Dolomiti, you pretty much covered everything I wanted to say, but saved me the time of having to type it.
Thor you are in way over your head on this one.

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Yes, I'm well aware of how it works. The inability to control the supply is part of the problem. For example, at the moment demand (by speculators, mostly) is vastly outstripping supply, which results in deflationary pressures and these rapid boom-and-bust cycles.

Right now, 2 BTC pays your entire rent one month, and half your rent the next month, and then 3/4 of your rent on the next day. This is encouraging for speculative investors who think they can beat the market, and terrible for use as an actual currency.


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Inflation has been below average during Bernanke's term. Again, it was only 2.1% in 2012, and will probably be around 1.5% for 2013. The average is around 3.5%.

We're in a liquidity trap, and the recession / slow recovery has caused all sorts of deflationary pressures. That's why the Fed's policies haven't caused massive inflation. In fact, the Fed policies are one of the things that prevented the recession from slipping into a depression.

It should also be noted that moderate inflation -- around 5% -- can actually be beneficial for the economy, as it encourages people to spend.


Quote:
Yep.

The number of Bitcoins in circulation has been increasing on a regular basis. In the past year, it's gone from roughly 10m to 12m in circulation -- a 20% increase. During that same time, the volume (i.e. value) of transactions has stayed the same, if not dropped. (A little more info, and another measure, is here: http://qz.com/72118/yes-people-are-hoarding-bitcoins/)

Hoarding is also a natural reaction to the kind of deflationary and speculative cycles we've seen over the past year. Anyone who bought a burger with 1 BTC last December is kicking themselves, since that same BTC is worth $1000 instead of $10. Unless you are jumping into the currency for an immediate transaction (e.g. you buy 0.1 BTC to purchase cocaine via the Internet 5 minutes later), or you believe it's in a bubble that's about to burst, it's highly irrational to spend BTC right now.

There's also anecdotal evidence of hoarding, such as the owner of Bitcoinshop.us seeing a drop in transactions in November.


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You can buy contraband with cash -- in a face-to-face transaction. (Good luck buying cocaine with gold nuggets though.)

An operation like Silk Road can't use cash or gold anywhere near as effectively as it can digital currency. The systems to transfer cash are regulated and supervised, whereas BTC is much harder to track.

When the FBI seized Silk Road's wallet, they grabbed around 170,00 BTC, and instantly made the FBI one of the largest holders of BTC -- and that was just from Silk Road's transaction fees. Yet another sign that very little BTC is being used for legitimate transactions.


What can I say, unless your customers are pushing you to take Bitcoin -- or you're a drug dealer -- I don't see any particular need for a JC business to start taking Bitcoin. I certainly wouldn't expect or recommend them to do so, just because it's the Latest Hot Tech Thing.

The nature of bitcoin software is that new btc issuance is specifically based on controlled protocol - not the whims of a private monopolistic bank. Only 21 million bitcoins will ever be in existence.

Days of the Volcker fed are way in the past (i.e. Bernanke's secret 16 trillion dollar 0% interest loans).

Do you have any actual data to back up your hoarding / illegal purchases claim ? Yes silk road was very illegal, but usd cash or gold can be used for the same things and are every single day.

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Since decoupling the dollar from the price of gold, the US largely ended the volatility of the value of the dollar -- which swung from deflation to inflation, and with much higher inflation than anything we've seen in decades.

It is precisely the policies of the Fed that has kept inflation under control since the early 1980s. The "rampant inflationary policies of the Fed" resulted in only 2.1% inflation for all of 2012; the value of BTC changed nearly double that just today.

Central control is not a problem for currencies, it's a strength. The extreme volatility of Bitcoin can never be fixed, because no one can control the supply. A currency whose value swings 50% in a single day cannot function as a currency, period.

The only people who think Bitcoin is a "good thing" are the people who a) think it's beneficial for a currency to swing wildly in value, b) have a libertarian agenda, and c) do not understand monetary policy.


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Very little is used for daily transactions. Most people are hoarding it, treating it like gold (i.e. buying and selling it as an investment), or using it to buy illegal goods and services via the Internet.


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Since BTC can lose 50% of its value in a single day, accepting BTC could easily result in losses for the retailer. Just waiting a few hours for a currency conversion could cost you far more than a credit card transaction fee.


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You could... and you should.

Hard currencies are inappropriate for modern economies and nations, and we're much better off for linking the value of a currency to a specific commodity -- or a digital item whose supply is, for all intents and purposes, now fixed.

I'd imagine you would take the market value and break it down for what usd you would want for the product or service.

If a hamburger is normally $10 and btc is $1,000 then you would charge 0.01btc. This could change based on the changing btc market and admittedly could be annoying at times for merchants, but using it as a medium of exchange via BitPay should make this somewhat easy.

If the value of bitcoin is fluctuating so wildly, how would you set the value of something people can buy with it? (Interesting concept to ponder.)

@dolomiti - speculators are resulting in price fluctuations, but your point about a central authority not controlling btc is actually an advantage given the rampant inflationary tendencies of the Fed for instance.

JC's position attracting highly educated professionals from NYC makes it a prime candidate for a tech hub - so why not ?

People all over are using btc for hamburgers, pizza, real estate, legal services, anything. Obviously its up to individual retailers to weigh the ease of use versus the potential for fluctuation, but if they are so worried, they can convert to usd within the week. You could make the same arguments against using gold to pay for something and thats been used for thousands of years.

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Nope. Currently trading at $1,000/coin.

China prohibiting sites such as Baidu from accepting payment in btc definitely let the wind out of its sails last month, but its rebounded nicely since then. There have been several bumps in the road so far, but this is not surprising given the disruptive nature to the world's money printing press central banks.

Keep in mind that btc has the potential to become a world currency - so far its seen uses from South America to Europe and Africa and not to mention Russia & India picking up alot of China's demand.

More and more businesses - from Overstock.com to Adafruit Industries to Zynga are now realizing the advantages of accepting btc.

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Why? Retailers should do whatever makes sense to them, not hop on the latest tech bandwagon.

Nor is JC anything like San Francisco or San Jose. We don't live in a major tech hub, there's no reason for JC to "lead the way."


Besides, few people are buying legitimate goods right now using these new digital "currencies."

I use scare quotes because they aren't really being used as a medium of exchange. Most are highly volatile. Others are basically Internet jokes (e.g. Dogecoin... look it up). There are literally over 50 active digital currencies, and more appearing all the time.

By design, there is no central authority that can stabilize the value of these currencies. Unlike credit cards, BTC trades offer no protection.

Most critically for retailers, people aren't actually spending them -- they're hoarding them.

For example, BTC has gone from around $500 to $1000 in just the last three weeks. Why would you anyone such a rapidly appreciating asset to buy a hamburger? And what happens if a customer buys something with what is the equivalent of $50 in BTC today, and wants a refund in two weeks?

I don't think local retailers are missing out on anything by biding their time.

I thought China killed it.

http://www.telegraph.co.uk/technology ... ans-banks-from-trade.html

Bitcoin tumbled 29 per
cent this morning as the
Chinese government
banned its banks from
trading in the virtual
currency.

The crypto-currency was
trading at around $1,225
this morning on the
Mt.Gox exchange but fell
more than $350 to a low
of $870 after the
announcement from
China.

A sharp rise in interest
from China was one of
the main driving forces
behind the 800 per cent
surge in bitcoin's value
over the last two months.
The world's largest
bitcoin exchange, in
terms of volume, is now
the Shanghai-based BTC
China. It has even been
adopted as a payment
option by China's search
engine giant Baidu.

Despite the severity of
the reaction, the
announcement from
China is far from a total
ban. The Chinese
government says bitcoin
is a "virtual product" and
forbidden banks from
dealing in it, but also
effectively given
individuals the green light
to invest their own
money.

?We have clearly
stipulated that at the
present moment all
financial institutions and
payment institutions
cannot develop any
business related to
bitcoin,? said the
government statement.

?Although there are
people calling it a
?currency?, it is not issued
by the monetary
authority, it does not
possess the attributes of
a currency such as legal
repayment and
enforcement abilities.

?Judged by its nature,
bitcoin is one particular
kind of a virtual product.
It does not have the legal
status of a currency, and
it cannot and moreover
should not be allowed to
circulate in the market as
a currency.?

The news came in a
statement signed by the
People's Bank of China,
the Ministry of Industry
and Information
Technology, the China
Banking Regulatory
Commission and the
China Securities
Regulatory Commission
and China Insurance
Regulatory Commission.
It has been taken by
some analysts as a sign
that China will attempt to
bring in regulations on
private ownership of
bitcoin, as it included
warnings of future action
to prevent money
laundering and use by
organised crime.

does anyone know of any ?

JC should aim to lead the way in advancing progressive tech products such as bitcoin, litecoin, etc among local businesses