Bitcoins

csm888

Tweaker wrote: »

Tell that to the Bank of England, so how can BitCoins become a global currency if it has no possibility of expansion, each coin would rise in value significantly which would render it impractical for use in day to day transactions unless you started to create smaller denomination BitCoins, how is that different from what the Bank of England does when it prints additional currency?

I see this misunderstanding all the time:
I think this analogy works....(sorry if it doesn't I just threw it together)

Current system of fiat:
The bank issues more currency thereby devaluing the existing currency. If the country has £1000 and each £1 buys a loaf of bread, then if the government issues another £1000, we have £2000 in circulation but now we will need £2 to buy a loaf of bread. (after inflation has brought the balance back)

Bitcoin:
There are 1000 bitcoins in circulation, each person can buy a loaf of bread for a bitcoin, we split a Bitcoin in 100 'pennies', a loaf of bread still costs 100 pennies or 1 bitcoin.

Marazan

Tweaker wrote: »

Tell that to the Bank of England, so how can BitCoins become a global currency if it has no possibility of expansion, each coin would rise in value significantly which would render it impractical for use in day to day transactions unless you started to create smaller denomination BitCoins, how is that different from what the Bank of England does when it prints additional currency?

Bitcoins can be sub-divided to an incredibly high (small?) level.

BoracicLint

Tweaker wrote: »

Thats the harsh reality of international currency, a government will ensure that foreign governments are paid before it's citizens, other than the basic promise it makes to insure personal savings up to £84,000

The majority of the money held in the banks would be lost to individuals whilst the country pays off it foreign debts as best it can, after all you would have to keep foreign governments sweet, it is your only chance of getting aid in that situation, nobody is going to send ships loaded with food and supplies if you owe them money and are unwilling to pay any of it back and future recovery would be hampered if nobody will lend you money, humanitarian aid from governments is just a veiled economic transaction.

Well that alone sounds like reason enough to put a little bit of thought into bitcoin. If sterling did collapse, you'd have an internationally recognised digital currency to rely on. Or that is what I hope the future holds

EDIT - not that I'm hoping for a sterling collapse of course, just that bitcoin survives alongside

BoracicLint

Tweaker wrote: »

Thats the harsh reality of international currency, a government will ensure that foreign governments are paid before it's citizens, other than the basic promise it makes to insure personal savings up to £84,000

The majority of the money held in the banks would be lost to individuals whilst the country pays off it foreign debts as best it can, after all you would have to keep foreign governments sweet, it is your only chance of getting aid in that situation, nobody is going to send ships loaded with food and supplies if you owe them money and are unwilling to pay any of it back and future recovery would be hampered if nobody will lend you money, humanitarian aid from governments is just a veiled economic transaction.

I forgot to mention that if we were to return to a gold standard today, the value of gold would need to trade at upwards of £5000 an oz. Gold is currently about £850 an ounce. That is how disjointed/hyperinflated our currency is.

There are never enough reserves of gold or anything else in the bank of england to satisfy all the pounds in circulation.

dryhat

The chinese government has been endorsing Bitcoin for several months and there have many TV documentaries encouraging citizens to get involved.

BTC china is now the biggest exchange in the world.

From China's point of view, they would rather have a world currency that nobody controls than one controlled by their biggest trading competitor.
The petrodollar puts them at a stategic disadvantage and Bitcoin is a way to counter that power.

This also ties in with what was said earlier about African nations using Bitcoin; since China have made and continue to make massive startegic investments in Africa.

They recognise the potential of Bitcoin on many levels and are probably the main drivers of the current price surge.

Marazan

Tweaker wrote: »

Sorry I don't get it, I must be missing something obvious.

A currency that has an upper limit on how much of it will ever exist means that few people will be willing to accept it as a payment, it wouldn't be viable as a day to day currency, as the value of individual coins would increase in value they would be worth too much money to use for small transactions, it might have a limited application for large financial transactions in the same way the Bank of England printed million pound notes to pay off the Martial Plan.

The Bitcoin is not the smallest unit of account. The smallest unit of account is a fundamentally unlimited subdivision of a bitcoin.

csm888

Tweaker wrote: »

Sorry I don't get it, I must be missing something obvious.

A currency that has an upper limit on how much of it will ever exist means that few people will be willing to accept it as a payment, it wouldn't be viable as a day to day currency, as the value of individual coins would increase in value they would be worth too much money to use for small transactions, it might have a limited application for large financial transactions in the same way the Bank of England printed million pound notes to pay off the Martial Plan.

The position of a decimal point is arbitrary, a loaf of bread could be worth,
.001 Bitcoin
140000 Satoshis
1x10^26 Atoms of Gold
1x10^28 Atoms of silver
99pence
£0.99


Whatever the number is, its irrelevant, its all the same value. So we layer on something to make it convenient, similar to re-valuation where 000's are dropped from a hyper inflated currency, so regular people use denominations they are comfortable with.

Cornucopia

What happens when someone holds on to BCs? Why should they benefit from an increase in value relative to real World assets? Where does the wealth come from?

csm888

Today + tomorrow are big days for Digital Currencies, there are 2 US senate committees discussing their implications, problems and benefits. Ben Bernanke has also just released a letter expressing interest and a positive view. China is driving a new huge surge in Bitcoin adoption (speculation?)
Things are changing fast and its will be interesting to see where it all goes. (Of course the UK is still in the stone age, deciding that Bitcoins are vouchers which attract VAT @ 20%... doh!)

BoracicLint

Tweaker wrote: »

Currency in circulation within the UK is not backed by gold, I thought we had agreed on that, but the money traded between countries that forms our national debt is backed by gold, we cannot produce gold out of thin air but as gold increases in value we can use it to stabilise and pay off some of our debt.

I wasn't saying currency is backed by gold was I? I was simply stating that if we were to return to a gold standard, the current price of gold is way below where it would need to be. I was using it as an example to demonstrate how bad hyperinflating a currency can be.

How does gold increase in value exactly? It doesn't, only its price relative to a fiat currency. An ounce of gold will always be just an ounce of gold. It moves up and down in price, like any commodity.