Since the beginning of this year, the price of a US dollar has declined by more than 98%, from BTC 0.074 to just over BTC 0.001!
Consider the last month:
2013-11-01 212.87 USD = 1 BTC
2013-11-22 733.71 USD = 1 BTC
If you think Bitcoin is a great investment and can sell your BTC to get other assets in at a high point, this is a good thing, though slightly worrying because of the boom and bust pattern and extreme volatility.
If you think Bitcoin is a stable currency, this is a terrible thing. I'm not even sure what the implications would be if buying raw materials one day cost more than selling a finished product the next due to rapid deflation, but it surely wouldn't be much better than rapid inflation which we have seen in other currencies.
Like a loaf of bread which is 1.6 trillion Zimbabwe dollars, one which cost 0.0000000001 Bitcoins would not be desirable either if that figure keeps changing rapidly and the next day becomes 0.00000000001 etc. Any extreme fluctuations in price are really undesirable for a currency, and I do think this mechanism of ratcheting up the difficulty of mining and an ever-increasing value is really damaging for Bitcoin's credibility as a currency, though presumably it was designed to boost adoption by encouraging people to see it as investment first, currency second.
I like the idea of a currency which doesn't allow politicians to introduce inflation, but perhaps we should have one which has a finite set of tokens on setup, and doesn't attempt to also attract people as some sort of investment with mining etc. - is that side of Bitcoin even useful except to turn it into a sort of pyramid scheme where early adopters are rewarded disproportionately?
[EDIT I am aware of the proposed 21m Bitcoin limit, which they're about half way to reaching, that's why I said on setup, which Bitcoin doesn't have]
> I like the idea of a currency which doesn't allow politicians to introduce inflation, but perhaps we should have one which has a finite set of tokens on setup, and doesn't attempt to also attract people as some sort of investment with mining etc.
Bitcoin _does_ have a fixed set of tokens on setup: 21 million of them... but you need a way of giving out those tokens without handing a windfall to a centralized decider that gives them out.
Mining isn't an "investment" thing: It's the @#$@ fundamental consensus process that makes the whole thing possible: Node autonomously validate the rules, but transaction order is not decidable autonomously and so mining produces a hard to rig / cheap to verify 'vote' on the order of transactions.
Bitcoin smarty aligned these two processes by making participation in the consensus also accomplish giving out the original tokens.
>I like the idea of a currency which doesn't allow politicians to introduce inflation, but perhaps we should have one which has a finite set of tokens on setup, and doesn't attempt to also attract people as some sort of investment with mining etc.
I'm sure someone will correct me, but as I understand it this is how Ripple[0] works. From my recollection (I haven't checked in on how Ripple has been progressing over the past 6-8 months or so), Ripple's currency (XRP) are established with a finite supply and all XRP is in reserve, not requiring any "mining" or similar. Also, it looks like Ripple is kind of an exchange as well? It seems to be able to cross-process payments between USD, EUR, BTC, LTC, XRP, and more (I believe most international currencies are supported currently)[1]. It's interesting but, like I said earlier, I'm not sure if I fully understand it.
Thanks for the link, that looks interesting (as a currency). From their FAQ they look like a Bitcoin inspired currency which tries to define all the parts necessary for independent digital payments:
Payment Network (with protocol)
Exchange
Currency
All in one place. The advantage to that if you trust them of course is that you can expect the exchange/payment processor isn't a buggy webapp sitting on an insecure VPS with multiple ways to be hacked (I hope!). If you don't trust them it's even more scary than bitcoin though.
I wish alternatives to Bitcoin got half the attention Bitcoin has been getting on HN over the last few months - a currency is not a success because it constantly shoots up in value, quite the reverse.
Consider the last month:
2013-11-01 212.87 USD = 1 BTC
2013-11-22 733.71 USD = 1 BTC
If you think Bitcoin is a great investment and can sell your BTC to get other assets in at a high point, this is a good thing, though slightly worrying because of the boom and bust pattern and extreme volatility.
If you think Bitcoin is a stable currency, this is a terrible thing. I'm not even sure what the implications would be if buying raw materials one day cost more than selling a finished product the next due to rapid deflation, but it surely wouldn't be much better than rapid inflation which we have seen in other currencies.
Like a loaf of bread which is 1.6 trillion Zimbabwe dollars, one which cost 0.0000000001 Bitcoins would not be desirable either if that figure keeps changing rapidly and the next day becomes 0.00000000001 etc. Any extreme fluctuations in price are really undesirable for a currency, and I do think this mechanism of ratcheting up the difficulty of mining and an ever-increasing value is really damaging for Bitcoin's credibility as a currency, though presumably it was designed to boost adoption by encouraging people to see it as investment first, currency second.
I like the idea of a currency which doesn't allow politicians to introduce inflation, but perhaps we should have one which has a finite set of tokens on setup, and doesn't attempt to also attract people as some sort of investment with mining etc. - is that side of Bitcoin even useful except to turn it into a sort of pyramid scheme where early adopters are rewarded disproportionately?
[EDIT I am aware of the proposed 21m Bitcoin limit, which they're about half way to reaching, that's why I said on setup, which Bitcoin doesn't have]