You'll need to find a currency exchange, open an account, and buy BTC with your 10 USD. It's the same thing you'd need to do if you wanted to buy yen or euros.
So, the article refers to the price of BTC increasing with respect to USD which lead me to think about things like investments, speculation, and currency trading. FOREX.com is a currency exchange that enables trading USD, euros, and yen. MTGOX.com is a currency exchange that additionally supports BTC. You would open accounts with either company to trade currencies. I apologize for any confusion.
Calling bitcoin a "currency" seems a bit off to me. I think of currency as the thing you use to buy a gallon of milk or buy a movie ticket. It's for facilitating day-to-day transactions. But nobody (or almost nobody) is using bitcoins to buy groceries or fill up their car with gas.
Bitcoins are more like stocks in my opinion. People don't use stocks to buy day to day items either. They're investments, some riskier than others. And that risk, which would be catastrophic to a currency such as the US dollar, is much more easy to tolerate if it's just another non-currency investment vehicle that you can choose to participate in or not.
This doesn't seem to make sense to me - BTC as an investment implies that there is some external value to BTCs beyond merely an investment vehicle (see: houses, which are useful for living in, power companies that produce electricity, etc).
If BTCs are not useful as an actual currency, then isn't it purely an investment vehicle that isn't backed up by any sort of real value, present or future?
Investments just require an expectation that they will rise in cost. Think baseball cards - they don't "do" anything or really have any value, but there's a pattern that rare commodities rise in cost over time. Bitcoin was engineered to stay a relatively rare commodity.
Stocks are the same. The value of a stock is really only it's dividend, and many stocks don't (or can't) pay much. The cost has little to do with the value.
With your definition, I guess I would consider bitcoin to be a currency in embryo. It will take some time to build up the infrastructure and adoption for people to use it for every day expenditures.
No, it's not a good thing beyond perhaps raising awareness of it and maybe temporarily increasing demand for it. The stability it had was a great sign and it was seeing some solid use for transactions (especially for virtual goods). The sudden increase is going to add risk to day to day transactions and thus make people shy again from using BTC for purchases.
But there's no reason to believe it won't go down 30% next week. Fluctuations of this magnitude are terrible for something that purports to be a usable currency; more like what you'd expect from penny stocks.
Generally no, it's why one half of the Federal Reserve's mandate is price stability. Wildly fluctuating prices make it very difficult for businesses to plan expenditures - hiring, production levels, R&D, etc., resulting in more conservative spending and investment.
But bitcoin is still new, not fully understood, in limited supply, relatively illiquid (compared to other currencies and financial assets), and coming onto the scene right in the middle of a banking system and sovereign debt crisis unlike anything ever seen and most of its early adopters see it as a hedge against that.
So, volatility is going to be norm for bitcoin's foreseeable future.
Do you really believe "most of Bitcoin's early adopters" see it as a hedge against monetary crises? I know some fairly successful Bitcoin speculators, and none of them see it as anything other than a way to make a quick buck.
Probably shouldn't have used 'most', since I haven't done a survey or anything. But from reading the bitcointalk forums the past year, there's a clear contingent of people who believe money should be deflationary and see btc as an option for hedging against possible dollar hyperinflation. Many of them also tend to be gold bugs and sound money types as well, and btc is just another basket for some of their eggs.
Another factor is that the cost/reward for mining will double (assuming same hashing power for the network) in the mid future. Quoting http://bitcoinx.com/profit/ "When the block count will hit ~200000 some time around December 2012 the generation reward will go down to 25BTC. This might partly be compensated by falling difficulty, raising prices, higher transfer fees, etc."
If you were an online gambling company why WOULDN'T you use bitcoin? As long as you're not running a money exchange like mtgox in tandem, doesn't it isolate you much better from legal problems?
These huge jumps (and crashes) in bitcoin valuation are precisely why gambling sites can't use them as proxies for cash... there's just no guarantee of parity between what a dollar is worth and what a bitcoin is going to be worth tomorrow.
Some sites try this schtick from time to time using things like long distance minutes on calling cards, but even those seem to fail fairly quickly because as soon as there is a major price disruption in whatever proxy you're using, you get screwed hard.
> why gambling sites can't use them as proxies for cash
Wrong, it's the users who can't use them as proxies for cash. A bitcoin casino is currency agnostic. It deals exclusively with bitcoins.
There are things like SatoshiDice which allow you to gamble with no possible cheating, with tangible probabilities etc., and these effectively _must_ operate currency agnostic. It's up to the user to decide how the exchange spread effects his/her bet.
* They can run their website with very few computers. It runs completely over Bitcoin, which is decentralized.
* The owners do not need to provide customer service, it's verifiable and they can't screw people over without everybody instantly knowing.
* This could be developed by a single person and never need to expand or compete. As long as the service is always running, he can take a _predictable and transparent_ commission out of losing bets. Hell, you'd even know exactly how much money the operator is making, and perhaps what they're earning against the exchange rate.
And this bitcoin casino is partly responsible for the immense jump in the number of transactions over Bitcoin in the last few months:
I know that millions of people sitting at penny slots prove me wrong every year, but what fun is inserting a digital coin and waiting for a yay/nay response from a server?
I really really wonder what's driving this. Some say it is money flocking to safety from the Euro crisis. I'm not convinced. I'm guessing it's more likely the increased media attention on bitcoin recently attracting speculators.
I would imagine it also has something to do with the guy that has been paying people 7% interest per week to hold on to their bitcoins: https://bitcointalk.org/index.php?topic=50822
So if I deposit 148 BTC today, he's promising to pay me 4991.3444 BTC in one year. Note that he only takes referrals, a classic way to drive up demand by limiting availability of the profits.
It could also be an idiot who is trying to engineer some sort of stability in the currency at his own expense. That is the only other thing I can think of, and it seems quite unlikely.
Interesting reading, thanks. Do you have an opinion if this is a ponzi scheme? If it isn't, do you think its sustainable over any decent length of time?
I can't think of anything legal that would net you 7% a week in a remotely safe manner. He has been going for a while now and only recently reduced his interest rates, so it may go on until there aren't enough new people signing up anymore.
I got in before the spike last summer and sold on the way down, netting some free hardware and USD, so I put what was left from that in. Worst case, I lose money that I earned through luck. Best case, new computer hardware!
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[ 0.27 ms ] story [ 74.6 ms ] threadhttp://www.mtgox.com is one such exchange.
No, it's not. I can go to pretty much any local bank and buy euros.
No, it's not. I can buy currency with cash, it will take me 10 min to get them from a local bank.
With bitcoins you have to jump through all kinds of hoops and pay all kinds of fees.
Now, what % of $20 would be gone by the time you get your bitcoins?
Bitcoins are more like stocks in my opinion. People don't use stocks to buy day to day items either. They're investments, some riskier than others. And that risk, which would be catastrophic to a currency such as the US dollar, is much more easy to tolerate if it's just another non-currency investment vehicle that you can choose to participate in or not.
If BTCs are not useful as an actual currency, then isn't it purely an investment vehicle that isn't backed up by any sort of real value, present or future?
Stocks are the same. The value of a stock is really only it's dividend, and many stocks don't (or can't) pay much. The cost has little to do with the value.
But bitcoin is still new, not fully understood, in limited supply, relatively illiquid (compared to other currencies and financial assets), and coming onto the scene right in the middle of a banking system and sovereign debt crisis unlike anything ever seen and most of its early adopters see it as a hedge against that.
So, volatility is going to be norm for bitcoin's foreseeable future.
Some sites try this schtick from time to time using things like long distance minutes on calling cards, but even those seem to fail fairly quickly because as soon as there is a major price disruption in whatever proxy you're using, you get screwed hard.
Wrong, it's the users who can't use them as proxies for cash. A bitcoin casino is currency agnostic. It deals exclusively with bitcoins.
There are things like SatoshiDice which allow you to gamble with no possible cheating, with tangible probabilities etc., and these effectively _must_ operate currency agnostic. It's up to the user to decide how the exchange spread effects his/her bet.
* They can run their website with very few computers. It runs completely over Bitcoin, which is decentralized.
* The owners do not need to provide customer service, it's verifiable and they can't screw people over without everybody instantly knowing.
* This could be developed by a single person and never need to expand or compete. As long as the service is always running, he can take a _predictable and transparent_ commission out of losing bets. Hell, you'd even know exactly how much money the operator is making, and perhaps what they're earning against the exchange rate.
And this bitcoin casino is partly responsible for the immense jump in the number of transactions over Bitcoin in the last few months:
https://blockchain.info/charts/n-transactions
7% interest per week, up to 5000 BTC:
http://www.wolframalpha.com/input/?i=1.07^52
3372.53% per year
So if I deposit 148 BTC today, he's promising to pay me 4991.3444 BTC in one year. Note that he only takes referrals, a classic way to drive up demand by limiting availability of the profits.
If it sounds too good to be true, it probably is.
I got in before the spike last summer and sold on the way down, netting some free hardware and USD, so I put what was left from that in. Worst case, I lose money that I earned through luck. Best case, new computer hardware!