Hmmm…yes the governments of Indonesia, Brazil, Argentina did an excellent job stabilizing their currencies against speculation. Sure, US currency is pretty resistant but that is a function of the size and stability of our economy, not a property inherent to national currency. Short of shutting down the banking system, governments have very little that they can do to prevent speculation. Indonesia tried desperately to protect its currency, but the speculators prevailed in the end. Don’t get me wrong, I completely agree that bitcoin seems to be very frothy at the moment but that is a separate issue from whether it is secure. Perhaps I was being a little too understated when I said it was rather resistant to forgery.
Your comment about inelasticity is interesting. Is this a weakness or a strength? The gold standard helped keep inflation under control by keeping the money supply strictly controlled. The only way to print more money was to increase the supply of gold. Does bitcoins predictable increase in supply help maintain stability? Eventually the speculative bubble will pop and then maybe we’ll see whether it has real legs as a currency.
This Note is Legal Tender for all Debts Public and Private.
[/QUOTE]
This inscription tells me U.S. banknotes will have a fairly well-defined value, at least in the near- and medium-term. Do Bitcoins come with any similar guarantee? (If you argue that the $4 BigMac is no more stable than the Bitcoin price of heroin, I’d ask you to reply in BBQ Pit.)
Nitpicking. This statement may have had some influence on the value of US currency in the pre-electronic era but it has very little bearing on it now. What gives a dollar its value is people’s acceptance of it as a medium of exchange for goods and services. That’s true whether i buy that BigMac with a saw buck (legal tender) or a credit card (not legal tender).
You do have the essence of the issue tho. USD are the benchmark currency because of their stability and universal acceptance. Wasn’t always that way. You might have held a different opinion in the 19th century. In fact, I find the parallel striking. IIRC, the US was awash in different currencies in the 1800s. Many companies printed their own money which of course became worthless when the companies ran into financial trouble since it was backed by their assets. I wonder if we could see a similar situation now. What’s to prevent a bitcoin rival from setting up a competing currency under a slightly different algorithm? If they made their mining payout a little more lucrative they could undercut bitcoin and miners would switch. People start to lose confidence, vendors stop accepting bit coins and then it’s toast. Then the cycle repeats.
morgensd
There isn’t anything, there are many other competing crypto-currencies such as Litecoins (faster mining), namecoins (domain reg and TOR hosting stuff) and a host of other copy bats. None of them are anywhere near the value of bitcoin because people are still speculatation on bitcoin.
Bitcoin doesn’t get value because vendors accept it, bitcoin has value because people speculate and invest in it. The mining payouts could get as lucarative as you want (they are a lot more lucrative with other cryptocurrencies to bitcoin because the mining difficulty for them, based on the total number of coins, is much lower and so they’re easier to mine).
I don’t see what you mean by how a faster mined currency (eg Litecoin) can “undercut” bitcoin since bitcoins don’t have any inherent value outside of speculation.
Not really, no guarantee. The bitcoin price of heroin, LSD and and a big number of other illict substances is pegged to their dollar value on silkroad (the main vendor of these things) making it in a sense stable, the bitcoin to dollar exchange rate is incredibly unstale - changing buy up to ~£10 in half an hour.
Interesting. In a certain sense, one can see speculating in bitcoins as amounting to placing a bet on crime (though with lots of other confounding factors). If it weren’t for those confounding factors, it’d probably be a good (if highly unethical!) investment–vice has never went out of style.
