Bitcoin, a service and the micro-micro-economy

http://www.bitcoinbulletin.com/2011/03/29/bowling-for-bitcoins-meet-the-trader-04/

by spenvo • 15 years ago

58 76 15 years ago

Looks like the article made the author some bitcoin on witcoin too http://bitcoin.witcoin.com/p/862/The-story-behind-witcoin-an...

motters3• 15 years ago

Unfortunately this model doesn't seem to work. If you look at what's getting votes it's things like pictures of girls and kittens.

spenvo3• 15 years ago

It may not work. It's still too early to tell. If you look at other content sites that have tried to pay out to contributors (think Mahalo), their models didn't work either. Huffington post finds more success by paying nothing.

noagendamarket8• 15 years ago

The difference is their money comes from ad revenue not from the users themselves. Didnt huffington post sell for quite a lot of money to AOL and the people who actually built it got nothing ?

motters3• 15 years ago

I think the problem here is that the introduction of payment changes the psychology from one of sharing information to one of maximizing income (gift Vs capital). In the latter mode of operation the quality of the information is a secondary concern.

dublinclontarf15• 15 years ago

Well if that's what people are willing to pay for then let them have it. I don't see how it doesn't work.

There is a cost if the articles isn't popular(which rules submitting any old crap)

There is a cost of voting up articles, which rules out people with too much time(and not enough money) on their hands scewing the numbers.

Perhaps it hasn't worked before, but then no one has tried doing this with bitcoin, that singular ingredient makes a lot of formerly impossible things very achievable.

motters3• 15 years ago

That's the same argument that the tabloid newspapers use, and it doesn't work for them either. What readers end up with is low quality information, popular conspiracy theories, sensationalism, voyeurism, etc. What's really needed is some kind of system which sets up a virtuous cycle rather than a downward spiral.

mischa_u• 15 years ago

Your two cents worth literally; although at the current Bitcoin exchange rate [1] a typical post/comment/vote on witcoin.com costs USD 0.079.

[1] http://www.bitcoincharts.com/markets/

noagendamarket8• 15 years ago

http://sandbox.witcoin.com/p/327/GETTING-STARTED--Reply-to-t...

you can post on the witcoin sandbox and someone is offering .10

Thanks for linking the bitcoin charts site which is another worthy bitcoin service.

mizerydearia• 15 years ago

or USD 0.0079

Also, each category has its own prices. Some categories post/comment/vote costs at current Bitcoin exchange rate are USD 0.0000000079.

burke• 15 years ago

This brings up a little facet of bitcoin that I'm /really/ not crazy about: The smallest possible unit is 0.00000001 BTC. With a fixed cap of 21M BTC, requiring that each transaction be for at least 4.8*10^-16 of the total possible amount in circulation seems like a questionable choice at best.

dublinclontarf15• 15 years ago

Allow me to extol the virtues of bitcoin over the current credit-card/banking based payment system.

1)Hard money, once you receive payment in bitcoin it stays with you, meaning no chargebacks(Paypal, credit cards, looking at you).

2)Fast payment, you can recieve payment within minutes of it being made(sometimes faster, but more on this in a moment).

3) Low barriers of entry, to start accepting bitcoin you don't need a bank account, or even your own computer. You can use one of a number of free(or cheap) online services such as mybitcoin.com or just go ahead and install it on your machine.

4) No red tape, this is slightly related to the above but important enough to warrant it's own point. With bitcoin there are no forms, no regulations, no paperwork. You can send bitcoin to anyone, anywhere, anytime, any amount and no one will care or track you, or freeze your account or any of the other issues when dealing with the current banking system.

5)It's the most innovative financial ecosystem on the planet and evolving damn fast. Because there is no regulation, it's easy to start writing applications that use bitcoin. Services and goods are springing up at an astounding rate.

Now you may say that payments take minutes, but creditcards are instantanious this is true (to a certain extent, at least with payment confirmation). However because of the flexibility of bitcoin, it's ease of development a technical solution to this issue will arrise in the near future(next two to three months).

Right now bitcoin is small, but it's growing fast, real fast, and faster than the growth of bitcoins themselves or even it's users are the services and goods that are springing up around it.

In a years time bitcoin is going to be so easy to use people like your grandmother are going to wonder why they ever bothered with credit-cards(or online banking) at all.

Sexy no?

noagendamarket8• 15 years ago

Thanks to bitcoin it makes things possible that other microtransaction systems cant do. If anyone wants to listen to a great podcast about it I recently discovered this - http://omegataupodcast.net/2011/03/59-bitcoin-a-digital-dece...

It is well worth a listen.

taken11• 15 years ago

Can you name some of those services that spring up? So far i have not been able to find anything that would make use of Bitcoins in an interesting way.

noagendamarket8• 15 years ago

The site mentioned in the article is a unique use of bitcoins. It makes it possible to give as you live http://witcoin.com/charities

The big upcoming service that will be able to utilise bitcoin is nfc which google is bringing to android. They recently introduced a bitcoin library so it will be a possibility at least.

spenvo3• 15 years ago

Given the ease of BTC as an electronic currency, there are not too many unique services. BTCSportsbet is cool and CoinPal allows you to buy giftcards, etc. but nothing ground breaking. Witcoin is interesting/unique because it operates in this kind of "micro-economy" space that is disallowed in other currencies because of transaction fees and the hassle of setting up paypal, etc..

Bitcoin is perfect/preferable for very small transactions. This coupled with the fact that there simply aren't many Bitcoins out there probably points to unique ideas cropping up in the micro-micro-economy space. Check out https://en.bitcoin.it/wiki/Trade for a complete list of services.

ashconnor3• 15 years ago

Some of the negatives:

1)Phishing, if your private keys and password are compromised your money is gone.

2)Regulations, although governments would find it difficult, if not impossible, to regulate BitCoin. They can regulate the exchange of BitCoin into everyday fiat currencies. We seen this with the likes of e-gold when exchangers were cracked down on due to the ease of laundering money in the system.

3)Value, if people have no faith in the value of BitCoins then the system will not work. Right not there's a lot of commerce with BitCoin but it seems that it's only digital products or services that are accepting it. Once sellers of physical products start accepting BitCoin then it might become are more common currency.

4)Drugs, CP and money laundering. Although I don't believe in the scaremongering tactics used by politicians in order to regulate the likes of the internet, this system is going to be vulnerable to the similar attacks. We've already seen narcotics marketplaces open up that are now accepting BitCoin by operating through the TOR network. Soon enough this will receive a lot of unwanted attention.

noagendamarket8• 15 years ago

If you leave your wallet on the beach your cash is gone or someone could pickpocket you. Egold was located on a central server that was liable to confiscation. You can buy alpaca socks with bitcoin. You can do money laundering ,cp and drugs with US dollars.

dublinclontarf15• 15 years ago

1) see this http://news.ycombinator.com/item?id=2386956

2)In the near future there will be anonymous bitcoin exchanges, immune from government actions. http://weekly.co.nr/index.php?q=article/anonymous-money-need...

3)If people have no faith in the $ then that system will not work, the reality is than money is what people accept for goods and services, every currency whether bitcoin, USD,or gold is backed by the goods and services people will accept it for.

Right now there are merchants that accept bitcoin for goods and services, it's users do the same, I've hired someone paying with bitcoin. It works just fine.

4)Short of banning cryptography (good luck with that) there is nothing the government could do to prevent people using bitcoin whether it's used for the purchase of illegal guns, drugs, sex, hit contracts etc. The worst the governmet can do is target the exchanges, but as I said before that's not going to be an issue either.

PostOnce4• 15 years ago

You know what else is great about it? The money is stored as a file on your computer. I can steal it from my laptop from the park across the street from your house and be gone before you know its missing, and you will never, ever be able to find me. All I have to do is steal your wallet file and transfer the bitcoins to my account, and the money is irreversibly mine.

Computer security being what it is, and with bitcoin growing at the rate you claim it is, I may soon be a millionaire without having done any real work.

Welcome to the future.

dublinclontarf15• 15 years ago

How will you do that? I don't even have wireless.

Jokes aside, the current financial system has the exact same problems, and infact can be worse, especially with username:password based authentication. If someone skims your ATM card and gets your pin number too bad, you've lost the money.

Or you could have your wallet pickpocketed, and the thief would be gone without you even knowing the money was missing.

What about credit cards? Protect consumers with chargebacks? yes. However these same consumer protections also hurt merchants, who are the ones that pay for chargebacks and frauds. Because there are no chargebacks bitcoin is very attractive to online merchants.

If users are not comfortable being responsible for taking care of their btcoins they can always use the bitcoin banking services like mybitcoin.com

Fact is bitcoin is money, clever thieves will be able to find clever ways of stealing money, it's been happening since money has been happening.

If you're looking for a perfectly secure currency don't hold your breath, cause one hasn't been invented yet and isn't likely any time soon.

shazow• 15 years ago

What about storing Bitcoins in "the cloud" (effectively becoming a bank)?

Or even something like Dropbox, especially if the drive becomes password-encrypted without internet and there's a remote-disconnect feature when online.

mburns• 15 years ago

Which is somehow different than owning someone's computer that has a traditional bank account that they check online?

If you access to their financial info, you can steal money. Just because it is digital doesn't make it magical.

rmc3• 15 years ago

1)Hard money, once you receive payment in bitcoin it stays with you, meaning no chargebacks(Paypal, credit cards, looking at you).

I read this as: "If you give bitcoins to someone in exchange for goods/services and they don't deliver, you're screwed, your money is gone, there is no-one you can talk to". That sounds like it's good for sellers and bad for buyers.

joelthelion2• 15 years ago

Check the seller's reputation before buying. I think it's a lot better this way.

dublinclontarf15• 15 years ago

Use an escrow service such as clearcoin, clearcoin.appspot.com

lutorm6• 15 years ago

Yeah, this is what makes no sense to me. In a f2f transaction, I exchange money for goods. In a virtual transaction, it creates a fundamental asymmetry if the money transfer can't be reversed, since you have no way of verifying the other part of the transaction, i.e., that the goods were actually shipped.

The bitcoin proponents make a big deal that transactions can't be reversed. But if you continue reading the FAQ, they also make a big deal about the fact that you shouldn't deal with people you don't trust and that it's your responsibility. I'm sorry, but that doesn't make sense to me. If transactions were only done between trusted parties, there wouldn't be a need for chargebacks either. You want to put the responsibility entirely on the customer, who has no practical ability to judge trustworthiness of an online retailer.

An escrow service doesn't make sense either. Then I have to trust that service. Maybe if some well-known non-bitcoin entity offered such a service, I would be inclined to trust it. But for now, it doesn't seem to me that any of the bitcoin entities have enough to lose to convince me that they're not front ends for scamming operations. I mean, Bernard Madoff and Enron were scams, how in the world could I judge that these operations aren't?

It's true I don't have much trust in the government to go find my money when my wallet's picked out of my pocket. But I do have some trust in that if a store front just took customers' money without giving anything back, they would be shut down pretty soon.

No, what's needed is a scheme which not only ensures the currency transaction, but the entire transaction. It seems that, at least for digital goods, one should be able to design a system where the good is encrypted, and the use of your key to decrypt it simultaneously effects the currency transaction. Still doesn't ensure the content is what they said it would be, though...

jrmg2• 15 years ago

I'm sure your tax authorities would have something to say about that. I'm pretty certain they'll want to see your bitcoin transactions accounted for in exactly the same way as any other.

dublinclontarf15• 15 years ago

Yeah, good luck attributing those transactions to me, or to anyone else for that matter.

Sure if you're an already existing company it's a good idea to keep accurate records, file forms etc. but if your some 15 year old kid with a great idea who cares, go for it!

With the arrival of new businesses operating entirely from within the bitcoin economy and cypherspace no amount of government regulation will matter. How can you tax something you can't even find, or stop or do anything to?

eli• 15 years ago

Is this a legitimate attempt at a currency or a political statement?

Also, what's the exchange rate between bitcoins and Flooz?

noagendamarket8• 15 years ago

Start a bitcoin to flooz exchange and find out ?

The difference is bitcoin is decentralized while every other internet currency has been reliant on a single entity to issue it.

dublinclontarf15• 15 years ago

Depends what the exchange rate between USD and Flooz is, the current exchange rate is about $0.77 for 1Bitcoin.

trotsky5• 15 years ago

People who grow interested in participating in the bitcoin market because of this or other articles about the currency should be aware that at its heart it is a very speculative market. The price of a bitcoin in USD has risen dramatically through most of its life while lacking economic fundamentals for why it should.

Indeed, the money supply in the bitcoin market increases steadily over time, this should be inflationary, causing the value of BTC to fall. The fact that it doesn't speaks to how thinly traded the BTC markets are, and that there are simply more buyers than sellers interested in BTC - primarily due to articles about bitcoin that drum up interest, and due to speculators participating in the market.

Bitcoin values are very loosely coupled to fundamentals - you can't buy food, energy or commodities with it. In general you need to transfer it back to a fiat currency to do anything classically useful with it. Currencies that either rapidly appreciate or rapidly depreciate are both ill suited for any kind of real commerce - people need relatively stable pricing to conduct any kind of direct business in fiat money. While there are certainly examples where fiat currency runs away in either inflationary or deflationary ways, central banks, charged with protecting their currencies often take dramatic steps at times to prevent moves either way.

In these ways bitcoin currently resembles either a pump and dump scheme the tulip bubble. Which it is depends on whether you believe the people driving the rises in pricing are intentionally exploiting the press and thin nature of the market, or if most of the participants are simply along for the speculative ride.

Of course, it is in the rational best interests of anyone who holds bitcoin to disagree with this assessment. That said, I do genuinely welcome any kind of informed debate on the issue.

kiba4• 15 years ago

"More goods and services" is practically the catchphrase of the community.

We are well aware of this fact.

How can I help bitcoin out? Sell something on the market!

trotsky5• 15 years ago

To be clear, I don't have a fundamental issue with the concept of bitcoin or the technical implementation. I just see a lot of people who grow interested in obtaining it without knowing what they'll do with except for selling it to someone else. If people want to trade their USD/EUR/GBP/JPY for it as is often suggested by the bitcoin community, or decide that they want to consume electricity in order to obtain it well more power to them. I just think it's good for them to understand what a thin, speculative market it is.

Rationally, people not wanting to speculate in the currency should hold off obtaining any until there is something they want to purchase with it right then.

yummyfajitas2• 15 years ago

Of course, it is in the rational best interests of anyone who holds bitcoin to disagree with this assessment.

No, it is in the rational best interests of anyone holding bitcoins to have the most accurate assessment possible of their future value.

If that assessment suggests the future value will go down, it is in their rational best interests to sell bitcoins.

trotsky5• 15 years ago

Good point. I didn't mean to say it is in the rational best interests of anyone holding bitcoins to not understand the market forces involved. You make a good argument that it is in their interests to understand what they hold. However, if you buy my argument that the BTC market is nearly wholly speculative at this point, it is probably not in the interests of speculators holding BTC to have it publicly understood as this would seem to lead to an evaporation of upward pressure on the market.

firethief• 15 years ago

This sounds like a well-thought out reply; that's bad, because it is wrong.

> Indeed, the money supply in the bitcoin market increases steadily over time,

This is partially correct - the money supply increases asymptotically; the deflation eventually resulting from this may become a problem in the future.

> this should be inflationary, causing the value of BTC to fall.

I have a couple of issues with this statement:

1. the value of a currency is usually most meaningful relative to another currency; BTC is not unique in having a money supply that increases over time.

The current annual rate of increase of the BTC money supply is about 7.57%. The rate of increase of the USD M0 money supply is around 4.50% (I am having trouble finding the exact value).

2. money supply alone does not determine the true value of a currency - the size of the economy (amount of goods and services purchasable with that currency) is also a factor, among other things.

It seems to me a reasonable assumption that, given how green BTC is (created in 2009), the size of the BTC economy is increasing substantially faster than the size of the USD. If this is the case, BTC's increasing market size is probably greater than its increasing money supply, relative to the USD - quite possibly enough to justify its increase in value, by my estimates.

EDIT: the Bitcoin M0 increase rate is currently 50%, not 7.57% - this is an important difference, and it supports your statement that the value of Bitcoins is quite speculative. However, I stand by my reasoning that it is less speculative than you claim.

Bitcoin, a service and the micro-micro-economy

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