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ganalon (83.21)

New Global Currency You've Never Heard of

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July 24, 2011 – Comments (12) | RELATED TICKERS: EBAY , GLD

It's not gold, silver or even SDRs.  It's called Bitcoin (BTC, $BCOIN).  It has some properties of gold: rarity and independence from government printing presses.  In some ways Bitcoins are mined like gold, by computers.

You may want to put Bitcoin on your investing radar.  If it works as planned, and that's still a big if, Bitcoin has the potential to become the next PayPal (Ebay).  Unlike PayPal Bitcoin is open-sourced technology.  The value of Bitcoin is in the BTC themselves.  And there will never be more than 21 Million "shares" of BTC; there will never be more than 21 Million Bitcoins.

If you are looking into alternative investments, check out Bitcoin.  You heard it here first.

12 Comments – Post Your Own

#1) On July 24, 2011 at 10:30 PM, ETFsRule (99.90) wrote:

Bitcoin got hacked. It's done, forget about it.

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#2) On July 24, 2011 at 10:43 PM, ganalon (83.21) wrote:

Actually, it was the site Mt. Gox that got hacked, not the Bitcoin algorithm.  It's like Fort Knox getting robbed.  It may disrupt the gold market, but gold itself remains untarnished.

 Current BTC values are around $13.50/BTC. See: Current daily bid/ask prices.

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#3) On July 24, 2011 at 10:43 PM, ganalon (83.21) wrote:

Actually, it was the site Mt. Gox that got hacked, not the Bitcoin algorithm.  It's like Fort Knox getting robbed.  It may disrupt the gold market, but gold itself remains untarnished.

 Current BTC values are around $13.50/BTC. See: Current daily bid/ask prices.

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#4) On July 24, 2011 at 10:56 PM, 100ozRound (30.42) wrote:

I blogged about them a month ago here

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#5) On July 24, 2011 at 11:00 PM, ganalon (83.21) wrote:

Touche, 100ozRound.

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#6) On July 24, 2011 at 11:29 PM, 100ozRound (30.42) wrote:

Well I'm sure that some people will stop here and see this blog and it will be the first time they hear about it - so there is that....

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#7) On July 25, 2011 at 2:23 AM, ganalon (83.21) wrote:

Fair enough... just trying to spread the word about Bitcoin.  Props!

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#8) On July 25, 2011 at 1:42 PM, chk999 (99.98) wrote:

With only 21 million bitcoins, there won't be that many transactions per day. Plus, you have built in deflation.

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#9) On July 25, 2011 at 3:13 PM, ganalon (83.21) wrote:

In the last week there have been about 8,000 transactions per day involving about 700,000 BTC per day.  That's an average transaction size of about 90 BTC.

However BTC transactions can be as small as 0.00000001 BTC.  This makes bitcoin suitable for micro-transactions like buying an e-book, e-music, or even a latte.

Yes, there is built-in-deflation.  For owners of bitcoins that is a good thing.

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#10) On July 25, 2011 at 6:41 PM, rfaramir (30.46) wrote:

Bitcoins may be more sound than dollars, but they are less suitable as money than gold or silver.

It's the regression theorem that they fail. See Mises contribution to Menger's original account of money, explained by Robert P. Murphy here: http://mises.org/daily/1333

Something like BTC may become an ideal currency someday. But the units themselves would have to be useful in some way, and consumable. Like if they were not just cryptographically discovered (mined), but cryptographically useful (to encrypt/decrypt messages), and once used, never to be disclosed again (like a password).

But don't let me throw water on your parade. I believe in freedom to choose the currency you accept, including ones I think are 'bad' (like dollars--I already agree BTC > FRN). One person already accepting BTC (for tips) is PraxGirl. See her excellent videos at http://praxeology.info/ 

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#11) On July 25, 2011 at 8:06 PM, chk999 (99.98) wrote:

In the last week there have been about 8,000 transactions per day involving about 700,000 BTC per day.  That's an average transaction size of about 90 BTC.

There are roughly 52 billion credit/debit card transactions a year in the US. Bitcoins is small potatoes. And will stay that, given the limit on the number of bitcoins. 

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#12) On July 26, 2011 at 11:06 AM, rfaramir (30.46) wrote:

ck999,

Actually, their limited number is a very positive attribute of BTC, and the number one reason why they are better than fiat dollars. Not only the government, but NO ONE can 'print' more (create more with no effort).

The reason this is not also a problem (even if you believed it is good to have an uncounterfeitable currency you might think the quantity matered), is that they are highly divisible, just like gold loses none of its value when you subdivide it. If eggs or pearls or diamonds were money, you can see how we'd have a divisibility problem when trying to pay small amounts. Not so with BTC or precious metals.

So how does divisibility solve the 'problem' of when people perceive that "there is not enough money" to make the economy work? The price mechanism. In a free market, there is never a shortage or surplus of any good. The markets always clear. Any time there is less supply than expected, the price rises, and whenever there is more supply, the price falls. Either way the market clears. (Oh, and of course, a sound money is also a commodity like any other, except that it is the only one still bartered for: every other commodity has a "money price" but money is exchanged for a vast array of other items, e.g., the cows price of money, the apple's price of money, the wheat price of money, the AAPL stock price of money, and so on.) The same is true of money. For example, what if suddenly the money fairy doubled everyone's bank accounts? With double the amount of money in the system, every price would quickly double, being bid up by the extra money. The opposite if everyone's account were cut in half, prices would fall to half. But no one would be better or worse off.

So any quantity of money, if sufficiently divisible, is enough for the smooth running of the economy, meaning market prices will form naturally and markets will clear.

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