The point is not that sheep and cigarettes will conquer the world, but that bitcoin won’t even be used locally.
Hmm, what if we didn’t call bitcoins money, lets call bitcoin a service that lets you securely pay on line at a competitive price? Thats how they would be perceived by most users. Why wouldn’t people use that service?
Because what does the recipient of the bitcoin get that he can use in his home as he drinks his tea in the evening? Nothing.
Live free:
We can exit the conversation because I fail to get what you are talking about. Whether this because I’m missing something or because your message is flawed, I just don’t get it. In either case, I see no point in continuing. Good luck to you.
My point is bitcoins are practical, and that in the end is the reason people use one tool rather than another (less practical).
The recipient can use bitcoins. at the very least he can trade them back into his local currency at one of the many exchanges. “So then why bother with bitcoins and not use cash directly?” because you can’t use cash on the Internet. Compared to other on line transaction services there’s an advantage to bitcoins, you cut out the middle men thus making bigger profit.
I think you have a point that some people will have some psychological aversion to the notion of bitcoins having value, and given a choice they would rather use sheep than bitcoins, but in the end most people don’t think about why money has value, they just use it because they can.
To all of the obviously invested Bitcoiners here that signed up just to post in this thread:
Get back to us when Bitcoin has achieved its evolution beyond dollar proxy for a niche. No need to worry about some video on youtube stopping its greatness. In the meantime I’ll be putting my money on telomerase activation…
I haven’t invested in bitcoins, nor am I saying it’s a good idea (nor gold for that matter.)
I don’t understand why something once used as a transaction medium, that use won’t be enough in itself to sustain the demand for it and keep the value stable enough for it to continue to be used as such.
I think bitcoins would be a high-risk investment, and I can think of many other reason why it might not work. But you don’t have to invest in them (more than a few minutes at least) in order to use them for transactions. And besides, sometimes risky investments pay of.
Risk is irrelevent to the debate.
I would disagree with you on the Entropia Dollar. The entire concept of the game was built upon the idea of virtual in game currency interfacing with paper currencies. Entropia was an early pioneer of the in game money concept which has spun off in several different manifestations in several MMORPG’s. If real world socialism and crony capitalism is not enough for you and you want to immerse yourself in a beautiful digital utopia of virtual crony capitaliism and socialism… Entropia is the ticket for all of your gambling needs.
I apologize for the late reply and missing your response in my earlier reviews of this thread …
Bitcoin is getting mainstream coverage (CNN):
@Smilingdave
Hmm, what if we didn’t call bitcoins money, lets call bitcoin a service that lets you securely pay on line at a competitive price? Thats how they would be perceived by most users. Why wouldn’t people use that service?
Because what does the recipient of the bitcoin get that he can use in his home as he drinks his tea in the evening? Nothing.
What does the recipient of the gold coin get that he can use in his home as he drinks his tea in the evening? Nothing.
Bitcoins not doing so well:
Running out of the required new influx of buyers to keep the price up?
Yes the price is low. But BTC is still doing better than the arguments that aim to show why it can’t be money 
A bunch of rebuttals remain unanswered on this thread for instance.
Possibly relevant context wrt to the currently low value: Mybitcoin.com (a popular online wallet management service) recently shut up shop after a bug in their code had allowed attackers to steal an (as yet) unknown amount of BTC from their users accounts. A polish exchange also reported having ‘lost’ their wallet.
Suede makes an interesting argument, basically that the tiny decorative value gold has might be more than zero, but what difference does it make when gold is selling at $1,600 per ounce? Or, consider if gold became money again and was used for all transactions. The price of gold would be WAYYY higher than it is now. But if people ever stopped using it suddenly, it’s price would fall back to decorative value, which would be such a small fraction of its value as money that it would be negligible. That is, if I had a kilo of gold I might be very wealthy, but if it lost 99% of its value because it was no longer being used for money, I’d be broke. Is the difference between losing 99% of its value and losing 100% of its value really so compelling that gold is a clear winner and BTC a clear loser?
AJ,
First of all, gold is not being used for money right now anywhere. Every country uses fiat currency. So I’m not sure what you are saying.
Second, are you familiar with Mises’ regression theorem? If yes, have you thought out the implications?
Finally, Smiling Dave to the rescue. Here is a quote from my humble blog, just to show you I have understood the argument Suede is presenting:
… just because gold might be worth a few pennies as a trinket doesn’t really give it an advantage over bitcoins.
The razor sharp rebuttal is right here: http://smilingdavesblog.blogspot.com/2011/06/bitcoin-takes-beating.html
You might enjoy the other two articles there on bitcoin. And don’t forget the comments in all 3 posts, plenty of nuggets that increase understanding.
P.S. A trillion times zero is zero. But a trillion times a really really really small positive number is positive. Doesn’t prove or disprove anything about bitcoins. Just saying.
@Smiling dave. In your linked post you say:
if you go back far enough, you get to the day when gold was useful as jewelry only, worth say a dime. Until someone relaized people are happy to take gold coins valued at a dime apiece. What have they got to lose? That’s what the gold is worth for jewelry, anyway. And from there, as gold coins became more popular as money, they started becoming worth more than a dime.
And this is where bitcoins achieve their fail. There is no reason for bitcoins to suddenly become worth a dime, or any other price. They are totally useless as jewelry, or anything else. So that there is no reason people should accept them as being worth a dime, much less $17.
Perhaps you’ll consider amending your post here because this has been answered in this thread several times over: BitCoin, like gold, does have non-trade related use. Most obviously it has been used as a symbol of ‘geek cred’ by early adopters.
Secondly, it’s not clear why a potential money even requires a non-trade related use in order to get its start. If a significant minority of traders start to buy quantities of a new potential money, because of its qualities that make it especially good as a medium of exchange, and believe it will be adopted by many in the future because of those reasons, why can’t this kind of demand work just as well as demand for jewellery in the process of a new potential money gaining value? This process solves the problem Mises describes without requiring that the new potetial money even has a non-trade related use.
Most obviously it has been used as a symbol of ‘geek cred’ by early adopters.
That’s too small a population. Even all the users of bitcoin right now is too small a population.
If you and your sister decide to use some rag as money, that’s obviously not enough, right?
Secondly…
There is no significant minority yet. See above.
Also, you are really just asking why Misessaid what he said. Which means you didn’t understand him.
All I can suggest is…
1, Sell all your bitcoins, making yourself a disinterested party. This sometimes remoives obstacles to undersatnding.
Smiling Dave,
first of all, Mises’ Regression Theorem does not say anything about significant minorities, or too small a population or other analogies that you guys literally made up. Other Austrians do not claim that either. I read books about money by Menger, Mises, Hayek, Rothbard, Huelsmann, and Bagus. Also books by non-austrians. The core of your argument, “not enough people interested”, is simply not there.
Second of all, the (allegedly) Misesian critiques of Bitcoin presented by you and some other people on the forum have consistently failed to define what the terms (significant minorities etc) actually mean in a coherent fashion.
Last but not least, you present an empirical argument as if it was a praxeological one.
You can be skeptical about Bitcoin all you want, even rightfully so, but you present fallacious arguments to support your position. If Baba Vanga predicted the failure of Bitcoin and it really happened, that would not make her a scientist.
@Smiling Dave, Why is the population too small when you can get in contact with it and trade with it within a few seconds? I agree that in the past, if you couldn’t use goldcoins in the next village that would be a problem for gold to be widely adopted as money, but the internet solves this problem for bitcoin.
As far as I can tell from your quotes regarding the regression theorem it only tries to explain why money (gold) has the value is has, and the reason is that the use as money creates demand for it. Mises then correctly point out that the regression can’t go on for ever, at one point in time it wasn’t used as money and in order for someone to use it as money in the very beginning there must have been an initial demand giving it some value. But bitcoins now have value (obviously) and that should enable it to be used as money (it already is to some small extent) which in turn should create more demand for it.
@ Smiling Dave.
You said (emphasis mine)
And this is where bitcoins achieve their fail. There is no reason for bitcoins to suddenly become worth a dime, or any other price. They are totally useless as jewelry, or anything else.
I remined you that this was not true:
it has been used as a symbol of ‘geek cred’ by early adopters.
You ignored the correction, didn’t retract your false claim (I think you ought to), and instead moved the goalposts:
That’s too small a population.
Too small for what? The issue here is not whether or not it is currently money (depending on where you arbitrarily draw the line that delimits ‘common use’, it may or may not be), It’s whether there is some principle that bars the population of bitcoin-accepters from growing until it crosses whatever the threshold is for you to agree that it’s commonly accepted. You’ve yet to offer one.
first of all, Mises’ Regression Theorem does not say anything about significant minorities, or too small a population
I read books about money by Menger, Mises, Hayek, Rothbard, Huelsmann, and Bagus. Also books by non-austrians.
Have you ever come across the phrase “money”? Mises uses it in his regression theorem over and over. Since it is an advanced book, he expects you to remember, when reading Page 405. what he wrote ten pages earlier on Page 395.
To help those who don’t have a copy of the book in front of them, we’ll quote it right here:
A medium of exchange which is commonly used as such is called money.
The notion of money is vague, as its definition refers to the vague term
“commonly used.” There are borderline cases in which it cannot be decided
whether a medium of exchange is or is not “commonly” used and should be
called money.
Our friend Wikipedia also insists that a medium of exchange, to deserve the name, be “widely used”.
Since you say you read Rothbard, you will surely have met these words from Man, Economy, and State:
A commodity that comes into general use as a medium of ex-
change is defined as being a money. It is evident that, whereas
the concept of a “medium of exchange” is a precise one, and
indirect exchange can be distinctly separated from direct ex-
change, the concept of “money” is a less precise one. The point
at which a medium of exchange comes into “common” or “gen-
eral” use is not strictly definable, and whether or not a medium
is a money can be decided only by historical inquiry and the
judgment of the historian.
Now, call me suspicious, but I fear that the next ridiculous defense of bitcoin will be that 25 geeks in their mothers’ basement who use bitcoin for geek cred, and certainly the number of people using bitcoin right now, constitutes “wide” “general” and “common” use. After all, the term is admittedly vague, and up to the judgement of the historian, meaning anybody at all who wants to. I will not bother to argue about that. You have every right to your opinion, however foolish and misinformed, about the meaning of those words. To me, “wide”, “general”, and “common” means you can buy most everything for sale in Walmarts or in a Sears catalogue with a bitcoin, which is hardly the case.
