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Hopefully someone can clear this up for me: With the price rising so quickly what incentive is there to actually use BTC as intended, as a currency? Because th

Hopefully someone can clear this up for me: With the price rising so quickly what incentive is there to actually use BTC as intended, as a currency? Because the maximum number of coins is fixed it's pretty easy to project where the valuation is headed, and so anyone in their right mind should just hoard their BTC instead of spending it, which in turn should drive the price down, no?

wikwocket 13y ago
Using BTC as money is an independent decision from holding BTC as an "investment." If you have 0.02 BTC (~$20), you can spend $20 on a pizza, keeping your 0.02 BTC. Or you can spend 0.02 BTC on the pizza, and have $20 more USD to buy BTC with. This of course assumes you can easily transact with BTC, and convert USD <-> BTC, which seems to be anything but a sure thing.
- bunderbunder 13y ago
  They're deeply dependent on each other. Both kinds of user are strongly influenced by BTC exchange rates, and BTC has the same exchange rate regardless of how you intend to use it. I encourage you to read up on the recent history of Iceland's currency.
- brown9-2 13y ago
  This ignores the part where you're not sure if that same pizza will cost 0.01 BTC tomorrow or 0.04 BTC or 10 BTC tomorrow. If I think that my 0.02 BTC could get me two pizzas tomorrow, why would I trade that amount for one pizza today?
  - yebyen 13y ago
    Can you make it til tomorrow? Are those 0.02BTC all you have? If you're sure you're going to buy a pizza with BTC tomorrow, why not buy the BTC today, or five days ago? The prices have been pretty consistently going up. Yeah, there's a chance that pizza will have been 5% cheaper if you bought the coin to pay for it yesterday, or if you wait til tomorrow. So, why wouldn't you just take all of your USD savings and convert them to BTC? Wait, you mean to tell me you _only have_ that 0.02BTC? (Wait, you mean to tell me you only have that $20 in the bank?) I have way more USD value of BTC than I ever planned on having. It started as $50 and when that performed well, I put some more in, and bought some mining equipment, and put some more in, and now it has significantly more than eclipsed my USD cash savings at this point. It is for this reason that I would love to spend BTC, in fact it's a karmic imperative for me to try to spend BTC, since I've done so well with it so far. I can always replace it at the market rate at Coinbase. If you're spending the bitcoins and you're valuing them lower than it costs you to replace them, you're getting screwed. If things keep moving the way they are moving, you're going to have a talk with your vendor that accepts bitcoins. (It's always fun to get to ask, "Tell me why am I paying you extra?") I make more hoarding a few meager bitcoins in the midst of this bubble than riding a desk at my dayjob. So you can see why I am in your corner. Still, I don't think there has been a bad day to buy BTC in the last (how long has bitcoin existed so far?). I recognize that I would be a fool to keep less actual fungible cash than I need for groceries, rent, etc, and when I can use a Bitcoin in an actual transaction with a person (rather than trading it for cash at an exchange), I feel that it's probably a good idea to use some of that cash I saved to offset the impact to my BTC portfolio. All that being said, when I watched the price take a minor tumble the other day, from 850 to 785, I got nervous and went to SatoshiDice to recoup my perceived losses in an even riskier way. Nobody will take my bitcoins in exchange for anything I need (I can't spend them on rent, I can't pay taxes with them, I can't leave them at the grocery store or at the restaurant or the bar), apart from the exchange site (which will give me cash, that I do need)... but I have all of the cash I need for the moment and it doesn't do any fun tricks like these BTC. So why am I buying pizza again? I don't know if all that's a sign of a healthy market, but I don't think so. Still, you weigh the facts, you pick your horses and you take your chances.
  - wikwocket 13y ago
    If you think that your 0.02 BTC could get you two pizzas tomorrow, you can still buy the pizza today with BTC, and then use the $20 you saved to buy more BTC. My point is that the decision to transact using BTC is independent from the the decision to accumulate BTC. If you want to hoard BTC because you think it will keep going up in value, then convert all your USD to BTC right now. And then if you want to buy a pizza so you don't starve to death, buy it using any currency you like, while continuing to invest all your disposable (ie non-pizza) currency into BTC.
  - greiskul 13y ago
    Because you are hungry now.
ashray 13y ago
This is a valid question. One that I think about often. It's not easy to predict the valuation. For that, we would need to know how much business is done in bitcoin in the future. That's anyone's guess. Will it do $1 trillion or will it do more ? The price isn't always going to rise at this rate. That's for certain. However, yes, there will probably be a long term rise until bitcoin finds it true usage, market cap, and as a result of this, it's value with steady deflation going forward. While, I'm not sure what an economist's opinion on this is, the fact that you are encouraged to spend money because it's worth less in the future (inflationary fiat money) leaves a really bad taste in my mouth. Consumerism is a horrible disease and our planet is suffering from it every. single. day. That brings me to bitcoin and it's deflationary nature. Well, you're still going to buy the stuff you want to buy. Then, you'll save more because you know it'll be worth more later. Why wouldn't you buy the things you always need ? (food, shelter, a few gadgets, etc.) Should I spend on a new iPad when I might be able to buy 6 months worth of food with that money a year or two later ? You'll save as much as you can. You'll consume less junk. Isn't that a good thing ? Shouldn't we ask ourselves if we really need all the crap we keep buying ? These are interesting questions that challenge the entire nature of mindless consumerism that most of us indulge in these days. Also, if the only reason you spend your money is because it's going to be worth less tomorrow then you have bigger problems than bitcoin ;) PS - I don't mean you personally, just stating some thoughts.
- danielweber 13y ago
  You aren't intended to hold dollars themselves as a very-long-term store of value. But most people don't do that anyway. They put them in (for small values) a bank or (for larger values) investments where the capital is used to create more wealth. If I had 1/1000th of the country's wealth in dollars under my mattress or gold buried in my yard or bitcoins in the cloud, and then go into suspended animation for 50 years, there is no reason I should still expect to have 1/1000th of the country's then-increased wealth. My capital wasn't doing anything to grow the economy. You can argue "but wouldn't it be great if you could take that 50-year nap and have more money?" Yes, it would. You have also described an excellent reason for someone to start a pyramid scheme, but not for everyone else to want to get in on it.
drcode 13y ago
The answer is a bit counterinuitive: If the price keeps rising, you are right a smaller percentage of all bitcoins will be in active circulation, because people want to save their coins instead of spending them. However, SOME coins will always be spent (people gotta eat.) Here's the counterintuitive part: The currency "notices" the low rate of spending and will increase its own value to make sure the amount being circulated, though lower in face value, remains constant in its real value. In short: Hoarding is fine, because the un-hoarded coins increase in value to compensate. As economists say, this is not a "zero sum game", we can have high spending AND high hoarding without difficulty, if the currency has a large enough market cap.
- Nursie 13y ago
  >> Hoarding is fine, because the un-hoarded coins increase in value to compensate. As do hoarded coins, neatly transferring wealth from the productive economy to people who just sit on their coins. Count me out.
  - drcode 13y ago
    Exactly wrong: People who have earned money ARE the productive economy. The current system puts money in the hands of those who run the printing presses. (and as I explained, the fact that coins are being "sit on" is irrelevant)
    - Nursie 13y ago
      >> Exactly wrong: People who have earned money ARE the productive economy. Not when they're getting richer just by sitting on cash they are not. That's not producing anything, any/all productive work they did was in the past. >> The current system puts money in the hands of those who run the printing presses. We're not talking about the current system, we're talking about Bitcoin. >> (and as I explained, the fact that coins are being "sit on" is irrelevant) Except it's not irrelevant, for the reason I've just mentioned. You can dismiss or ignore it all you like but simply saying "You're wrong" doesn't cut it. If the amount of currency in circulation goes down because people sit on it, then yes the rest may well increase in value to cover the activity in the economy, but the hoarder gains economic power on the backs of everyone else's work. No thanks.
vinhboy 13y ago
Bitcoin worshippers will tell you, "no it does not matter, why would you not spend bitcoins, it's better than fiat", blah blah blah... Yet if you look at /r/BitCoin, there are dozens of "OMG!! I spent all my bitcoins on Pizza instead of holding on to them, look at this gif of me being sad" So to answer your question, it's just insanity. I miss the days before this month when BitCoin prices were stable for a couple of months. Spending it was actually pretty cool.
- danielweber 13y ago
  Yep, there are two fundamental and incompatible forces behind Bitcoin. First is the currency group. Second is the speculator group. The more success the second has, the more problems the first has.
  - Helianthus 13y ago
    Heh. And the success of the first group is dependent on the success of the second group.
- snitko 13y ago
  I spent bitcoins on many things and intend to do so in the future. The thing is, if you need something, you'll buy it, either with USD or Bitcoin. If you buy it with USD, then that is the amount of Bitcoins you haven't bought instead. So it doesn't matter. Bitcoin in no way stops you from spending it when you really want.
  - JamisonM 13y ago
    This is true, but the definition of "really want" changes if everything you can buy is subject to deflation in your currency of choice. If you believe Bitcoin will keep rising you will defer every expense until the last possible second and many transactions you will defer and later find that you do not need to engage in them, thus there is less commerce ongoing. How does a rational consumer justify going out for dinner on Friday if on Sunday they expect the date to be 15% cheaper, and Tuesday to be 20% cheaper, and so on? It is like the pain of finally biting the bullet and buying a new computer in the 90's knowing it will be cheaper in 3 weeks, but on every transaction you make.
ericb 13y ago
Bitcoin will have an S curve of growth. Spending once you're at the flat top of the S curve is a different proposition than doing so while you're on the vertical. Store of value stage must come first before the currency stage. Anyone going on about "intrinsic value" is missing the "intrinsic value" of the protocol.
Nursie 13y ago
>> which in turn should drive the price down, no? Up surely, as the hoarding scarcity makes buying harder and creates demand? Either way, yes, it destroys the utility as a currency. Which is probably a good thing, I don't like BTC as a currency.
eof 13y ago
well; for me its fun. before bitcoin went through the roof i would invest in bitcoin and periodically buy stuff that i could only buy with bitcoin; or replace my bitcoin as i spent it (using coinbase). now for me, as well as probably others.. i got so much upside on my bitcoin i don't mind spending a bit here and there. i still hold it mainly as speculation because i deeply believe in its long term value--but i bought a plane ticket at like $860/btc .. no regrets whatsoever. i got to buy a frickin plane ticket with frickin bitcoin.. that might seem like 'oh yeah whatever' to most people, but if you have been watching bitcoin for years, as I have.. as many people with decent stashes have, that is one of the main things people came back to again and again to say "it will be a real currency when". i am waaaay over vested in bitcoin so i can't justify 'replacing' my bitcoin anymore; when i am so exposed to the exchange rate; but 'spending it' is like cashing it out
conanbatt 13y ago
Its vital to understand that even if bitcoin is never used for any commercial transaction, application , services or goods, it can be very valuable just as a fiat to transfer dollars/yuan/currency from one place to another. This is a very international, expensive problem. I wouldnt be surprised to see that china is leading BTC trading because of chinese people sending money to their homeland, this time, with a much smaller fee than Wester Union or wire transfers. For giving money to someone else, its better than banks (which you might not have an account to, or the wires are expensive), WU (very high fees), mailing money (gets stolen). I share a negative feeling when i think that someone with 10k U$S in BTC last year is now a multi-millionaire, i find it hard to believe that much value was created. My surprise is that those insta-millionaire's arent cashing out. Or if they are, the demmand is so big its still working out.

wikwocket 13y ago

Using BTC as money is an independent decision from holding BTC as an "investment." If you have 0.02 BTC (~$20), you can spend $20 on a pizza, keeping your 0.02 BTC. Or you can spend 0.02 BTC on the pizza, and have $20 more USD to buy BTC with. This of course assumes you can easily transact with BTC, and convert USD <-> BTC, which seems to be anything but a sure thing.

bunderbunder 13y ago
They're deeply dependent on each other. Both kinds of user are strongly influenced by BTC exchange rates, and BTC has the same exchange rate regardless of how you intend to use it. I encourage you to read up on the recent history of Iceland's currency.
brown9-2 13y ago
This ignores the part where you're not sure if that same pizza will cost 0.01 BTC tomorrow or 0.04 BTC or 10 BTC tomorrow. If I think that my 0.02 BTC could get me two pizzas tomorrow, why would I trade that amount for one pizza today?
- yebyen 13y ago
  Can you make it til tomorrow? Are those 0.02BTC all you have? If you're sure you're going to buy a pizza with BTC tomorrow, why not buy the BTC today, or five days ago? The prices have been pretty consistently going up. Yeah, there's a chance that pizza will have been 5% cheaper if you bought the coin to pay for it yesterday, or if you wait til tomorrow. So, why wouldn't you just take all of your USD savings and convert them to BTC? Wait, you mean to tell me you _only have_ that 0.02BTC? (Wait, you mean to tell me you only have that $20 in the bank?) I have way more USD value of BTC than I ever planned on having. It started as $50 and when that performed well, I put some more in, and bought some mining equipment, and put some more in, and now it has significantly more than eclipsed my USD cash savings at this point. It is for this reason that I would love to spend BTC, in fact it's a karmic imperative for me to try to spend BTC, since I've done so well with it so far. I can always replace it at the market rate at Coinbase. If you're spending the bitcoins and you're valuing them lower than it costs you to replace them, you're getting screwed. If things keep moving the way they are moving, you're going to have a talk with your vendor that accepts bitcoins. (It's always fun to get to ask, "Tell me why am I paying you extra?") I make more hoarding a few meager bitcoins in the midst of this bubble than riding a desk at my dayjob. So you can see why I am in your corner. Still, I don't think there has been a bad day to buy BTC in the last (how long has bitcoin existed so far?). I recognize that I would be a fool to keep less actual fungible cash than I need for groceries, rent, etc, and when I can use a Bitcoin in an actual transaction with a person (rather than trading it for cash at an exchange), I feel that it's probably a good idea to use some of that cash I saved to offset the impact to my BTC portfolio. All that being said, when I watched the price take a minor tumble the other day, from 850 to 785, I got nervous and went to SatoshiDice to recoup my perceived losses in an even riskier way. Nobody will take my bitcoins in exchange for anything I need (I can't spend them on rent, I can't pay taxes with them, I can't leave them at the grocery store or at the restaurant or the bar), apart from the exchange site (which will give me cash, that I do need)... but I have all of the cash I need for the moment and it doesn't do any fun tricks like these BTC. So why am I buying pizza again? I don't know if all that's a sign of a healthy market, but I don't think so. Still, you weigh the facts, you pick your horses and you take your chances.
- wikwocket 13y ago
  If you think that your 0.02 BTC could get you two pizzas tomorrow, you can still buy the pizza today with BTC, and then use the $20 you saved to buy more BTC. My point is that the decision to transact using BTC is independent from the the decision to accumulate BTC. If you want to hoard BTC because you think it will keep going up in value, then convert all your USD to BTC right now. And then if you want to buy a pizza so you don't starve to death, buy it using any currency you like, while continuing to invest all your disposable (ie non-pizza) currency into BTC.
- greiskul 13y ago
  Because you are hungry now.

ashray 13y ago

This is a valid question. One that I think about often. It's not easy to predict the valuation. For that, we would need to know how much business is done in bitcoin in the future. That's anyone's guess. Will it do $1 trillion or will it do more ? The price isn't always going to rise at this rate. That's for certain. However, yes, there will probably be a long term rise until bitcoin finds it true usage, market cap, and as a result of this, it's value with steady deflation going forward. While, I'm not sure what an economist's opinion on this is, the fact that you are encouraged to spend money because it's worth less in the future (inflationary fiat money) leaves a really bad taste in my mouth. Consumerism is a horrible disease and our planet is suffering from it every. single. day. That brings me to bitcoin and it's deflationary nature. Well, you're still going to buy the stuff you want to buy. Then, you'll save more because you know it'll be worth more later. Why wouldn't you buy the things you always need ? (food, shelter, a few gadgets, etc.) Should I spend on a new iPad when I might be able to buy 6 months worth of food with that money a year or two later ? You'll save as much as you can. You'll consume less junk. Isn't that a good thing ? Shouldn't we ask ourselves if we really need all the crap we keep buying ? These are interesting questions that challenge the entire nature of mindless consumerism that most of us indulge in these days. Also, if the only reason you spend your money is because it's going to be worth less tomorrow then you have bigger problems than bitcoin ;) PS - I don't mean you personally, just stating some thoughts.

danielweber 13y ago
You aren't intended to hold dollars themselves as a very-long-term store of value. But most people don't do that anyway. They put them in (for small values) a bank or (for larger values) investments where the capital is used to create more wealth. If I had 1/1000th of the country's wealth in dollars under my mattress or gold buried in my yard or bitcoins in the cloud, and then go into suspended animation for 50 years, there is no reason I should still expect to have 1/1000th of the country's then-increased wealth. My capital wasn't doing anything to grow the economy. You can argue "but wouldn't it be great if you could take that 50-year nap and have more money?" Yes, it would. You have also described an excellent reason for someone to start a pyramid scheme, but not for everyone else to want to get in on it.

drcode 13y ago

The answer is a bit counterinuitive: If the price keeps rising, you are right a smaller percentage of all bitcoins will be in active circulation, because people want to save their coins instead of spending them. However, SOME coins will always be spent (people gotta eat.) Here's the counterintuitive part: The currency "notices" the low rate of spending and will increase its own value to make sure the amount being circulated, though lower in face value, remains constant in its real value. In short: Hoarding is fine, because the un-hoarded coins increase in value to compensate. As economists say, this is not a "zero sum game", we can have high spending AND high hoarding without difficulty, if the currency has a large enough market cap.

Nursie 13y ago
>> Hoarding is fine, because the un-hoarded coins increase in value to compensate. As do hoarded coins, neatly transferring wealth from the productive economy to people who just sit on their coins. Count me out.
- drcode 13y ago
  Exactly wrong: People who have earned money ARE the productive economy. The current system puts money in the hands of those who run the printing presses. (and as I explained, the fact that coins are being "sit on" is irrelevant)
  - Nursie 13y ago
    >> Exactly wrong: People who have earned money ARE the productive economy. Not when they're getting richer just by sitting on cash they are not. That's not producing anything, any/all productive work they did was in the past. >> The current system puts money in the hands of those who run the printing presses. We're not talking about the current system, we're talking about Bitcoin. >> (and as I explained, the fact that coins are being "sit on" is irrelevant) Except it's not irrelevant, for the reason I've just mentioned. You can dismiss or ignore it all you like but simply saying "You're wrong" doesn't cut it. If the amount of currency in circulation goes down because people sit on it, then yes the rest may well increase in value to cover the activity in the economy, but the hoarder gains economic power on the backs of everyone else's work. No thanks.

vinhboy 13y ago

Bitcoin worshippers will tell you, "no it does not matter, why would you not spend bitcoins, it's better than fiat", blah blah blah... Yet if you look at /r/BitCoin, there are dozens of "OMG!! I spent all my bitcoins on Pizza instead of holding on to them, look at this gif of me being sad" So to answer your question, it's just insanity. I miss the days before this month when BitCoin prices were stable for a couple of months. Spending it was actually pretty cool.

danielweber 13y ago
Yep, there are two fundamental and incompatible forces behind Bitcoin. First is the currency group. Second is the speculator group. The more success the second has, the more problems the first has.
- Helianthus 13y ago
  Heh. And the success of the first group is dependent on the success of the second group.
snitko 13y ago
I spent bitcoins on many things and intend to do so in the future. The thing is, if you need something, you'll buy it, either with USD or Bitcoin. If you buy it with USD, then that is the amount of Bitcoins you haven't bought instead. So it doesn't matter. Bitcoin in no way stops you from spending it when you really want.
- JamisonM 13y ago
  This is true, but the definition of "really want" changes if everything you can buy is subject to deflation in your currency of choice. If you believe Bitcoin will keep rising you will defer every expense until the last possible second and many transactions you will defer and later find that you do not need to engage in them, thus there is less commerce ongoing. How does a rational consumer justify going out for dinner on Friday if on Sunday they expect the date to be 15% cheaper, and Tuesday to be 20% cheaper, and so on? It is like the pain of finally biting the bullet and buying a new computer in the 90's knowing it will be cheaper in 3 weeks, but on every transaction you make.

ericb 13y ago

Bitcoin will have an S curve of growth. Spending once you're at the flat top of the S curve is a different proposition than doing so while you're on the vertical. Store of value stage must come first before the currency stage. Anyone going on about "intrinsic value" is missing the "intrinsic value" of the protocol.

Nursie 13y ago

>> which in turn should drive the price down, no? Up surely, as the hoarding scarcity makes buying harder and creates demand? Either way, yes, it destroys the utility as a currency. Which is probably a good thing, I don't like BTC as a currency.

eof 13y ago

well; for me its fun. before bitcoin went through the roof i would invest in bitcoin and periodically buy stuff that i could only buy with bitcoin; or replace my bitcoin as i spent it (using coinbase). now for me, as well as probably others.. i got so much upside on my bitcoin i don't mind spending a bit here and there. i still hold it mainly as speculation because i deeply believe in its long term value--but i bought a plane ticket at like $860/btc .. no regrets whatsoever. i got to buy a frickin plane ticket with frickin bitcoin.. that might seem like 'oh yeah whatever' to most people, but if you have been watching bitcoin for years, as I have.. as many people with decent stashes have, that is one of the main things people came back to again and again to say "it will be a real currency when". i am waaaay over vested in bitcoin so i can't justify 'replacing' my bitcoin anymore; when i am so exposed to the exchange rate; but 'spending it' is like cashing it out

conanbatt 13y ago

Its vital to understand that even if bitcoin is never used for any commercial transaction, application , services or goods, it can be very valuable just as a fiat to transfer dollars/yuan/currency from one place to another. This is a very international, expensive problem. I wouldnt be surprised to see that china is leading BTC trading because of chinese people sending money to their homeland, this time, with a much smaller fee than Wester Union or wire transfers. For giving money to someone else, its better than banks (which you might not have an account to, or the wires are expensive), WU (very high fees), mailing money (gets stolen). I share a negative feeling when i think that someone with 10k U$S in BTC last year is now a multi-millionaire, i find it hard to believe that much value was created. My surprise is that those insta-millionaire's arent cashing out. Or if they are, the demmand is so big its still working out.