Trading BTC (bitcoin) for Achaea Credits

Jonners

You missed the wild bitcoin bubble a few months back. Prices were as high as $250 before crashing down to about $70 and then coming up to around $100 now.

Sarapis

Teg said:

Taking bitcoins is both a hilariously good and bad idea simultaneously.

It's hilariously bad because the price is so inherently unstable (because a finite currency encourages speculation and there's nobody to stabilize the currency) that accepting $100 of bitcoins today might very well mean it's worth like $25 two hours later.

Bitcoin prices do fluctuate substantially over time, but rarely are they quite that volatile. The trick, in any case, from a merchant's perspective is to use a service like BitPay that assumes intra-day currency risk for you and then deposits funds daily. 

Teg

Sylvance said:

Teg said:

Taking bitcoins is both a hilariously good and bad idea simultaneously.

It's hilariously bad because the price is so inherently unstable (because a finite currency encourages speculation and there's nobody to stabilize the currency) that accepting $100 of bitcoins today might very well mean it's worth like $25 two hours later.

It's hilarious good because if the price ever stabilizes chances are nobody who buys credits actually calculates the real interest rate on BTC correctly so it's really easy to gain a few extra % points of profit when accepting BTC.

I'm not an economist by any stretch of the imagination, but I just cannot see how your first point could possibly be true.

Why not? I'm pretty curious as to what your reasoning is.

I mean by 75% depreciation thing was a hyperbole, but on the general point.

Sylvance

Teg said:

Sylvance said:

Teg said:

It's hilariously bad because the price is so inherently unstable (because a finite currency encourages speculation and there's nobody to stabilize the currency) that accepting $100 of bitcoins today might very well mean it's worth like $25 two hours later.

No way.

Why not? 

@Teg - Ah, my bad! Was specifically disagreeing that it could be that volatile; I thought those were serious number >_<

To be sure, I don't get how the fact that it's finite and 'unpropped' could make such a huge difference versus real money; I'd have said that its being finite would make it more stable. But as I say, these are the musings of a social scientist that is not particularly good with money

Korben

Real money is part of a real economy, with a real government interested in that economy's well-being. High exchange volatility is bad for the economy, so the real economy's real central bank exchanges currency to keep rates within an acceptable range.

You have a point, in that a real government can overspend, over-emit money to cover up its expenses, and devalue its real currency that way. But that's a less relevant factor, all things considered, than the first one.

Sarapis

Not at all. Traditionally, "real money" has been based on physical items such as gold or silver, which have almost no actual value beyond some industrial uses, and that only relatively recently. For most of history, gold had no actual value beyond that people arbitrarily agreed it had value. You couldn't just create more of it, and it required no government or central bank to regulate it. The mere existence of an economy definitely does not require any sort of government intervention or central banking policies, at all. 

(Btw, moving this to Universal Membrane.)

Teg

Sarapis said:

Not at all. Traditionally, "real money" has been based on physical items such as gold or silver, which have almost no actual value beyond some industrial uses, and that only relatively recently. For most of history, gold had no actual value beyond that people arbitrarily agreed it had value. You couldn't just create more of it, and it required no government or central bank to regulate it. The mere existence of an economy definitely does not require any sort of government intervention or central banking policies, at all. 

(Btw, moving this to Universal Membrane.)

The difference between gold and bitcoins is essentially that everyone accepts gold in the 19th century and.......well nobody really knows how much % of the world's goods/services can be bought with gold coins. And well, you could mine more gold past the year 2020 or w/e, but that's another issue.

To elaborate a bit on why I think this means that Bitcoin will be inherently unstable: nobody knows what the "real" value of a Bitcoin is.

Now, as you pointed out: value is subjective and the value of gold or silver coins is just what everybody arbitrarily agrees it is, but that's the thing though. If everybody accepts the gold coin you have a pretty good way of knowing what you could buy with it on the market if only by dividing the total value of the economy in dollars (which you have data on) by the number of gold coins in existence.

But because very few people accept bitcoins you have no idea how much stuff you could actually buy with your bitcoin (sans exchanging it for dollars of course but that begs the question of why you would want to accept bitcoins as oppose to dollars), there is no way to even estimate how much a bitcoin is worth (btw how much would you be charging in terms of bitcoins for credits? The current market rate? A fixed rate? What you think it will be in 2 weeks? Are you going to adjust the prices if the price of each coin goes up by like 25% or fall by 25%?) in "real" terms. In other words it's entirely up in the air.

The key compounding factor is the fact that Bitcoins are by design deflationary: which means that lots and lots (or even most) people are going to be holding onto the Bitcoin primarily in expectation of future appreciation as oppose to wanting to spend it. But since nobody can even begin to make any sort of accurate prediction on what that is likely to be it's going to be entirely on the whims of crowd psychology and pretty much nothing else. And even if you do know how much you could buy with the aggregate amount of bitcoins chances are it will be fluctuating wildly on the whim of who is accepting it on any particular day and how well they are doing. And since human beings seem bent on recreating the same market bubbles over and over again chances are what happened with Bitcoins since its inception is going to simply continue because the primary reason why you would hold onto it is speculation.

I mean, if it really gets to the point where Bitcoin is mainstream enough so that Walmart and Amazon accepts it I guess it wouldn't be as much of a problem but then you have to deal with all the other implications of a deflationary currency.

Yes, you could (obviously) have a functioning monetary economy without a central bank or government intervention, it's just that it's going to be very unstable. The role of money is merely to facilitate transactions between the buyer and the seller: and the key component of that is for money to have stable enough value so that the day after committing the transaction both side still have what they agreed on receiving.  Bitcoin doesn't do that because if you price $300 credits for 1 bitcoin when it's worth like $250/coin you are going to lose out massively once it drops to $100/coin a week later, same thing reverse for the buyer if the it goes up to $350/coin later on.

In other words, you have ask yourself if you really want to deal with a part of your revenue consist of something the price of which seem to be less stable than a number of stock shares. And there really is a reason why in international trade pretty much everyone bolts to use the Dollar or the Euro as oppose to barter with gold bullions or w/e.

Teg

Sylvance said:

Teg said:

Sylvance said:

Teg said:

It's hilariously bad because the price is so inherently unstable (because a finite currency encourages speculation and there's nobody to stabilize the currency) that accepting $100 of bitcoins today might very well mean it's worth like $25 two hours later.

No way.

Why not? 

@Teg - Ah, my bad! Was specifically disagreeing that it could be that volatile; I thought those were serious number >_<

To be sure, I don't get how the fact that it's finite and 'unpropped' could make such a huge difference versus real money; I'd have said that its being finite would make it more stable. But as I say, these are the musings of a social scientist that is not particularly good with money

The reason why is because the economy is constantly expanding, so if you have a finite currency it will end up unpredictably appreciating in value, which encourages speculation and hoarding. The most stable currency is one which grows with the economy so that the value of a single unit would not shift by more than a few percentage points a year.

Korben

To add to Teg's posts, the reason gold worked so well for so long was that 1) The speed of transactions was -much- slower, so it took decades for imbalances to have an effect, and 2) The rate at which gold was mined was, by happy coincidence, approximately equal to the rate at which economies expanded. Neither applies today.

Tvistor

Sarapis said:

 In the world where governments are much more oppressive, btc has value simply as a somewhat-more-anonymous currency.

I use bitcoin to purchase all of my weapons grade plutonium because the capitalist dogs keep repressing my culture.

Teg

Btw if someone makes me Achaea's central banker and allow me to run monetary policy to stimulate credit sales/in game economy while simultaneously keep inflation low I will jizz my pants.

Zeon

wat?