Bitcoins reached $300

Damn. Sometimes I can't believe it. I have been following bitcoin quite closely for over 18 months now. The ecosystem is growing in ways only a few bold people have predicted. Fundamentally, it is about belief and trust. The protocol has largely proven itself. People are starting to believe in bitcoin. This is why the price is going up.

For those who say "It isn't being used as a currency!" here is my response:

Bitcoin excels as a secure protocol for tracking account balances in a decentralized, seemingly untamperable fashion, as well as transferring value very quickly to anywhere in the world at the sole, uncensorable discretion of the owner. It is both a payment protocol and a distributed ledger. A lot of people want these unique feautures, even if they can't buy groceries with it yet. Those types of merchants will always be the last to adopt.

Bitcoin also has the pontential to be used in diverse ways as "progammable money". It has a built-in API, and features like timelock, mutli-entity transaction signing (built-in escrow), and others that I don't fully understand. An AI bot could utilize bitcoin (might have trouble with a bank account!).

Also, see gold and its $8 trillion of largely made-up valuation (not stemming from industrial/ornamental demand). You don't see gold owners buying things with a few shavings ;) Bitcoin is far superior to gold in almost every way (it isn't quite as shiny tho). If society can make up several trillion dollars of monetary valuation for gold, then I definitely can picture bitcoin snagging a pretty decent slice (right now it is only 1/3,000 the size gold).

People recognize this potential, and thus choose to invest. The first mover advantange is massive. Network effects are very important - it will take quite the innovation to unseat bitcoin, and it has to be something that can't be simply copied/integrated into the existing protocol. The whole thing is sort of a self-fullfilling positive feedback loop. I'm a cautiously strong proponent, and find it absolutely fascinating to watch. These kind of events don't unfold that often.

TL;DR - magic internet money!

Sorry for the multiple edits. I wrote this on my phone.

oleganza · 12 years ago

Small addition: for something to become a currency, it must have value and market acceptance. The value is coming only from the speculative desire to hold money (either expecting it either to grow, or at least to outperform alternatives, like Argentinians holding dollars to protect against peso inflation). In case of Bitcoin, the amount of acceptance is reflected in the price because the more people want to hold it, the higher price they will have to bid. Therefore, price tells everyone that 1) bitcoin has value and 2) bitcoin has growing acceptance. Only after that it can be used as a currency.

TL;DR: Speculative investment is the only way for an asset to have value and thus become useful currency.

chii · 12 years ago

i wish bitcoin's equating with gold is going to last - but i believe that because bitcoin's uncontrollability (from the banker's point of view), it will be stamped out as soon as it threatens fiat currencies as the dominant means of transfer.

VexXtreme · 12 years ago

I was actually having a similar discussion with a friend today and we touched upon the topic of BTC getting outlawed by governments.

Hypothetically, what's to stop countries and ISPs blocking it on the protocol level, the way China blocks certain types of traffic? Wouldn't that kill it for mainstream use and make it work only on darknets like TOR?

vdaniuk · 12 years ago

Stamping out a global, decentralized currency with mass adoption won't be easy. Even if bitcoin will be legal in 10% of countries it would be enought to bridge bitcoin-fiat exchanges.

crassus · 12 years ago

The only thing I don't like about bitcoin is that the mining reward goes to 0. Sure, there will be fees, but fees reduce the usefulness of a currency. And if people don't mine, bitcoin dies. Perhaps something else will take its place?

gnerd · 12 years ago

I may be wrong, but due to the deflationary nature of BTC (limited supply, increasing demand), when that happens, those fees are worth more (in government backed fiat currencies) than they are today.

It's like being upset that the original miners could get a block reward of 50 BTC for mining on a CPU but today you have to use specialized hardware for less BTC. But as competition increased (and difficulty increased), the BTC is worth way more than it was and is less risky (although, still risky).

Profit is profit and some people/organizations will still have incentives to mine. Of course, there are problems that need to be sorted out before then though, like having more transactions included in each block to make it worth while for miners and cheap for users.

If I had money in bitcoin I'd find this movement terrifying. It is not correlated with broader economic movements or the inflation rate of USD, and has all the classic hallmarks of a bubble, including true believers telling everyone it is different this time, increasingly wild oscillations, and exponential growth.

I find bitcoin really interesting, love the idea of a cryptocurrency, and also find the idea of a deflationary currency interesting. I've no argument with that side of it. Obviously there are issues with things like exchanges which seem to be almost entirely run by amateurs who think that a VPS or leased server is secure enough for financial transactions, but those problems could go away in time, they are not inherent to the currency, though they're another reason to be cautious at present.

However there are a few issues with the use of the currency which can't easily be fixed. What I find more troubling is the commitment to anonymity and lack of accountability from the creators - it is designed to allow anonymous transactions, and the users seem to be resistant to regulation. Those two things mean people can engage in bitcoin theft, fraud, laundering, cornering the market, setting up bogus or insecure exchanges/banks, with impunity and anonymity. Without proper regulation, insurance, compensation, which means identification of users and verification of transactions and everything that goes with that, I can't see bitcoin spreading beyond enthusiasts.

I wouldn't use it for anything important because of the lack of regulation and controls, but do think it represents something of the future of currencies, after our latest experiment in hyper-inflationary fiat runs its course (see Fiat Money Inflation in France for a previous experiment). It'll be interesting to see if other cryptocurrencies are born which take a different direction and attempt to build in accountability and responsibility to secure transactions and allow them to be policed effectively by tying them to real world identity. Anyone know of any?

Mahn · 12 years ago

I have money in bitcoin, I believe in its future, and I acknowledge we are in a bubble. Nothing to be terrified of; the aftermath of the last April bubble left the prices much higher than when it started. And with every single bubble bitcoin kept going no matter how big the crash was.

Those two things mean people can engage in bitcoin theft, fraud, laundering, cornering the market, setting up bogus or insecure exchanges/banks, with impunity and anonymity. Without proper regulation, insurance, compensation, which means identification of users and verification of transactions and everything that goes with that, I can't see bitcoin spreading beyond enthusiasts.

You have to consider that this is a new way of thinking of money. No regulation and a decentralized nature does not necesarily mean all sort of bad things will happen at once; this thought is what comes naturally when you think of money in a traditional sense, but people can adapt and start seeing and thinking of money in a different way.

Let me give you an example: Email. It's unregulated and decentralized, and anyone, anytime, can write anything to any email address with almost zero effort. In paper this sounds like a terrible idea, because the moment my email address is public anyone can send all sorts of crap to it, not to mention that malicious people could completely trash my inbox by sending thousands of crap emails having no repercussions. But, as a society, we still adapted and embraced it.

grey-area · 12 years ago

I have money in bitcoin, I believe in its future, and I acknowledge we are in a bubble. Nothing to be terrified of;

As long as you don't have significant money in it, it's no big problem, but say you had your savings in it or were paid a salary in it - at that point the volatility would be a nightmare and the prospect of a bubble seriously troubling (bubbles always burst badly, and frequently go through successive waves of euphoria before they do). That the price has returned to a new high does not mean it will stay that high.

To supplant other currencies bitcoin would have to deal with the volatility and perhaps more importantly the lack of regulation and verification - with the current setup and community that'll be a huge issue, and perhaps impossible. It'll be really interesting to follow the trajectory of bitcoin and similar currencies as they negotiate these problems but I don't trust them just yet.

I do think email is broken for precisely the same reason - it thrived in spite of its anonymous insecure nature, not because of it, they simply didn't think about having to verify identity at the start, which has led to all sorts of problems with phishing and spamming. A lack of verified identity is at the heart of both these systems and causes issues for both of them, so I think email is a great example of a system which has problems of abuse (spoofing, spamming, phishing, fraud) because of anonymity being allowed.

TomGullen · 12 years ago

Look at Bitcoin closing price on a log scale: http://bitcoincharts.com/charts/chart.png?width=940&m=mtgoxU...

Not so scary anymore! From what I understand, people should be looking at this sort of data on a log scale.

WayneS · 12 years ago

I agree the log chart is the desired way to view the data because then a straight line is showing steady growth.

But look at the chart you posted. I see a sharp uptick on a nice linear trend since July. Now go look at the rest of the chart and ask yourself what happened every time there was a sharp uptick? Hmmm

I believe bitcoin will continue to grow, but I wouldn't tell people this is a good time to buy. Wait for the "correction" then buy.

leokun · 12 years ago

Why?

ajiang · 12 years ago

I think of the value of any asset in the form of expected value. For bonds and stocks, it's present value for forecasted future cash flows. For Bitcoins, there is an element of underlying value, but also an element of acceptance as a broader currency. As the probability of Bitcoins becoming a more accepted currency increases, so does it's value. While the underlying currency value may not change (or perhaps it does, hard to tell), its probability of acceptance is going up as Bitcoins enter the mainstream via publicity and mass adoption.

oleganza · 12 years ago

Instead of "accountability from the creators" you have accountability of every single investor and bitcoin business. Every single one of them is motivated enough to keep system working well and preserving their individual wealth. Compare that with coercive power of government which simply declares something a "legal tender" and then you are forced to accept their paper and their monetary policy as a fact.

Houshalter · 12 years ago

Well people were saying it was a bubble over a year ago when it was only $19. How do we know if it's not a bubble though? Is there any way to estimate what the "true value" of a bitcoin is? Like the number of bitcoins in circulation and the total size of the bitcoin economy?

gnerd · 12 years ago

When dealing with an entirely new concept, isn't everyone an amateur?

grey-area · 12 years ago

Securing money or valuable info is not an entirely new concept. There are basic precautions, like complete physical control of the server for a start, basic precautions which many of these exchanges neglect (see inputs.io, run on a VPS!). They could learn a lot from banks, who have been doing this for decades.

crassus · 12 years ago

According to the bubble theory of money, all money is a bubble. The bubbliness is what defines money - it is that which is irrationally overvalued. See[1] Bitcoin is money, Bitcoin is a bubble

[1] http://unqualified-reservations.blogspot.com/2013/04/bitcoin...

dwaltrip · 12 years ago

ck2 · 12 years ago

Somewhere buried on my hard drive I have a fraction of a bitcoin that people were giving out for free when bitcoin first came out to encourage adoption.

I really need to find it, it's actually worth money now...

ps. that pizza is now worth $3 Million

Tegran · 12 years ago

All you need to do is travel back to 2010 and visit this page:

http://web.archive.org/web/20100703032414/http://freebitcoin...

5 free bitcoins for solving a captcha? Yes please!

theklub · 12 years ago

Yeah, I did the same exact thing. I have a few "lost" bitcoins from the early days.

valevk · 12 years ago

What about Ebay announcing that they might accept Bitcoins?

nikcub · 12 years ago

I've been buying up in the last week (previously I was in at 5, 10, 12$ and sold at the last peak at $240) because I think PayPal will jump in soonish.

shubhamjain · 12 years ago

When Silkroad went down I expected bitcoin to take quite a slump but what has happened is contrary. I am not implying that anonymous transaction s for illegal use are the only thing bitcoins are good for but its my guess that it forms a major part of the group that actually use bitcoins for buying stuff. I am not sure why would anyone would get troubled in buying bitcoins for purchasing rather than punching a CC number. What is pushing its value, I am not sure but I am really spectical that it has to do with bitcoin's popularity.

jafaku · 12 years ago

Most of the people of the world can't really have a bank account, let alone be eligible for a credit (card). With Bitcoin you only need internet access.

Most of the people of the world can't really save either. Cash loses value over time, gold is hard to validate and keep safe, and is even banned in lots of places. Bitcoin to the rescue! Now everyone can start saving, and even be rewarded for that.

I could go on all day long, the benefits are endless. Just live in a shitty country for some time and you'll figure it out pretty fast.

rmc · 12 years ago

Yeah cause internet access and a modern computer are waaaaay more common than bank accounts or prepaid credit cards....

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pera · 12 years ago

SilkRoad was important, but most important was its community (dkn255hz262ypmii.onion) that it's still online. You see, the most important things for the anonymous market are the WoT and the PGP pubkeys, and that's not illegal (at least until now). Additionally Black Market Reloaded was already very popular when SR was seized.

I believe that what is pushing Bitcoins value is that many people call it "the credit card of the 21st century" and they are buying bitcoins as shares of the next Visa.

EDIT: as wildgift said, there is no insurance in Bitcoin yet, but I'm sure that if Bitcoin starts being really popular we are going to start seeing online wallets with insurance provided by big corporations. CCs (as a technology) don't include insurance either...

wildgift · 12 years ago

I thought this too, but then, due to my lame password management, my mtgox account got owned and they took out around $250. Oh well. Easy come easy go. But what I learned is that bitcoins really are like cash. You lose it, and you won't get it back.

That's what's different with Visa - there's an element of insurance with a credit card, and that is greater than what you get with a bank's checking account.

The insurance of being able to cancel a check is what you get with a regular checking account, and that's greater safety than what you get with bitcoin.

Of course, there's a price to this insurance, and it's the fees, which are much higher than what you pay for bitcoin transactions.

fit2rule · 12 years ago

Bitcoin is still very, very - VeRY - obscure to most of the world. Hardly anyone 'gets it' but every time something to do with Bitcoin appears in the news, a few thousand more people get interested enough in the subject to educate themselves about it, and invest in Bitcoins. This strengthens the currency - for as long as it continues to 'get known about' by the general population, the value will rise. It is still very obscure.

Wingman4l7 · 12 years ago

Bitcoin did take a hit, but it recovered fairly quickly.

fragsworth · 12 years ago

I think the simple explanation is that Silk Road's takedown increased Bitcoin's media coverage, which is leading to new buyers, which offsets whatever sell-off there might have been.

VMG · 12 years ago

Bitcoin is antifragile

lingben · 12 years ago

silkroad 2.0 launched just recently

mtgx · 12 years ago

Bitcoins should lose 3 zeros, like many countries do to their currencies.

So 1 new Bitcoin = 0.001 old Bitcoins = $0.3

I think I'd like that more than just starting naming them something else all of the sudden, and call them Satoshis or whatever, and then when the Bitcoin reaches $10,000 we'll probably have to use new names yet again.

Cutting the zeros could be a little confusing at first, but I think less confusing than starting talking about Satoshis, or mCoins or whatever, all of the sudden.

letney · 12 years ago

A "Satoshi" already has the common usage/definition of 0.00000001 BTC -- the current smallest denomination.

[1]https://en.bitcoin.it/wiki/FAQ#What_do_I_call_the_various_de...

user24 · 12 years ago

people have suggested mBTC or "millibits".

I think it's not something that can be mandated. A new terminology will naturally arise if the need is genuine.

netcan · 12 years ago

I don't think it'll be needed until/unless bitcoin stablises enough that people start quoting prices in bitcoin.

Right now, advertising a computer at 3 bitcoins is not practical. The value of those bitcoins change to fast.

dagurp · 12 years ago

What about 8 bitcoins = 1 bytecoin

dxm · 12 years ago

And 1 nibblecoin == 4 bitcoins.

svantana · 12 years ago

>Bitcoins should lose 3 zeros, like many countries do to their currencies.

I've never heard of that, although the opposite has been done plenty of times. But that's rarely a sign of a healthy economy, most of the time it's done out of desperation I would think.

dagw · 12 years ago

It was very 'popular' in the 80's and 90's for countries coming out of high inflation. Off the top of my head, Brazil, Peru, Russia, Poland, Yugoslavia, Turkey and Bulgaria all cut three or 4 zeros from their currency to make the numbers easier to handle and to try to mark a psychological end to previous inflation.

Zimbabwe did it about once every other year or so back in the mid 2000's.

zorked · 12 years ago

I live in a country that used to need that. The real reason for doing that is simply not having to write so many useless zeroes. The people who were calling for cutting zeroes were mostly banks having issues dealing with whatever hard-coded limit was on their systems. There was no expectation that cutting zeroes would actually improve anything at all.

Though the situation was exactly the opposite of Bitcoin. Money was losing value so the numbers were getting too big. Bitcoin is becoming too valuable so the numbers are getting too small.

kolinko · 12 years ago

you really don't want that. imagine a confusion you'd have all the time when using software. say a year from now, you launch your older wallet software, and send 1 (old btc) instead of 1 (new btc) to someone. You'd need to double check every single place you'd ever spend bitcoins on to make sure that it's new bitcoins and not old bitcoins.

Similarily with software - everyone in the source code it'd say "bitcoin" programmers would need to check whether it's new or old.

The amount of confusion, and engineering work would be staggering. It's far better to have a new term alltogether. People have been proposing "millis" or "millibits".

jpswade · 12 years ago

There's a theory that it could just keep going for a while yet.

We're talking $10,000 to 1BTC. So what then? Lose another set of zeros?

Dead Comment

phaed · 12 years ago

To the moon! ┗(°0°)┛

achalkley · 12 years ago

Amen.

$320 now.

jaibot · 12 years ago

In this thread - people confusing up arrows with "good".

(Rapid deflation is not a great thing for a currency in general)

Semaphor · 12 years ago

I'm wondering, is it as bad for a currency that still rather rarely get's used exclusively? I don't have a lot of economic knowledge (only what I learned in high school, though one of my majors was economics & politics; Germany, school until 13th grade) but it just seems to me that not all the normal rules would apply in the case of bitcoin.

jcfrei · 12 years ago

But it might be for a world reserve currency - and replace gold to a large extent.

jackgolding · 12 years ago

Looking at the chart it doesn't seem as volatile as mainstream media leads us to believe.

this_user · 12 years ago

Your average currency pair moves less than 1% on almost all days. Moves above 1% are rare and days with moves of several percent are extremely rare and occur a couple of times a year at most. BTC, on the other hand, may be worth anything from 250 to 60 USD a day. That is the reason why BTC as a currency is of little use. You cannot do serious business with something like this unless you immediately hedge all of your exposure. In a larger organisation that would be impossible and, on the other hand, only means that someone else is holding the bag for the next crash.

BTC is driven by little to no fundamental data. Its exchange rate is subject to pure mass psychology which is why it repeatedly goes through boom and bust cycles. This is not going to stop unless something like a real BTC economy of non-trivial size develops. But I think it very unlikely for this to happen for the aforementioned reason of volatility and the fact that BTC is by design deflationary. BTC's deflationary properties would choke off any such economic system that is based on this crypto currency.

All in all, I am of the opionion that BTC is an interesting experiment and a case study in speculative behaviour. The difference compared to former manias (see [1] for historic examples) is that in BTC the process plays itself out at an extremely accelarated pace. Maybe this is even what the creator(s) intended. Maybe they created a purely electronic ecosystem of speculative behaviour to be able to study and better understand the phenomenon of financial bubbles. This would certainly explain the 'Satoshi' entity's non-interference.

[1] http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions...

This is the kind of response I wanted to invoke - that you for your insight!

I guess the closest 'real' currency examples would be something like http://www.xe.com/currencycharts/?from=ZWD&to=USD&view=10Y

The fuck? USD changes less than 2% a year. Within the last _six months_ BTC has been valued at anywhere from $65 to $321 USD (http://bitcoinity.org/markets). It would be incredibly difficult to oversell how volatile BTC is - it's really, really, really, really fucking volatile.

necubi · 12 years ago

It increases 50% in a week, and you don't consider that volatile?

JanezStupar · 12 years ago

You know, its the oscillations == volatility philosophy.

Of course only should only look at daily graphs no older than two days.

http://bitcoincharts.com/charts/mtgoxUSD#rg1460zigDailyztgSz...

imd23 · 12 years ago

Some days are really volatile.