So here's the thread for all further bitcoin discussion that is not related to the question of wether or not kaya should support it.

As the transaction fees for PayPal transactions are typically paid by the vendor, there seems little benefit for consumers in using bitcoin. Vendors on the other hand basically have to support PayPal as it has become like a standard. Adding another payment method which is not even requested by the consumers does not seem very attractive.

A real benefit for the consumer only exists if he wants to make a transaction that should remain anonymous. This is a) only a tiny fraction of all the transactions and b) does not lead to a positive reputation for bitcoin.

Therefore, I don't think we will see a fast and widespread adoption of bitcoin.

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Stay out of my territory! (W. White, aka Heisenberg)

This is exactly the opposite. The vendor doesnt take money of its own pocket to pay the fee, it comes from the consumer. Which means that the price is adjusted to the comission.

This is why there arent micro-transactions with paypal. For example, KGS charges 3 months for KGS+ as opposed to a monthly subscription, because at 5dollars a month, paypal would take more than 20%. The only logical step would be to charge 7 dollars a month and give a discount for bulk purchases, which is a very established practice.

Sites like GuoJuan's school that sell lecture per 1/2 Euros are also affected.

Lastly, there are countries without Paypal, whic hwe have had cases already. So there are several reasons to use bitcoin as a rather established virtual coin.

In anycase, its jsut not important for people that dont use bitcoin. There is no practical advantage to those.

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Founder of Kaya.gs

You are right, bitcoin does have a further advantage when it comes to micro-transactions! (However I am not sure if I want to execute all those transaction separately.)

To put my above statement differently: For standard internet shopping senarios (well above 10 Euros), if PayPal is already in place, I doubt that vendors would give a discount for bitcoin payment (just as they do not give me a discount for doing a bank transfer). They would use those savings to pay the PayPal bills.

_________________
Stay out of my territory! (W. White, aka Heisenberg)

For 4 Euro, the Paypal fee is a little less than 11%. (Still much, agreed.)

You meant 6 dollars calculating with 20%.

_________________
Stay out of my territory! (W. White, aka Heisenberg)

I've recently signed up for bitcoin, so i think it would be neat for a go server to adopt it as currency. a very cheap way to transfer cash, almost no mark up, more secure than paypal, and no charge-back problems.

Paypal obviously has its limitations but aren't there already existing micropayments solutions that use real money?

i wanted to comment on a few things posted in the kaya bitcoin topic.
there was an argument over the inflationary v.s. deflationary model.
I'd like to offer my own take.
let me offer two scenarios and you tell me which you would prefer.
first, let's take inflation. money supply increases, so prices rise. you make the implicit assumption that wage will also increase, which is not neccisarily the case. there have been several occurances throughout history where prices rose, but wages didn't. in the short term, yes, there would be a buying frenzy, but after the dust settles, do you really think that no one able to afford food is good for the economy? even if wages rise along with prices, i don't see how earning a million dollars an hour and paying a hundred thousand dollars for a loaf of bread is neccarilly better than earning 10 dollars an hour and paying 1 dollar for a loaf of bread. espically if the tax brakets stay the same.

second let's take deflation. agian if wages remain the same, then how wonderful would that be if instead of 10 dollars buying you a loaf of bread, you can buy tomatoes as well now? how much more would you be able to doanate to charity if 100 dollars buys you everything you need for a month?
how much more prosperous would a nation be if everyone's retirement fund essentially doubles, becuase prices got cut in half? how much more could the goverment spend on the things society needs if its purchacing power increases? sure, you might wait a bit to buy that new tv if you expect to pay less for it a week from now. but everyone still needs food, water, shelter, medicine, and entertianment. no one is going to stop wanting these things simply becuase prices are decreasing.
i agree, more sales do mean more production, and more money for taxes. my question is: which is more valueable, being able to buy more goods, or buying goods because you will soon be unable to?
http://scienceforums.com/topic/23955-ke ... ge__st__30

Sure, the great depression was a wonderfull state of economy (it's a nice exemple of severe deflation).

Another exemple of extremely moderate deflation is the economy in Japan since 1995: not really enviable too.


In a deflationnary economy, the salary always deflate :

If before the deflation you need 1 employee to create 1000$ of wealth, you can pay this employee up to 1000$ to be sustainable

Now after the deflation, he create the same goods, but they sell only 100$ : do you really believe it's sustainable to pay someone 1000$ to create 100$? It just doesn't work in long term.


In inflationnary economy, the salary can stay the same, the company will just make more benefices (but the employee grow poorer)

And to add to Tryss's point: if you've promised your employees $1000/wk, they are going to enter into a whole set of legal arrangements premised on that salary: sign leases on apartments, send their children to college, borrow money to buy cars, purchase vacations, invest in retirement plans, etc. Given that you've already agreed to give them a fixed (nominal) salary, and on the basis of that agreement they've agreed to give most of that (nominal) salary to other people, they will be extremely upset if you try to force them to accept a $100/wk salary, even if in theory $100 can buy just as many things as $1000 could previously. In most cases they will want legal safeguards in place preventing you from suddenly cutting their salary, and even if they don't, they'll be extremely cranky about it. (It doesn't help matters that "the money supply made me do it" sounds like an extremely convenient excuse for a boss looking to cut a few corners; and most people don't have a strong sense of what core inflation is, anyway.)

On the other hand, if there's inflation and you need to raise your employees' salaries to keep them with you (and probably to attract new hires, too), no one is going to complain about that.

IMO, the speculations about whether the deflationary design of bitcoin is a problem are irrelevant.

Bitcoin is primarily two things:
1. A virtual currency for online purchase
2. An object of speculation/money betting - a much bigger problem than the deflationary aspect

The economic system you are living in will not pay wages in bitcoin and there will be no relevant goods that are only available in exchange for bitcoin. Your bank will not offer loans in bitcoin.

Because of point 2 above, you will not keep a huge stock of bitcoin, unless you are speculating/gambling with it. So the deflationary aspect is not a big deal.

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Stay out of my territory! (W. White, aka Heisenberg)

I have looked at our current economic system, done much studying on it, and have come to believe that it is unsustainable. have you looked at what the federal reserve is doing as of late?
have you not even paid attention to the news of how broken the american dollar currently is?
i'm putting a stock of my money in bit coin not so much as an investment, but as a safeguard against it losing value. i know full well how little time is left before hyper inflation is likely to set in. i give it 2 years at the most. even if i'm wrong about hyper inflation, i seriously doubt my money will increase in value over the coming years.

That is exactly what I meant by Gresham's Law kicking in. You prefer to save money in the form of bitcoins, and spend other forms of money. As long as you are able to cash out your bitcoins later, that's cool.

_________________
The Adkins Principle:
At some point, doesn't thinking have to go on?
— Winona Adkins

Visualize whirled peas.

Everything with love. Stay safe.

I don't understand all the hype about bitcoin.

The only interesting thing I can see about it is that it's a resource that can be exclusively owned but is still transferable online. That is, if I give a bitcoin to you then I no longer have it and I cannot duplicate it, but I can still somehow give it to you purely electronically. This is a little unusual, since most other objects that can be exclusively owned are physical objects that must be physically shipped to be transferred, which is costlier and less convenient.

Aside from this, bitcoin seems wholly unremarkable to me. Besides greater ease of transfer, what makes it any different than gold? Both are resources that exist in the world in limited amounts. Both can be mined in limited amounts at additional cost. Both can be traded or kept as a store of wealth. From a macro perspective, it seems to me that building an economy around bitcoin would be almost identical to building an economy around the gold standard, and with all of the same properties (no central authority, inflexible money supply, etc), except with lower transaction costs.

Am I missing something? Do all of the bitcoin supporters also think that reverting to the gold standard would be a great idea too, and merely that bitcoins would be a slightly better choice of resource than gold for that purpose? Or is the support really mostly for the micro-level transaction advantages?

Little pieces of paper with pictures of dead white men on them are not something that one would generally expect to increase in value over time. And I think we've done a good job laying out why that would actually be unlucky for the monetary system if they did increase in value.

If you want something that will increase your wealth over time, I suggest you take your pictures of dead presidents and buy an asset. Something like a jackhammer or a power loom or a condominium. You can use it in a profitable way, or rent it out to someone else who wants to use it. If that seems too troublesome, you can buy a share in someone else's stock of assets, or lend someone the money at interest so that they can buy their own assets.

By the way, would you care to state your 95% confidence intervals for the core inflation rate in 2014?

IIUC, there are a couple of significant differences between bitcoin and gold. First, even though the supply of gold in the world is finite, the production of gold has roughly kept pace with the human population for a few centuries now. From what I hear, bitcoin production is dropping substantially. Second, gold has uses aside from being money. (And I don't think that any country is on the gold standard now, right.) Third, as money, bitcoin is completely fiat. Fourth, as money, no government supports bitcoin like they supported gold and silver.

The most troubling difference is the lack of government support. (Although perhaps the support of organized crime is just as good. ) In 1873 the U. S. went off of silver money, to a straight gold standard. As a result, the price of silver in U. S. dollars dropped by 50%. That drop represents the loss of the fiat money value of silver, when the U. S. government stopped supporting it. Since the value of bitcoins is all fiat, there is a danger of complete collapse in the future. Bitcoin is a social experiment. We shall have to see how it goes.

_________________
The Adkins Principle:
At some point, doesn't thinking have to go on?
— Winona Adkins

Visualize whirled peas.

Everything with love. Stay safe.

My own thoughts on Bitcoin:

It's actually not anonymous at all. If you know one endpoint of a transaction and have a lead pipe (I.e. you are government), you can figure out the entire history. It won't be a good choice for crime once the government starts paying attention.

The potential upside is pretty large, and they are pretty cheap right now (about five dollars), so it is probably worth it to buy a few. Not a lot but a few.

Something like bitcoin is probably necessary in the long run, but it's pretty unclear for now whether bitcoin will survive that long.

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That which can be destroyed by the truth should be.
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My (sadly neglected, but not forgotten) project: http://dailyjoseki.com

Why? (And when you say "something like", what category are you referring to? That might make it more clear.)

essentially, bitcoins are backed by computer processing power, in a very round about sort of way.
miners have become increasingly rare, because it's currently more valuable to just buy them and wait for the price to go up (a similar problem with gold, i think?). personally i find the lack of government backing the least troubling aspect of it. sure it may never be wildly popular because of that, but i would rather have a currency like bitcoin than a currency like the american dollar; where my money increases in value over time rather than decreasing. i would like to be able to retire knowing the money i saved years ago is now much more spendable than it was then. (for the record, i tend to think buying a bar of gold would probably have about the same effect, with the exception of ease of transfer.)

Alright, well, maybe "necessary" was a little strong. But imagine a large colony on Mars. It'd be silly to ship them gold. Which may not be worth much if we mine too many asteroids.

(I see bitcoin maybe replacing gold, not normal fiat. Although the latest iPhone and android apps make trading it very convenient...)

_________________
That which can be destroyed by the truth should be.
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My (sadly neglected, but not forgotten) project: http://dailyjoseki.com

.... which nations are still on the gold standard? Or you mean, bitcoinbugs will replace goldbugs?

But you're right that interstellar travel poses interesting problems for open economy macroeconomics. Like so many issues, though, Paul Krugman got there first:

http://www.princeton.edu/~pkrugman/interstellar.pdf