Are bitcoins something like internet tulips?

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CrossOverGuy
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Are bitcoins something like internet tulips?

Post by CrossOverGuy » Fri Apr 19, 2013 12:09 pm

Could someone please explain what this so-called currency is? What can people supposedly buy with it? It sounds to me like some over-hyped sleight of hand, but it is being discussed more often on some sites. I could be wrong, but my gut feeling says avoid and run away.

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Re: Are bitcoins something like internet tulips?

Post by momar » Fri Apr 19, 2013 12:12 pm

Tulips are a real thing that have real value with real resource constraints.
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Re: Are bitcoins something like internet tulips?

Post by Default User BR » Fri Apr 19, 2013 12:14 pm

CrossOverGuy wrote:Could someone please explain what this so-called currency is? What can people supposedly buy with it? It sounds to me like some over-hyped sleight of hand, but it is being discussed more often on some sites. I could be wrong, but my gut feeling says avoid and run away.
There are at least two previous threads on the topic you should be able to find with a forum search. It doesn't seem likely that a new thread would be useful.


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Re: Are bitcoins something like internet tulips?

Post by KyleAAA » Fri Apr 19, 2013 12:15 pm

It's just an alternative currency, of which there are many in existence. You can buy a lot of things online with bitcoins but I'm not aware of any brick & mortar retailers that accept them.

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Re: Are bitcoins something like internet tulips?

Post by FireProof » Fri Apr 19, 2013 12:16 pm

Why would your gut feeling anything about it? How would being involved in it even be in the realm of consideration? There are millions of possible things in the world to buy, and Bogleheads (and investors) generally buy 2 - stocks and bonds. I don't have a gut feeling bout the Mongolian Togrog, about molybdenum futures, or about Negro League baseball cards, and I certainly never pause to consider something far more opaque.

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Re: Are bitcoins something like internet tulips?

Post by CrossOverGuy » Fri Apr 19, 2013 12:30 pm

There are at least two previous threads on the topic you should be able to find with a forum search. It doesn't seem likely that a new thread would be useful.
I read one of them, and it got a bit more complex than I want to read. I want a simplified version; someone once said something to the effect that if a 7th grader can't understand it, don't invest in it.
Why would your gut feeling anything about it? How would being involved in it even be in the realm of consideration?

I think one is always judging if things are worthwhile to some extent, even whether a post is worth reading or deciding to give up on it in the middle and move on to something else. I ignored reading about bitcoins for a while, but then started to see more articles about them in more substantial websites. I don't like what I'm reading about them, as they seem purposely confusing, yet supposedly people are investing in them.

I guess frequent flyer miles could be considered an alternative-type currency, but they are usually good within the confines and rules and companies with which the airline has contracted. You can exchange your miles for plane tickets, sometimes for merchandise, but I don't see people trying to make an investment killing on them other than trying to do mileage runs. Where do people send their money (or credit card numbers) to purchase these bitcoins? It just sounds like something which could evaporate by having that webpage put out of service after someone purchased these things. I don't think there's anything wrong with having a gut feeling of impending danger or apprehension.

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Re: Are bitcoins something like internet tulips?

Post by Default User BR » Fri Apr 19, 2013 12:59 pm

CrossOverGuy wrote:
There are at least two previous threads on the topic you should be able to find with a forum search. It doesn't seem likely that a new thread would be useful.
I read one of them, and it got a bit more complex than I want to read.
Best of luck with your endeavors.


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Re: Are bitcoins something like internet tulips?

Post by money » Fri Apr 19, 2013 1:05 pm

^ nice. :P
1Fi1LTvx8KmtotRqcha9mj5h43319mJvjY

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Re: Are bitcoins something like internet tulips?

Post by FafnerMorell » Fri Apr 19, 2013 1:19 pm

The NPR Planet Money podcast has some info on bitcoins, as does the Economist magazine. Wikipedia also covers it.

As you point out, if you don't understand it, don't invest in it. Also, just because you understand something, doesn't mean you should necessarily invest in it.

And it's probably very arguable whether or not Bitcoins is an investment per see, or more of a technology for alternatives to conventional currency. If you look at "money" over the course of history, there's been a lot of different approaches which seem bizarre to other cultures.

Personally, I'd take a pragmatic approach - does Bitcoins do anything useful for you that you can't do better another way? Even if you view it as speculation, couldn't you speculate on another currency (say, the Yen or Euro) or gold or such more easily?

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Re: Are bitcoins something like internet tulips?

Post by Calm Man » Fri Apr 19, 2013 2:47 pm

As much as I have anti-establishments feelings and great distrust of the establishment, I think this is a sure risk that has no benefit to take. Why not just read about it on occasion but goodness, how can you buy a piece of internet bit, with no possibility of cashing it out except an anonymous stranger hopefully paying you a fair price?

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Re: Are bitcoins something like internet tulips?

Post by greg24 » Fri Apr 19, 2013 2:51 pm

Most individuals shouldn't be "investing" in a currency anyways.

If you had to choose between holding bitcoins for 20 years, or US dollars, which one would you choose? The answer is an easy one for me.

And I understand the technical details better than most people.

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Re: Are bitcoins something like internet tulips?

Post by nisiprius » Fri Apr 19, 2013 3:10 pm

As to what you can buy with them, Planet Money had one of their amusing pieces where, among other things, they found a New York cafe that takes bitcoins and bought lunch with bitcoins there.

I guess the question I have is, why does it matter much? I have a remote, distanced curiosity about bitcoins as an interesting phenomenon, but I don't feel any need to "avoid and run away" because I don't feel any urge to run toward them.

Maybe it's the great speculative opportunity of the century, but great speculative opportunities are not my thing.

As to whether it's a currency, right now, it isn't a very good medium of exchange and it isn't a very reliable store of value; I think calling them a "currency" is just marketing. They are less of a "currency" than Disney dollars or frequent flyer miles. Maybe someday they will be a currency. But I don't need to make any judgement about it today. When I took a trip to the Netherlands, I didn't research the Euro, I merely exchanged currency as needed for actual purchases. If bitcoins become, say, as popular as PayPal is today, and if I encounter a situation where I need to buy something and bitcoins are the most convenient or economical way to do it, I'll buy whatever bitcoins I need for the purchase. Until then, they're just something to read about.

Oh, sure, I think it's probably a scam. Most scams have a very convincing and plausible story behind them. With Ponzi, it was international postal coupons. It made perfect sense, because international postal coupons really did have inconsistent values and could be arbitraged. It was just that it wasn't feasible to do it on a scale to overcome costs, and Ponzi wasn't actually doing it.

With bitcoins, there is also a plausible and an appealing story. There always is. The question is whether the story is "The Emperor's New Clothes."
Last edited by nisiprius on Fri Apr 19, 2013 8:51 pm, edited 2 times in total.
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Re: Are bitcoins something like internet tulips?

Post by bungalow10 » Fri Apr 19, 2013 3:38 pm

Everytime I hear about bitcoins I think about flooz. I was a senior in college when someone was telling me that Flooz was the next big thing, everyone would be buying and selling in Flooz!

10 big dot com flops

Granted, bitcoin is very different, but sometimes not so much.
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Re: Are bitcoins something like internet tulips?

Post by Hastibe » Fri Apr 19, 2013 4:01 pm

CrossOverGuy wrote:Could someone please explain what this so-called currency is? What can people supposedly buy with it? It sounds to me like some over-hyped sleight of hand, but it is being discussed more often on some sites. I could be wrong, but my gut feeling says avoid and run away.
Check out this website: http://bitcoin.org/ - it is very informative.

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Re: Are bitcoins something like internet tulips?

Post by ThatGuy » Fri Apr 19, 2013 4:34 pm

KyleAAA wrote:It's just an alternative currency, of which there are many in existence. You can buy a lot of things online with bitcoins but I'm not aware of any brick & mortar retailers that accept them.
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Re: Are bitcoins something like internet tulips?

Post by LadyGeek » Fri Apr 19, 2013 7:40 pm

CrossOverGuy wrote:
There are at least two previous threads on the topic you should be able to find with a forum search. It doesn't seem likely that a new thread would be useful.
I read one of them, and it got a bit more complex than I want to read. I want a simplified version; someone once said something to the effect that if a 7th grader can't understand it, don't invest in it.
I posted in the complicated thread ( Subject: Bitcoins Purpose in a Portfolio), perhaps this will help:

Planet Money (NPR) has an easy-to-understand podcast: Episode 450: Bitcoin Goes To The Moon

In the last few minutes, they ask "Should you invest in bitcoins?" The answer: Only if you can afford to take the loss. (In this forum, we suggest limiting your "speculating" or "play money" to 5% of your portfolio.)

The point is brought home in this interview: Adam Davidson Talks Bitcoin With Stephen Colbert - it's humorous and to the point.
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Re: Are bitcoins something like internet tulips?

Post by otbricki » Fri Apr 19, 2013 8:02 pm

Well, I don't think they are internet tulips. Tulips are a well established commodity that got out of hand in a classical (maybe the first) bubble.

Bitcoins are an attempt to build an alternative currency with some novel features. It's not based on a commodity and yet it has some built in limitations that prevent the disease of all fiat currencies - inflation.

There are some problems with it, the primary one is that it's thinly traded making manipulation easy.

Survival seems questionable to me, but maybe the lessons learned will make their way into better experiments that will lead to something that will actually help increase economic stability in the world.

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Re: Are bitcoins something like internet tulips?

Post by LadyGeek » Fri Apr 19, 2013 8:18 pm

otbricki wrote:Well, I don't think they are internet tulips. Tulips are a well established commodity that got out of hand in a classical (maybe the first) bubble.
To new investors, this is worth a read: Tulip mania - a classic

Investors should understand not only the technical details of investing, but the history that got us to this point. It's a nice change of pace from the many on-going discussions about stocks and bonds.
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Re: Are bitcoins something like internet tulips?

Post by staythecourse » Fri Apr 19, 2013 9:22 pm

I am hoping someone can explain how bitcoins are NOT another form of derivitive, i.e. something that's value is based on the value of something else.

Please explain, anyone??
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Re: Are bitcoins something like internet tulips?

Post by 3CT_Paddler » Fri Apr 19, 2013 9:28 pm

Its interesting to read the posts from two years ago on this site about Bitcoin... http://www.bogleheads.org/forum/viewtopic.php?p=959091 and http://www.bogleheads.org/forum/viewtop ... 10&t=76868 . What is interesting to me is the difference in overall comments (should it be a part of my portfolio?) now that Bitcoin has shot up in value.

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Re: Are bitcoins something like internet tulips?

Post by Noobvestor » Fri Apr 19, 2013 11:07 pm

Hey now folks - let's not get carried away into fantasy land with these comparisons.
momar wrote:Tulips are a real thing that have real value with real resource constraints.
If by 'real value' you mean 'they look pretty' then I guess we have a pretty weak idea of 'real value.' If by resource constraints you mean 'we can only make so many' that is actually *less true* of tulips than Bitcoins. Bitcoin is currently the *only* way to make certain kinds of purchases, and one of multiple ways to make many other kinds of purchases. I'm not saying Bitcoins aren't a bubble (I've called a few points along the last rise and burst rather well, albeit just by guessing), but let's stick to facts, please.
nisiprius wrote:As to whether it's a currency, right now, it isn't a very good medium of exchange and it isn't a very reliable store of value; I think calling them a "currency" is just marketing. They are less of a "currency" than Disney dollars or frequent flyer miles.
As a store of value, frequent flyer miles exhibit dubious but, I'll concede, *relatively* high stability. I don't know about Disney dollars but will assume they do as well. As a medium of exchange, Bitcoins can be used on more things in more places. You don't have exchanges around them. You can't buy coffee (or a car or any number of other things) with them. And most importantly, perhaps: you cannot cash them out (well, FF miles anyway) for cash via one of any number of methods (selling on an exchange or to someone right in your area for cash via local coin seller/buyer-connecting sites).

Meanwhile, a lot of time, money and effort is going into more and better support for Bitcoins (many well-funded new companies continue to spring up to provide services to Bitcoin holders, traders, merchants and consumers), and they are getting more and more press (and not just about the bubble bursting). The last leg of the inflating/deflating bubble left Bitcoin down (as of now) only 60% or so from its peak - may sound like a lot, but the 90% it lost last time was much worse. I still think there's a huge chance for any one of a number of factors (ranging from government intervention to even more massive frauds/hackings than we've seen yet) to destroy it utterly, but in the meantime, it *is* a currency - just a wild and unstable one.

My prediction: a series of bubbles and bursts that either eventually stabilize (unlikely) or ultimately result in the currency going away (possibly due to corruption, competition or some fatal flaw in the entire system yet to be fully understood or exploited)

TL;DR Bitcoin is more currency than tulip, but more tulip than American dollar.
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Re: Are bitcoins something like internet tulips?

Post by roymeo » Sat Apr 20, 2013 12:21 am

momar wrote:Tulips are a real thing that have real value with real resource constraints.
What do I do with a warehouse of tulips? What if it costs more to haul them away to compost/landfill than they're worth? What if I need the warehouse empty so I can stop paying rent on it but I can't get anyone to take them? What if I paid 10,000 for a bulb?

Sure it may be a real thing, but the value has become a speculative value far far far divorced from the physical thing. I can't buy drugs with a warehouse of tulips, but I can with bitcoin.
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Re: Are bitcoins something like internet tulips?

Post by 3CT_Paddler » Sat Apr 20, 2013 7:44 am

roymeo wrote:I can't buy drugs with a warehouse of tulips, but I can with bitcoin.
But why buy some drugs today, when I can buy much more or better drugs by the end of the week/month/year as my bitcoin gets much more valuable? What percentage of bitcoins are actually used as a currency to buy goods vs speculative hoarding of the currency in the hopes of making money?

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Re: Are bitcoins something like internet tulips?

Post by 3CT_Paddler » Sat Apr 20, 2013 8:00 am

My speculative prediction with bitcoins is that the bubble is just beginning. Once your cashier or landscaper starts telling you about bitcoins, then you know the speculative frenzy is ripe. :) I wouldn't be surprised to see it go to $1000/bitcoin or more, but when real people start to lose real money (say a 30% correction that amounts to a month's worth or year's worth of salary) there will be a rush to the exits, and the party will be over. It has all the ingredients of a speculative bubble... its a very constrained resource, it has growing popularity, most of the trading is based on the idea that this will be much more valuable in the coming months/years, and its believed to be a paradigm shifting idea (like the internet... which was a paradigm shift, but not in the way and timing that most dotcom stocks were predicting).

I also think if a couple serious competitors could tank the value of bitcoin, if people realized there really is no reason for bitcoin to be more expensive than something like litecoin or any other cryptocurrency that is capable of enacting the same things. The implementation is open source after all... anyone can copy it... they just need a slightly better "hook" to get computer geeks and libertarians excited about their particular "brand" of cryptocurrency while still carrying the implicit promise of riches for early adopters.

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Re: Are bitcoins something like internet tulips?

Post by nisiprius » Sat Apr 20, 2013 8:12 am

staythecourse wrote:I am hoping someone can explain how bitcoins are NOT another form of derivative, i.e. something the value of which is based on the value of something else.

Please explain, anyone??
But simply saying that doesn't in itself discredit bitcons. We are always making that kind of transition. The concept of currency is an abstraction. It is just a big interlocking network of cultural norms, laws, and expectations.

Thirty years ago one might have said that a check was a call on paper money. But these days, I think paper money is just a fading tradition, and that the true "dollar" is certain sets of bits that exist in banks' data processing systems--guarded by technical mechanisms that are supposed to guarantee that the total in one database cannot possibly decrease unless some other total in another database increases by the same amount, and by laws that state the rules under which you are allowed to change those numbers.

This is NOT to say that bitcons are just as much currency as dollars, merely because they are both just made of bits and rule. Monopoly money is not the same thing as Federal Reserve notes, merely because they are both just made of printed paper and rules. The nature of the rules is pretty important!

The Planet Money episode about the big stone wheel at the bottom of the sea was a classic, and everyone should listen to it. Basically, huge heavy stone wheels were currency in Yap Island, but because they were so difficult to move, everybody was willing to track ownership through agreement and recordkeeping rather than by physical location. So, when one of them fell out of a boat and fell to the bottom of the sea, it didn't matter, because there was social agreement that the wheel had existed and still did exist and everyone knew to whom it belonged. And when German colonialists wanted to compel the Yap islanders to build roads, they did so by imposing a fine on the islanders who refused to participate: they marked their stone wheels and said they were now German property, and it was accepted as so. The islanders felt and acted as if their property had been confiscated.

The bitcon culture is trying to promote the acceptance of their own version of big stone wheels, PayPal accounts, DeBeers diamonds, FDIC-insured bank deposits, etc. as having some intrinsic value. If the web of promises and guarantees turns out to be reliable enough, they might succeed. For the time being, as far as I'm concerned, it's just another exotic collectible.
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Re: Are bitcoins something like internet tulips?

Post by tadamsmar » Sat Apr 20, 2013 8:20 am

CrossOverGuy wrote:Could someone please explain what this so-called currency is? What can people supposedly buy with it? It sounds to me like some over-hyped sleight of hand, but it is being discussed more often on some sites. I could be wrong, but my gut feeling says avoid and run away.
Bitcoins are like tulips, stocks, gold, etc. in that they have had price bubbles. Other than that, no, bitcoins are not like tulips.

I far as I know there is no sleight of hand involved.

My plan is to avoid them for now.

Stay where you are, no need to run away, unless you already own too many bitcoins.

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Re: Are bitcoins something like internet tulips?

Post by LadyGeek » Sat Apr 20, 2013 8:49 am

nisiprius wrote:The Planet Money episode about the big stone wheel at the bottom of the sea was a classic, and everyone should listen to it.
I agree, here's the podcast: The Friday Podcast: A Giant Stone Coin At The Bottom Of The Sea (December 10, 2010)
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Re: Are bitcoins something like internet tulips?

Post by allsop » Sat Apr 20, 2013 9:34 am

BitCoins are backed by nothing but confidence, be it misplaced or not.

Currencies issued by states are legal tender and can be used to pay taxes, as well as being backed by the states power to tax.

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Re: Are bitcoins something like internet tulips?

Post by momar » Sat Apr 20, 2013 9:35 am

edit: no desire to get into internet posting war
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Re: Are bitcoins something like internet tulips?

Post by momar » Sat Apr 20, 2013 9:36 am

edit: no desire to get into internet posting war
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Re: Are bitcoins something like internet tulips?

Post by momar » Sat Apr 20, 2013 9:37 am

edit: no desire to get into internet posting war
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Re: Are bitcoins something like internet tulips?

Post by nisiprius » Sat Apr 20, 2013 9:46 am

Who in this thread has actually bought anything with bitcons? Just curious. (Obviously I don't expect anyone to mention anything felonious).

But I think that's the real question. Are people buying things with bitcons, as opposed to just buying bitcons themselves? Not statistics, please: personal testimony.

Much like the question: has anyone here purchased and used any Herbalife products? (For me: Avon, yes; at one time, my wife did semi-regularly, but there doesn't seem to be a rep covering the area I live in now. Herbalife, never).

I remember when I made my first PayPal purchase--someone was selling a self-published $15 print-ond-demand book I wanted to buy through his small website. He presented two alternatives: mail a check and PayPal, which he somewhat misleadingly presented as "pay by credit card." He pointed out that at that time PayPal would put $10 in any new PayPal account--and would put $5 into the account for any referral. He said if it was a new account and I named him as my referral, he'd cut the price to $10, i.e. he'd get the $5 referral, I could pay for the book with the $10 account-opening gift, and I'd get it for free. I went ahead, it was an OK book, everyone was happy. At that time, eBay was just getting started, but I found that PayPal was convenient for eBay purchases and hung onto it. (eBay had their own competitive system, BillPoint, for a while).

So far, I haven't found any situation in which it would have been convenient to use bitcons.

Yes, of course I just like saying "bitcons."
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Re: Are bitcoins something like internet tulips?

Post by linenfort » Sat Apr 20, 2013 9:51 am

nisiprius wrote:Who in this thread has actually bought anything with bitcons? Just curious. (Obviously I don't expect anyone to mention anything felonious).
I know a guy who accepts bitcoins at his online store. So far, not much traffic. Mostly credit card transactions and some PayPal.
Is it too early for an all-bond-portfolio thread?

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Re: Are bitcoins something like internet tulips?

Post by Noobvestor » Sat Apr 20, 2013 11:28 am

3CT_Paddler wrote:I also think if a couple serious competitors could tank the value of bitcoin, if people realized there really is no reason for bitcoin to be more expensive than something like litecoin or any other cryptocurrency that is capable of enacting the same things. The implementation is open source after all... anyone can copy it... they just need a slightly better "hook" to get computer geeks and libertarians excited about their particular "brand" of cryptocurrency while still carrying the implicit promise of riches for early adopters.
Agreed. We're looking at cryptocurrency in beta, basically. It has early adoption and name recognition, but by design it can't really evolve without a fully new version (though to some extent better support systems around it can) - more likely something better comes along and knocks it out of place. Its early-to-the-game status might leave it some market share though. Now that I think about it: maybe the only thing that can save it from extremes (hyper-deflation or complete collapse in value) is having other coin types come along.

What I find amazing (if not downright shocking) is that Bitcoin actually *held up pretty well* during the last crash, all things considered. There was mass panic, 60% drop, major trading lags, speculation that someone was DDOSing *all* Bitcoin-related sites (from exchanges to purely-informational blogs and forums) due to the high traffic everywhere, wide coverage of the crash, late-adopters who got cleaned out, early adopters who could have cashed out, exchanges/banks that shut down ... a whole recipe for a final nail in the coffin, yet ... things have since stabilized again relatively quickly, and Bitcoin is currently valued at about what it was just one month ago.

Meanwhile, http://www.economist.com/news/finance-a ... ng-digital
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Re: Are bitcoins something like internet tulips?

Post by ps56k » Sun Apr 21, 2013 4:47 pm

Wasn't there an episode of The Good Wife -
where they are representing the founder of "Bitcoins" - and the Gov is after them for creating it... ???
I think they even used the term "Bitcoins", maybe before they actually came out - or maybe after, as an interesting tie in.

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Re: Are bitcoins something like internet tulips?

Post by Default User BR » Mon Apr 22, 2013 12:51 am

ps56k wrote:Wasn't there an episode of The Good Wife -
where they are representing the founder of "Bitcoins" - and the Gov is after them for creating it... ???
I think they even used the term "Bitcoins", maybe before they actually came out - or maybe after, as an interesting tie in.
http://en.wikipedia.org/wiki/Bitcoin#Popular_culture


Brian

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Re: Are bitcoins something like internet tulips?

Post by mattymcmatt » Mon Apr 22, 2013 1:09 am

nisiprius wrote:Who in this thread has actually bought anything with bitcons? Just curious. (Obviously I don't expect anyone to mention anything felonious).
I have paid for my VPN service with bitcoins as well as made donations to websites with bitcoins to support the service they provide.

As to why you would use bitcoins. For example, just today I came across an article on a paid site that I would liked to have purchased and read the full thing. However, when I tried to pay for it, I realised I first would have needed to sign up to their website, and then I would have needed to get my credit card information and fill it out. Maybe it's just because I'm lazy but I ended up changing my mind while thinking that I would have much preferred to pay with bitcoins. In that case, I could have quickly sent a payment from my bitcoin application to their site which would have instantly granted me access. There would be no need to sign up and no need to enter my credit card details and no need to pay off the credit card bill a month later when it arrives.

Just like you said about when you started to use Paypal, once you have bitcoins available to you, it is just much more convenient. Basically it's like sending cash through the internet. Unfortunately, the current sticking point is the acquiring of bitcoins by trading fiat currency for bitcoins. That part is not convenient at the moment.

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Re: Are bitcoins something like internet tulips?

Post by nisiprius » Mon Apr 22, 2013 5:49 am

mattymcmatt wrote:
nisiprius wrote:Who in this thread has actually bought anything with bitcons? Just curious. (Obviously I don't expect anyone to mention anything felonious).
I have paid for my VPN service with bitcoins
...I think counts. So, in this thread, one example of actual use, so far.
...as well as made donations to websites with bitcoins to support the service they provide.
I don't think that counts, because you're not seriously interested in getting value for money. If a site asks for donations and offers bitcoins as one option, then you've done what they asked and you get the warm fuzzy. Any issues they experience with bitcoins after the fact isn't a serious concern. Imagine, though, that you donated $50 worth of bitcoins when they were at a high, and a couple of days later you got an email from the site saying that they had been dilatory about cashing them in and had only gotten $15 for them, so would you please donate another $35. I suspect you'd feel annoyed and would be hesitant to pay with bitcoins in future.
As to why you would use bitcoins. For example, just today I came across an article on a paid site that I would liked to have purchased and read the full thing. However, when I tried to pay for it, I realised I first would have needed to sign up to their website, and then I would have needed to get my credit card information and fill it out. Maybe it's just because I'm lazy but I ended up changing my mind while thinking that I would have much preferred to pay with bitcoins. In that case, I could have quickly sent a payment from my bitcoin application to their site which would have instantly granted me access. There would be no need to sign up and no need to enter my credit card details and no need to pay off the credit card bill a month later when it arrives.
Thank you for your meticulous accuracy in making clear that this was hypothetical. Why didn't you buy the article? I think this particular story doesn't show whether or not bitcoins work; what it does show is that micropayments don't work.
Just like you said about when you started to use Paypal, once you have bitcoins available to you, it is just much more convenient. Basically it's like sending cash through the internet. Unfortunately, the current sticking point is the acquiring of bitcoins by trading fiat currency for bitcoins. That part is not convenient at the moment.
That's an interesting observation. Notice that although cash is anonymous, it has a dual role. It is used by those seeking anonymity, but it also has a large and important role in which it is used by people who don't care about the anonymity aspect and just want to buy stuff.

It sure looks to me as if, as of 2013, the bitcoin phenomenon is still being driven primarily by novelty, by the urge to participate in something new, by speculation, and possibly by real use sub rosa.
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Re: Are bitcoins something like internet tulips?

Post by tadamsmar » Mon Apr 22, 2013 8:43 am

nisiprius wrote:Who in this thread has actually bought anything with bitcons? Just curious. (Obviously I don't expect anyone to mention anything felonious).

But I think that's the real question. Are people buying things with bitcons, as opposed to just buying bitcons themselves? Not statistics, please: personal testimony.
I wonder why posters ask questions like this. You want only anecdotal information, you ask specifically that people don't provide anything more useful for addressing the question of the extent to which bitcoins are used in trade.

I don't think you are just curious. I think you are trying to make some kind of point. Perhaps the speculation vs trade ratio is higher for bitcoins than other real or want-to-be currencies, but anecdotes are not going to determine that.

I am not trying to defend bitcoins, I just see this kind of question here often when someone is trying to make a point using dodgy reasoning.

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Re: Are bitcoins something like internet tulips?

Post by nisiprius » Mon Apr 22, 2013 8:58 am

(Decided not to defend myself here--would just lead to further argufying).
Last edited by nisiprius on Mon Apr 22, 2013 9:13 am, edited 3 times in total.
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Re: Are bitcoins something like internet tulips?

Post by diasurfer » Mon Apr 22, 2013 9:07 am

It would be interesting to see what would happen to bitcoin if the US government started producing a cryptocurrency version of dollars. Would it be wiped out? The folks who want to use bitcoins for the convenience of internet cash would switch to cryto-dollars, since they would be legal tender for all debts public and private, and thus much more useful than bitcoins which can only be spent in a few places. On the other hand the anti-government types would be just as disdainful of these new dollars if not more so.

Of course, it will never happen, because illicit commerce on websites like Silk Road would explode. Most governments would eliminate cash entirely if they could. Isn't Sweden going to?

I think Krugman's take on bitcoins made a lot of sense.

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Re: Are bitcoins something like internet tulips?

Post by ftobin » Mon Apr 22, 2013 12:14 pm

nisiprius wrote:(Decided not to defend myself here--would just lead to further argufying).
I thought nisi was making up a (useful) word here, but Merriam-Webster has it! "Argufy" is a great word to have on-hand in forums.

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Re: Are bitcoins something like internet tulips?

Post by Kenkat » Mon Apr 22, 2013 1:48 pm

nisiprius wrote:Who in this thread has actually bought anything with bitcons? Just curious. (Obviously I don't expect anyone to mention anything felonious).

But I think that's the real question. Are people buying things with bitcons, as opposed to just buying bitcons themselves? Not statistics, please: personal testimony.
My son bought a pair of Skullcandy Low Rider Headphones (about $25 retail) and had them shipped to the house. He also bought a $10 bill which was mailed to him but switched to Amazon Gift Cards since the exchange rate was better and it was easier overall. I redeem the Amazon Gift Cards for him so he can get the cash and I will eventually use the Amazon credits. He's bought around $80 in gift cards if I remember correctly. He mined all of the Bitcoins using his graphics card in his PC so to him it has been free money. The huge run up in Bitcoins helped him as he would mine them and then sell at higher prices. From a downside, the mining is becoming more difficult as more people are mining due to the attention received.

It's still pretty experimental (he realizes this) but not bad as long as it lasts.

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Re: Are bitcoins something like internet tulips?

Post by sommerfeld » Mon Apr 22, 2013 2:24 pm

kenschmidt wrote:He mined all of the Bitcoins using his graphics card in his PC so to him it has been free money.
If I were you I'd have him buy a Kill-a-watt meter (or equivalent) from Amazon, hook it up to his PC and charge him for the power he's using to generate the bitcoins - and charge him extra if he's doing it in an air-conditioned house in summer, and maybe give him a discount if he's heating the house in winter.

My biggest concern about the system is around transactional privacy. Bitcoin is that it maintains a public transaction log of all bitcoin transactions. (I believe entries in the log are it's along the lines of "A gave B bitcoins X, Y, and Z at time T"). "A" and "B" are public keys rather than names (if you don't understand public key cryptography, think of these as randomly generated codenames which isn't far from the truth), but a well-resourced entity could potentially start a datamining effort associating various names and identifiers with bitcoin keys through traffic analysis, eroding the supposed anonymity of the system.

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Re: Are bitcoins something like internet tulips?

Post by sommerfeld » Mon Apr 22, 2013 3:03 pm

CrossOverGuy wrote:Could someone please explain what this so-called currency is? What can people supposedly buy with it? It sounds to me like some over-hyped sleight of hand, but it is being discussed more often on some sites. I could be wrong, but my gut feeling says avoid and run away.
Ignoring the cryptographic aspects of it, bitcoin is a commodity which is being "discovered" at a perfectly-defined rate by "miners" (currently 25 new bitcoins are created every 10 minutes); which miner get the coins is a combination of luck and effort (computing and electrical power). Once created, they can be transferred - the miner signs it over to someone else, who signs it over to a third, etc.,; they can also be subdivided. The rate of bitcoin creation is scheduled to decline over time.

bitcoins can also be lost - if you lose your key you lose the ability to transfer them. They can be stolen - someone who steals your key can sign your coins over to another key. Software Bugs can cause the bitcoin transaction journal to "fork" - see http://en.wikipedia.org/wiki/Bitcoin#Th ... March_2013 - resulting in massive confusion in the market until operators decide which journal to believe and which one to discard...

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Re: Are bitcoins something like internet tulips?

Post by Kenkat » Mon Apr 22, 2013 7:21 pm

sommerfeld wrote:
kenschmidt wrote:He mined all of the Bitcoins using his graphics card in his PC so to him it has been free money.
If I were you I'd have him buy a Kill-a-watt meter (or equivalent) from Amazon, hook it up to his PC and charge him for the power he's using to generate the bitcoins - and charge him extra if he's doing it in an air-conditioned house in summer, and maybe give him a discount if he's heating the house in winter.
We actually did hook up a power meter out of curiosity - he drew an extra 150W or so when he was mining which wasn't all that much. I supply free power within reason... :D

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Re: Are bitcoins something like internet tulips?

Post by mattymcmatt » Mon Apr 22, 2013 7:47 pm

tadamsmar wrote:
nisiprius wrote:Who in this thread has actually bought anything with bitcons? Just curious. (Obviously I don't expect anyone to mention anything felonious).

But I think that's the real question. Are people buying things with bitcons, as opposed to just buying bitcons themselves? Not statistics, please: personal testimony.
I wonder why posters ask questions like this. You want only anecdotal information, you ask specifically that people don't provide anything more useful for addressing the question of the extent to which bitcoins are used in trade.

I don't think you are just curious. I think you are trying to make some kind of point. Perhaps the speculation vs trade ratio is higher for bitcoins than other real or want-to-be currencies, but anecdotes are not going to determine that.

I am not trying to defend bitcoins, I just see this kind of question here often when someone is trying to make a point using dodgy reasoning.
Thank you. I agree with this and unfortunately see this a lot where people argue about the topic emotionally instead of logically.

I guess I would say I'm a curious supporter of bitcoin. I only have researched it for the past few months and only started buying some at the beginning of March. I probably only have about 2% of my net worth in bitcoins as I know it's still experimental and could end at any moment. After researching it, I thought that this technology, if it holds up, does really have the potential to make changes to the way finance works. It also offers a great opportunity for people at the lower end of the wealth scale (ie. in developing countries where only the rich have access to financial services) to easily transfer wealth around and accept payment without fees. So I see my purchase of bitcoins as investing in this system because I think it could offer good to the world.

nisiprius asked about making payments in bitcoins so I said I had made a purchase. I would like to make more purchases in bitcoins but unfortunately most sites don't accept them yet but slowly more are.
Imagine, though, that you donated $50 worth of bitcoins when they were at a high, and a couple of days later you got an email from the site saying that they had been dilatory about cashing them in and had only gotten $15 for them, so would you please donate another $35. I suspect you'd feel annoyed and would be hesitant to pay with bitcoins in future.
I just don't know how to reply to this highly unlikely scenario. If I felt annoyed, it would be more at the site than bitcoins. Imagine you buy something from a store and pay cash. Later they call you up and say "We actually charged you the wrong price and you need to pay $35 more." Would you be upset at the US dollar or upset at the store?

Do I think that it will ever replace cash or other instruments? No. Not even in the most widely successful scenario can I see that happening. But it does have some advantages over current payment methods - especially in relation to moving small amounts of money globally. Bitcoin is basically offering another choice and what is wrong with that?
Last edited by mattymcmatt on Mon Apr 22, 2013 8:32 pm, edited 4 times in total.

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Re: Are bitcoins something like internet tulips?

Post by pennstater2005 » Mon Apr 22, 2013 7:47 pm

I must be an idiot. I have read a fair amount on Bitcoin and it still makes very little sense to me. :oops:
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Re: Are bitcoins something like internet tulips?

Post by mattymcmatt » Mon Apr 22, 2013 7:55 pm

pennstater2005 wrote:I must be an idiot. I have read a fair amount on Bitcoin and it still makes very little sense to me. :oops:
Can you say what's still confusing you? I'll try to explain. Basically, I just think of it like cash for the technological age.

Currently if you want to send cash over the internet, you either have to do that with a credit card or a third-party provider like Paypal. Bitcoin removes the third party and allows direct transactions.

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Re: Are bitcoins something like internet tulips?

Post by pennstater2005 » Mon Apr 22, 2013 8:02 pm

mattymcmatt wrote:
pennstater2005 wrote:I must be an idiot. I have read a fair amount on Bitcoin and it still makes very little sense to me. :oops:
Can you say what's still confusing you? I'll try to explain. Basically, I just think of it like cash for the technological age.

Currently if you want to send cash over the internet, you either have to do that with a credit card or a third-party provider like Paypal. Bitcoin removes the third party and allows direct transactions.
Who mines the bitcoins? And how did they get there in the first place to be had? How easy is it to steal someones bitcoins?
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

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