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As Bitcoin Soars Over $300, A Question Arises: Could It Become A Global Reserve Currency?
Having now tripled since August, Bitcoin's break above $300 ($324 highs) raises an important thought experiment - can a digital currency act as a global reserve currency?
It seems yesterday's CNBC discussion that Bitcoin is nothing but a beanie-baby fad just served to feed the beast... on heavy volume after Draghi's comments...
Charles Hugh-Smith, from OfTwoMinds blog, attempts an answer of just that question:
Could a non-state issued digital currency like Bitcoin become a global reserve currency? The idea came up in my recent conversation with Max Keiser on the Keiser Report during our discussion of reserve currencies.
The idea is intriguing on a number of levels. In terms of retaining value though thick and thin, the ultimate reserve currency cannot be printed (and thus devalued) with abandon by a government. Gold and silver have served as the ultimate reserve currency, as precious metals can be traded for commodities and services, provide collateral for debt and serve as reliable stores of value.
While many observers believe gold is still the only reliable reserve currency (or if you prefer, the only reliable backing for government-issued paper money), it's a worthy thought experiment to ask if a digital currency could also act as a reserve currency.
Since there is no real-world commodity backing the digital currency, its value must be based on scarcity and its ubiquity as money. The two ideas are self-reinforcing: there must be demand for the digital money to create scarcity, and the source of demand is the digital currency's acceptance as money that can be used to buy commodities, goods, services and (the ultimate test) gold.
It follows that the first step in a non-state issued digital currency becoming a reserve currency is that it isn't created in quantities that dwarf demand. If the digital currency is issued with abandon, it cannot be scarce enough to gain any value. If I own one quatloo (our hypothetical digital currency) and a trillion new quatloos are issued tomorrow, the value of my one quatloo will decline to near-zero.
The second step is its widespread acceptance globally as money, i.e. a store of value and something which can be traded for goods and services.
There is a bit of a built-in conflict in these two requirements. To be useful in the $60 trillion global economy, the quatloo must be issued in size: there must be enough of it around to grease transactions large and small in all sorts of markets. Using the U.S. dollar as a guide (since the USD is the primary reserve currency), we can estimate that a minimum of $1 trillion in quatloos would be needed to become a practical global currency.
To act as a reserve currency, another trillion or two would be needed, as nations would hold these quatloos as reserves. (Nations hold an estimated $7 trillion in USD reserves, about $3 trillion euros and $1 trillion or so in yen, pounds and other currencies.)
But issuing quatloos in these quantities would remove any scarcity value. Thus the issuer of the quatloo would have to carefully issue more quatloos only when demand justified the need for more monetary "grease" for the global economy.
If on the other hand skyrocketing demand/scarcity drove the value to the stratosphere, holders of the quatloo would rejoice, but this volatility would present its own set of risks for those seeking to use the quatloo as a reserve against currency volatility in the home-country currency. If a digital currency can leap ten-fold in a short time, then might it not drop with equal volatility?
Volatility is the enemy of reserves; the holder of reserves needs a liquid (meaning it can easily be sold or traded in size) currency that predictably retains its value. A volatile currency poses risks, as do currencies that cannot be traded in size without drastically influencing the market value of the currency.
These conditions pose a steep challenge for any digital currency, but they are not insurmountable. Even as a niche currency, non-state issued digital currencies could play a role in the global economy, especially if government-issued fiat currencies destabilize/ devalue due to massive money creation by desperate central banks and state treasuries.
Is scarcity enough to back a non-state issued currency? Bitcoin offers a real-world experiment.
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Meanwhile, in Russia if you pay with Bitcoin, you get a 10% discount:
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+ TEOTWAWKI
Power is noy out et.
The 20th century's inventions won't last forever. Even the average bridge in the US receives a "D" when rated for structural wear and tear.
What's next, "Bit-oil?"
cheap power technology exists, but is wrapped in a blanket of "national security". it will be doled out gradually as necessary to maintain central power, but only after a die-off
Not that gold doesn't have its place in the economy or financial system, but if, IF the power goes out -- and no one knows for how long -- having your own power generators, food and water will be worth a fuck of a lot more. The odds of having gold become the get-rich-quick (golden ticket) are remote, but ok as an insurance policy... a hedge.
Better bet is a combination of solar+wind power @ home, and wood+coal, to live off the grid by choice, or if need be. Be your own utility company!
Big-city people are mostly screwed in a prolonged national crisis. Small cities and town will fare better. And a village may fare better than lone ranches/homesteaders in a prolonged outage and devolution to the middle-ages, due to strength in numbers for security and diversity of skill sets that are necessary for more than day-to-day survival. But to each his own, depending on how "basic" an existence you want to tolerate.
Actually, what's funny about gold is that it is as abstract as Bitcoin.
How? No, not in the old-man way of comparing something that you see versus something you can't (but is there anyway, if you could see down to the atomic level). More like this - You were taught that gold was valuable, you stored that information in your mind.
Over time, you did your research augmenting what you knew, that was also stored in your head. Our neurons are nothing but electrical circuits, discharging and recharging by shuttling chemicals around. The differences in their state is influenced by learning.
So, you're storing your knowledge about Gold being great as electrical charges in your head.
You're also dismissing Bitcoin because it is, at its core, based on math and states of electrons.
Get it?
I really don't get the pretense of scarcity in Bitcoin. A new Bitcoin can arise overnight. A new Bitcoin with the backing of major international corporations would instantly surpass the existing scheme in relevance and acceptance. There is nothing scarce about digital ones and zeroes. Tulips are more scarce and harder to reproduce.
A Bitcoin clone can arise overnight. It won't be Bitcoin, however.
It can be in all but name, and the name has no value.
ALL valuation is subjective, based on the desires of those who consider its possible utility.
iCoin only transferable through Apple products, the iSheeple
would love it.
Apple knows better then to do that, it would get hacked to pieces.
The estabilished market certainly has value. Why would I take IicanhasbailoutCoins over BTC if they are identical in every way, except that BTC already has an established user base?
Now, perhaps you will tweak the code to produce not an exact clone, but a better currency than BTC. In that case, I say go for it: we need competition in currencies!
Or you come up with the worst clone.
Worked for computer operating systems.
And if we've learned anything from the Internet and culture, it's that things that are popular today will always be popular.
The Internet itself is still plenty popular. Everything depends on your choice of analogue.
Wait, I thought people were just telling me that only gold can be money because of its popularity in the past.
What you mean is that you don't understand the true scarcity designed by the system. As for a new competitor arising overnight... so? That just means there's competition to provide the best form of crypto currency.
In other words, a win-win.
Also, I'm of the opinion that there are far more than 21 million tulips in the world.
A new Google or Apple can arise overnight.
Not really. There is a LOT of infrastructure that goes into supporting Bitcoin. The ASIC hardware, and millions and millions of lines of code for POS systems, wallets, business rules, etc. Simply forking the bitcoin software won't cut it because none of the existing infrastructure or network userbase will support it.
@icanhasbailout
What you've said is like this: "I really don't get the value of Apple's products, a new mobile phone company can arise overnight."
The difference, obviously is the head start involved and the startup costs. In Bitcoin, the costs are the extent of the network processing power. For anyone to catch up, it would take a rather hefty sum to do so.
It isn't as "easy" as you imply.
Bitcoin will hit $1000 per by next year. Global reserve currencies benefit the Banking class. Fuck them. They don't even understand Bitcoin yet.
Bitcoin is set up for a Crash as I write.
Exponential Growth leads only to Exponential Collapse.
That Chart is an Exponential Curve. I'd not touch that with a Ten Foot Pole.
Bitcoin always crashes. Then it rises. Then it crashes. Then it rises.
Replace "crash" with "retreat" and "rise" with rally and it sounds like...what?
Bullshit!
Bitcoin just reflects the exponential increase of $, €, £, ¥ ... supply.
the price of bitcoin reflects the exponential decline in fiat currency, yes. but multiplied by the exponential growth in the size of the bitcoin economy as increasingly many transactions are denominated in bitcoin.
exponential growth is the result of a nutrient rich environment. it is only when the limits of the environment are reached that collapse occurs. PQ=MV in the long run. there will be many spikes, and plummets, along the way, but bitcoin always stabilizes at a higher plateau, as long as PQ keeps rising. fiat economies are it's nutrient broth. it will consume them all.
Exponential growth is the output function of a positive feedback loop. It will ill only end, if
a) civilization disappears
or
b) ressources are exhausted
The 1 BTC question is: What comes first?
Point taken, but don't confuse dogmatic people with 'fancy math', like MV=PQ. ;-)
They won't thank you with Up votes for what they don't understand.
Notwithstanding the usual/inevitable correction after each Hype+Hyperbole that leads to an Exponential rise, the same BTC-hating have been made here on ZH for over a year. Usually by the same guys too.
If these guys can handle facts and "can handle the truth", w/o resorting to personal attacks, they will have to admit that BTC has risen 10x in a year. Imagine if that happened to gold... the gold bugs would shit their pants and shout about it from their roof top (about their rags to riches story). I/you/we don't have to LIKE it (at the emotional level). We just have to UNDERSTAND, and make use if it.
If it were me and I wanted to hedge my bets, I'd own some of BOTH: PM + BTC. I'd allocate 25% in PM and 75% in BTC. But I'd wait for the Dip, then BTFD.
An emotional person will continue to love/hate, but a person with 1/2 a brain will realize that money (fiat currency!) is to be made on BTC. ---> Love/hate, or buy/sell accordingly.
I've made peace with the fact that the stock markets are rising at a frenetic pace, too, but that doesn't mean I think for a moment that it is sustainable over the long term.
@Tall Tom
Actually, the only chart that looks steep is the Weekly - and you'd better be using Log charts, because everyone in Bitcoin does. If it started looking exponential on the log charts on daily/weekly timeframe, I'd agree - but it doesn't.
Also, you've ignored the phenomenon that every previous exponential decline high becomes the "floor" for the next one. We haven't gone to zero on any of these declines, at all. That means something.
And this is not a bubble because....??????????????????????
Banks create debt and turn it into bubbles. Bitcoin absorbs excess debt and turns it into money.
It's only money if the electricity is working. In the middle of a desert, no amount of bitcoin in the world can buy you a glass of water. To me, that's not money.
There's no water in the desert. Gold won't buy it either.
Of course there is.
"I'll give you 1BTC for that glass of water. 1 WHOLE BTC!"
*passing nomads speak amongst themselves*
"Sorry, infidel, I don't take credit."
It's always money. Whether or not you can get to your money at any given time is an entirely different question.
In the middle of a desert, no amount of gold stored in my safe at home can buy me a glass of water either.
As a Bitcoin enthusiast, I expect it is a bubble. The price usually "crashes" back down to what it was a couple week ago, though, so I'm not that worried overall.
If you were a bitcoin enthusiast, you would see that the trend is to ALWAYS end up higher than the previous crash.
Isn't that what I said?
there is short-term speculative froth, but it is fundamentally not a bubble because PQ is rising. the fundamentals dictate that bitcoin will appreciate dramatically. without need of speculative price inflation. that does not mean that speculative price inflation will not occur, but it does mean that it is a wise investment.
LOL, I guess Keiser is done with silver now? What a self centered hypocritical douchebag that guy is.
Fuck you Max.
Perhaps silver was his bait and bitcoin is his hook? And perhaps he is being led a bit, whether he knows it or not.
watch them all jump off the PM ship and on the bitcoin ship to keep themselves relevant. Marc Faber will be pitching it on CNBC within a month.
Anyone that followed him on silver the last few years around here knows this about Keiser. Stealing other people ideas (like "Buy Silver, Crash JPM") is his MO.
Now he is humping Bitcoin for all it's worth. (And I'm not against Bitcoin, or any other competing currency, so no need to junk me on that point).
"stealing other people's ideas" is a good idea. it's called "learning" and "becoming well-informed"
No, he pawned it off as his own idea fuckhead. It was ZH's Lennon Hendrix who coined the term.
Your ever hear of honesty and integrity? Give me a break with your semantics.
You'll know that bitcoin has peakied when Art Cashin gives interviews dressed like Tron.
Max Keiser is a bitcoin millionaire. Guess what silver has done for him? Well, maybe its kept his safe bacteria free, but that's about it.
No, he still pumps PMs too.
There is no need for a global reserve currency with digital currencies. You and have any infinite number of them and they will all work.
But I be fixin to cash out when BitCoin hits $795,000 each.
"I be fixin to cash out when BitCoin hits $795,000 each"
Excellent! At that stage, you'll be able to use that money to fill up your gas tank, take your wife out for a nice dinner, and give the valet parking guy a decent tip, but that's about it.
~ Robert A. Heinlein
and when you find somebody to give you 795k for a bitcoin, please send them my way. I've got this bridge....it's FABULOUS!!!!...and a bargain.
POSSIBLE STATE When 1 bitcoin = $795,000 and $1 = 1/795,000 of a Yuan so 1 bitcoin = 1 Yuan.
DREAM STATE Now if you said 1 bitcoin = 795,000 Yuan I would say smart person here because
then you have $795,000 ^ 2
JUST DUMB STATE Alternatively if you said 1 bitcoin = 795,000 Yen why wait?
GET OUT OF STATE is using 1 trillion Zimbabwe dollars to buy bitcoins :-)
A currency with a perpetually rising "value" is ____________________ ?
deflationary and good for savers
Too much deflationary pressure too fast leaves you saving for no available goods or services. Wages, prices and value are all tied together.
As goods and services become scarcer, their price in BTC will rise, thus tending to counteract the deflationary pressure and reach an equibilirium.
As you say, it's all tied together.
You have tied together prices (push/pull) and inflation/deflation - value lies in labor, knowledge, energy and the commodities that arise from their interaction. Value is the larger of the ropes in this knot, though perhaps the most often underappreciated in today's "societies." As systems become more and more unstable the basis of value will be appreciated more and more.
Shall I tend to my garden or calculate my margins? Both may be in order as things stand today, but what shall tomorrow bring?
helpful thoughts, sir. i would add that uncertainty appears to be very positive for bitcoin. it correlates well with all the macro and political risk factors.
That's not a mathematically sound assertion. Savings is properly measured in spending power, not in units of currency.
Not good for those who seek inflation to deflate away debt.
The minute you 'buy' a property (or any appreciating REAL asset), you have a vested interest in inflation...
To deflate whatever Debt you may have on said property/asset. For Borrowers this is good. For Savers this is bad, as they put their savings into a depreciating asset (fiat). Let's simplify to this...
INFLATION: Good for Borrowers, bad for Savers (of fiat currency). Hedge with PM, Real Assets
DEFLATION: Bad for Borrowers, good for Savers (of fiat currency). Hedge with Currency (fiat, BTC). Those who had King Cash during the Depression, not only lived in comfort, but snapped up all kinds of deals (real assets) from desperate people who lacked cash. And thus became even richer afterwards.
If you were smart enough to mitigate risk by having a mix of assets (Real Assets/Property + PM + Cash + BTC) -- to protect you in either/any environment -- you're fine. Else... not so fine.
which means it's bad for traders - so much for a trustworthy currency...
At some point it gets very lucrative to mine the crap out of these things with the fastest super computers known to man.
doesnt everyone know DARPA has contracted with several companies for the development of Quantum CPU's? encryption works basically by factoring very very large numbers. currently todays tech cant do this effeciently, supposedly. however quants will be able to do it in seconds. then there goes bitcoin, right? BTW i own BTC
http://www.dwavesys.com/en/dw_homepage.html -This is D-Wave, a quant cpu company
Should that day come, a quantum cryptocurrency will be created that will be superior to Bitcoin.
Why would that be the case?
It'd suck, actually, as you couldn't validate shit on your home PC so the concentration of miners would be too high. (And we already know that the current level of concentration among bitcoin miners is close to dangerous security-wise).
Other altcoins, such as litecoin, correctly identified the pointlessness of that approach so they changed the way coins are generated so that investing in custom-created mining rigs doesn't make sense.
If quantum computing exists, home PCs will be obsolete.
From what I understand, it basically reduces the effective length of a key by the number of qubits of the quantum computer.
So an 8-qubit quantum computer attempting to break a 1024-bit key would computationally be the same as breaking a 1016-bit key on a conventional computer.
not quite. take the logarithm base 2. an 8-bit quantum computer attempting to break a 2^10 = 1024 bit key would require the same work as breaking a 2^(10-8) = 4 bit key on a conventional computer.
Interesting. I guess I should look into it more. Have a link I can check out?
http://homes.cs.washington.edu/~oskin/quantum-tutorial/
What do you mean, where does bitcoin then go?
What's yours is yours, it's got nothing to do how much of the unmined remainder they can grab for themselves.
The processing power of the bitcoin network is far beyond all the supercomputers in the world combined.
until it becomes self-aware.
*goosebumps
Yes, that point was in 2010 or 2011
LOL
Bitcoin hash rate is the most hyper-exponential chart I have ever seen.
http://blockchain.info/charts/hash-rate
4 PETAhashes/second now vs. < 3 KILOhashes/second back in January. That's a 12 order of magnitude increase in less than a year.
This is where the serious money has gone this year.
How many people here realize what this means for the future BTCUSD exchange rate?
> How many people here realize what this means for the future BTCUSD exchange rate?
About ten of us that I've seen.
I'll bite. What does it mean?
It means the people who have put in cold hard cash to buy mining equipment to generate bitcoin expect bitcoin's value to go much higher in order to eventually earn a ROI. Either that or they are idiots.
Diminishing returns will make that a foolish plan. I hear it now costs more in electricity alone to mine a bitcoin than the bitcoin is worth, never mind the capital expense.
the electrical cost of producing bitcoin is determined by the free market. if the mining competition declines, the cost of producing bitcoin declines. the high difficulty of mining is a direct result of the intense interest in acquiring bitcoin by any and all possible means.
>the electrical cost of producing bitcoin is determined by the free market
Oh, you kidder, you.
After this run up, it's due for a crash back down to about 180. If it hits 400 anytime in the next week or two... run.
It will be interesting to watch the heavy hand of the state in action when bitcoin starts getting under TPTB's skin.
Buy bitcoin even if it's just for the entertainment value.
I think I'm with Ron Paul here.
Bitcoin is dependant on electricity and technology and vulnerable to computer firepower unless new issuance is capped – and who gets to decide that?
Re: and who gets to decide that?
I'm think a group of very wise men, many with intellectual looking beards.
Issuance is capped. It's hardcoded.
Really? How close are we to the ceiling?
Then it just trades like BRK/A?
I'm too lazy to go look right now but it is due to stop "making" coins I think around 2020, but it does it at a x^2 rate. so the last 4 years are basically nothing. I think something like 60% of all the coins there will ever be have already been made (mined).
2140, at 21 million. currently 12 million.
We're about halfway. It's hardcoded at 21 million, about 12 million coins have been mined.
Here's the kicker, though -- the remaining 12 million get mined over the next 100 years, so new supply slows dramatically:
https://en.bitcoin.it/wiki/Controlled_supply
You can see we've mined about 56% of the supply by year-end, and will be at 75% of the supply in another two years. If demand continues to scale up faster than the supply expansion (hint, it is), you might image what that will do to price.
The bitcoin price before the halving of the block reward last year was $10ish. The supply/demand imbalance is highly deflationary.
After all this time talking about Bitcoin on ZH, I have a little flat spot on the front of my forehead.
I'm temped to do a ZH-oriented bitcoin primer. Wonder if Tyler would care for that?
He might. I asked ZH to setup a Bitcoin address last year. Crickets...
Hell, I tried to GIVE bitcoins away here when they were at ~$25. Got like two takers.
I'll assist on the primer if you need. I'm an excellent proofreeder.
You gifted me 0.5 bitcoins on 1/13/2013 here -- so $5 at the time. Today that's better than $150. ( http://www.zerohedge.com/news/2013-01-13/nsa-pairs-banks-fight-hackers-w... )
Nothing is more guaranteed no strings attached than being handed cash or bitcoins.
Good memory, my man. My memory is going at my ripe old age. I'm an old geek, btw. Nothing makes me laugh more than when the geezers here think I'm just a 20-something trying to push BitBux on them.
Not really, I just went into bitcoin-qt, looked at the ledger and found the gift address transaction. Google found the thread for that date.
Seek-
I think the larger obstacle to adoption isn't necessarily the fixed supply, but rather the (re)distribution mechanism (or lack thereof)... because, as it stands neither the Obamaphone FSA nor the Bankster FSA is likely to adopt something they have to enrich someone else in order to get... I think Uncle Sam is actually an easier sale since he is usually willing to sacrifice some direct control in exchange for his more than "fair share." Growing to any sort of "international reserve" isn't going to happen in any of our lifetimes with linear growth.
Thoughts?
Its more like destined... Hardcoded means MAX_BITCOINS=21,000,000. Destined because its more like REWARD=50 and ultimately decrements to zero.
> unless new issuance is capped – and who gets to decide that?
It's part of Bitcoin's coding. If it changes, it creates a fork in the blockchain and it's not Bitcoin anymore. Miners that don't agree with the changes won't go with the new blockchain and will stay with the original Bitcoin.
We've all been born raised in a command economy with controlled money. Because of that, we're unable to see this economy-by-consent that's staring us in the face.
No, not until it's made out of gold or silver.
As a holder of gold (and silver) I feel like I am rooting against Bitcoin.....I am probably wrong , but that's how I feel
As a holder of gold, silver and bitcoin, I'm rooting against the Federal Reserve.
both my wife and i have a relative who had to flee a country in the past century
on my side germany, and on hers, russia
gold is what got both of them across the border
just sayin'
Re: gold is what got both of them across the border
You don't think a dead iPhone and a claim of having lots of BigCoins will work the same?
On the flip side, if you want to go across a border with your coins, bitcoin is the safer bet.
Best to have some of each, I think.
No.
Gold is still the reserve currency. Technology can make it easilly divisable and accepted anywhere.
Its coming.
Goldbulliondebitcard.com
That sounds like it will be centralized, a weakness in this day and age. Trust in 3rd parties is so 1990s.
No there isn't enough coins to support it. It could become a universally accepted currency for digital transactions across the globe though. The NSA spying on everything makes it that much likely if it is not bitcoin it is going to be some sort of stateless crypto-currency(s) that will eventually overtake all bank transactions for digital commerce. There are a lot of arguments for in favor of vendors and customers. Banks should not be the in the commerce chain as far as facilitating transactions between vendors and customers goes. The regulatory agencies can just deal with it on the digital to analog transaction aka turning bitcoins back into cash at the banks end and get the fuck out of the way of the flow the commerce as far as regulation goes. You regulate the end points not the whole highway.
21,000,000 x 10^8 coins is not enough?
The bitcoins once it hits it's peak supply will lose value if too much currency is pushed behind it at once. I don't think there is enough coins to avoid a major devaluation if demand is great enough at that point. You need high enough volatility aka turn over of people cashing in and out of coins between speculators and people just flipping cash in for one off transactions that the vendors then flip back out for cash afterwards to offset demand to keep it from devaluing to quickly. Debt/Credit system is inflationary by design bitcoin is deflationary by design once supply max is reached. Demand vs volatility will determine the rate.
Re: 21,000,000 x 10^8 coins is not enough?
I just talked to Krugman, he said he needs MOAR!!!
There will only ever be 21,000,000 coins.
There will never be 21,000,000 x 10^8 coins.
and it will take over a hundred years to mine those few million.
Each coin is divisible to 8 decimal place. That's what I was referring to.
You are, of course, correct.
so someday a Happy Meal will cost 0.00000815
all those decimal places are gonna take some getting used to...
There's a different unit (Satoshi) that moves the decimal point way to the right, so you can buy a happy meal with 81.5 satoshis.
I suspect eventually they'll move some decimal places in the display.
I wasn't taking that into consideration that each coin can be divisible by up to 8 decimal places, maybe there is depending on how the pricing conversions work out. I need to run some raw math based on a global money supply estimate. I'll post back on that in a bit.
Doesn't work.
http://simonthorpesideas.blogspot.com/2013/04/total-global-debt-and-mone...
Take the global money supply there I am going to estimate up to 100T to make the math simple.
We hit peak bitcoins of 21M so divide 21M/100T = 2.1 E -7. Means each bitcoin is worth $2.1 E -7 at max saturation of both. If each bitcoin is divisible up to 8 decimal places that means the absolute smallest denomination in bitcoin .00000001 = $2.1.
Doesn't work since you can't price anything below $2.1 at peak saturation of both. Only way it works is if the divisibility capacity can be upgraded later on to at least 12 decimal places so you can price things in the absolutely lowest denomination in dollars which is half cents .001, just round up or down anything below that same for .01. This fast becomes a computing power/calculation speed issue now once we get into numbers this large or small.
Technically if that is possible then bitcoin is not finite but infinite.
The universal set size is finite but you can keeping carving up the individual pies into infinitely smaller and smaller pieces theoretically though you don't reach it, It is like calculating a calculus limit doing it algebraically.
The other problem is how to make a nice neat conversion table to translate between dollars and bitcoins. Most people can't count past 20 you think they are going to understand what something priced .00025 BTC means as far as how many dollars it costs which is something they do. You need to make the conversion process as eloquent and easy as possible for the lowest common denominators to understand if you want it to be global currency when the underlying asset class determining it's value is dollars. It is not mathematically impossible but it is the human issues aka things Austrians take into account concerning economics that need to be dealt with. It is more than the math models and calculations that need to be considered.
the first is a not a problem, but a feature. the second is not an issue, because you simply call it something. 10^-8 BTC is called a satoshi, for example.
actually, they are infinitely divisible. all it requires is a software update which propagates to a majority of miners.
don't. feed. the. trolls.
I believe its' 21,000,000 coins. Which is 2.1 x 10^8.
Your quote of 21,000,000 x 10^8 = 2.1 x 10^16 = 21,000,000,000,000,000 = 21,000 Trillion.
2.1 x 10^7
> No there isn't enough coins to support it.
You sound like some gold skeptic from CNBC. Awh, there's not enough gold for gold standard to be feasible! We're screwed!!!
There is more than enough gold (and bitcoin) for everything, but they need to be properly priced.
The article itself is poorly written. In normal economy it doesn't make sense to "save" in bits. It's meaningless.
can a digital currency be the world reserve currency? What do you think the USD is?
+1. Best question for this article.
The downside is going to rip some faces off cuz NO one is going to bid it.
You can tell it's being manipulated by it's Reptilian owners.
Over.
All this talk about Bitcoin and yet so few have touched on the most important point: they're neither heavy nor shiny.
Which is great because they are still very secure. For international settlement, multiple mystery plane trips under guard of legions of security thugs just becomes an irksome, time-consuming headache.
Just remember how many people do not have a computer or smart phone.
So the answer is NO.
Gold is the reserve currency.
Don't need a smartphone or computer. You can use SMS. Check out Coinapult.com and M-PESA.
A necessary feature for a global reserve currency is that it be able to be used by tribesmen who are well versed in ultrasound and acoustic wave decay?
All these rallying "No's" are missing the point. Bitcoin isn't perfect certainly. However if we are to have an alternative to the current cartel controlled monopoly of money systems, we must have options. Bitcoin has proven itself to be a competitor of the options available.
May I remind everyone of a very important speech / paper written by F.A. Hayek: http://mises.org/document/3983
From Mises Institute:
"A path-breaking essay by Hayek, newly in print in cooperation with the Institute of Economic Affairs, this piece first appeared in 1976, during an inflationary bout in the U.S.. Hayek saw that it was crucial to bring the forces of competition to bear in currency markets, not just between countries but within them as well. All people should be free to use any currency of their own choosing, even if that means rejecting the favored domestic one. This provides a check against inflation, permitting citizens to keep assets denominated in any unit. Governments, then, would have greater incentive avoid inflating because a depreciating unit would lead people to flee to other currencies. At least this would work as some check, and it would be a great improvement over the existing system in which citizens in a currency region are caged sheep led to the slaughter. This is an important essay in many respects, because it represents a reform that could take place right now, one that would change the institutional incentives faced by central banks. This is not his full plan for sound money but rather a creative idea to diminish the total power of central banks within individual countries."
Just one notable quote from the essay:
"Otherwise gold is not really necessary to secure a good currency. I think it is entirely possible for private enterprise to issue a token money which the public will learn to expect to preserver it's value, provided bot the issuer and the public understand that the demand for this money will depend on the issuer being forced to keep its value constant; because if he did not do so, the people would at once cease to use his money and shift to some other kind." F.A. Hayek
Bitcoin is generated with electricity and a computer. My goodness where else have I heard of such a currency? hmmm
a digital currency that can't be printed or otherwise replicated thanks to cryptographic ciphers created by a mystery person
that is unhackable until it is
and as for mystery person,
(Serious question) Are we going to start seeing some BC chart on ZH?
http://bitcoincharts.com/charts/bitstampUSD#rg60ztgSzm1g10zm2g25zv
Can ya print it?
No. You can work at securing the network and possibly get some Bitcoin as a reward for your efforts. https://en.bitcoin.it/wiki/Mining
Since there is no real-world commodity backing the digital currency, its value must be based on scarcity and its ubiquity as money.
There is so much insanity in this article it is difficult to read.
1. Money is "a promise to complete a trade". It is "created" by traders making trading promises.
2. A properly managed money never changes value anywhere. It exhibits zero inflation
3. A properly managed money is in free supply and supply is in perfect balance with demand (as is a trade)
4. A properly managed money has no need for a reserve. It is backed by the traders and the marketplace; not by something scarce or someone's capital or collateral.
Money's proper management (monitoring defaults; collecting an equal amount of interest; guaranteeing zero inflation by the relation INFLATION = DEFAULT - INTEREST) gives it its value and appeal and rock solid usefulness as an enhancement to simple barter. There is no money authority. Proper management of money is robotic.
Knowing this, go back and read the article again. It's totally ridiculous.
Todd Marshall
Plantersville, TX
> "properly managed"
During the American Revolution, British commanders assumed that the rebels would lose because they weren't acting like a proper army. Boy howdy, were they wrong.