that warning is any less applicable to bitcoin.

Granted, it is not widely accepted, but there seems to be many widely-used exchanges to and from multiple real currencies.  There ARE some providers of goods and services who accept it as payment (again, not many).
It seems to be suitable enough for the purposes that originated this thread drift, which is a secure alternative to Paypal, if two people on both ends of the deal agreed to use it.

The wisdom in the wooden nickel advice is based on the fact that anyone can make a wooden nickel.  I'll grant that bitcoins are not widely in use, but they aren't easy to make (mining them seems to take forever, and possibly costs more in the power eaten by your CPU time than they can be bought for), and they (unlike actual coins) are impossible to fake.

[De Selby]

From the looks of it, you'd be economically better off having your CPU run Warcraft games online to generate gold.  There seem to be more people trading for that than bitcoin.

Why not bank transfers as an alternative?

[MicroBalrog]

Right, I see what you meant now.  It just looks to me like this is a currency that, well, isn't really a currency because it isn't accepted as a medium of exchange. 

A currency is a product. Just like any product. The success of this currency is limited by the desire of other people to accept is - just like any other currency.

Remember also that it's not very relevant to me how many people accept a given currency, as long as there is a merchant willing to accept it for a product I want to buy for an acceptable price within easy reach of me.

[CNYCacher]

From the looks of it, you'd be economically better off having your CPU run Warcraft games online to generate gold.  There seem to be more people trading for that than bitcoin.

I'm not trying to generate anything.  Mining is not my objective nor is it the point of bitcoin nor is it needed to use bitcoin.  Since there is no central bank printing bitcoins (like other currencies), mining is a decentralized way to grow the money supply.  The peer-to-peer bitcoin network controls the rate at which mining is fruitful, and the rate is very low to prevent runaway inflation.  The fact that mining bitcoins is difficult is a point I adopted to differentiate bitcoins from wooden nickels.

Why not bank transfers as an alternative?

There could be many reasons why someone might not want to use bank transfers.  I don't think it's my place to try to speak for anyone who is aversive to using bank transfers.  Off the top of my head I guess security, lack of fees, anonymity and convenience would rank up there.

[AJ Dual]

Damn... that's interesting.

[De Selby]

A currency is a product. Just like any product. The success of this currency is limited by the desire of other people to accept is - just like any other currency.

Remember also that it's not very relevant to me how many people accept a given currency, as long as there is a merchant willing to accept it for a product I want to buy for an acceptable price within easy reach of me.

It must be somewhat relevant, as it would be impossible to differentiate the barter system from a monetary system otherwise.  If too few people accept a thing in trade, what you basically have is a nifty collector's item that you can occasionally trade for other goods. 

[roo_ster]

It must be somewhat relevant, as it would be impossible to differentiate the barter system from a monetary system otherwise.  If too few people accept a thing in trade, what you basically have is a nifty collector's item that you can occasionally trade for other goods. 

Like most currencies on Earth.

[De Selby]

Like most currencies on Earth.

How are most currencies on Earth accepted by only a few people???  Most of them are universal at least within the borders of the issuer, and can be traded for other currencies.  Not so with Bitcoins, it seems.

[AJ Dual]

How are most currencies on Earth accepted by only a few people???  Most of them are universal at least within the borders of the issuer, and can be traded for other currencies.  Not so with Bitcoins, it seems.

They've already posted links to exchanges.

And no one here is denying that Bitcoin has the same challenge any new currency has, which is acceptance. However that is also the point, it's also the same challenge any new currency that's ever been introduced has also faced.

You seem to have some kind of mental block somewhere that money has to have some fundamental level of  "reality" or "officialdom" in it's issuance.  Even gold or silver has to have some sort of value in the minds of those who mine it, trade it, or hold it.

If everyone is starving, and I have the last loaf of bread on Earth, all the gold in Fort Knox is worthless. This is a fundamental risk and challenge any medium of exchange ultimately has, no matter what it is. In this, all currency is equal. Where they are not equal is when and how they suffer these risks, if ever.

[roo_ster]

How are most currencies on Earth accepted by only a few people???  Most of them are universal at least within the borders of the issuer, and can be traded for other currencies.  Not so with Bitcoins, it seems.

Not so with many, many currencies.  Some countries do not let their currencies float in an exchange and dictate exchange rates.  Some countries have currency so worthless/volatile that there is no real exchange or exchange rate.  (See Zimbabwe.)  In many countries, if a merchant is presented with local currency and USD, they will prefer USD.

We are spoiled, in the Anglosphere, with reasonably stable currencies that can be exchanged.  We must understand that is not the default setting in the world either now or in the past.

To sum up, I am not denying many/most of your points WRT Bitcoins.  I am merely illustrating that it is more like most currencies than unlike.