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To: jjsheridan5
Why take the risk on a new currency, that may or may not ever become widely accepted, if I also believe that the new and risky currency will go down in value? What is the generally accepted response to this, in the bitcoin community?

I can only speak for myself. New currencies often have legitimacy crisis. If a large country, seemingly acting reasonably, introduces a new currency, it is easier. Euro is one such example. If an individual, who keeps his true identity secret, introduces a currency and keeps some for himself, this becomes a much dicier proposition.

Some of the key factors that a customer considers are:

One desired quality of money is that the tokens themselves should have minimal cost; preferrably zero. Paper money comes close to that, as paper is reasonably inexpensive. Electronic money as they exist today in banks and on our credit cards have zero cost. This is good because the token itself should not be an expensive good. You do not want to pay for your cup of coffee with an original painting by a famous artist - even if the nominal value of that "coin" is one cup of coffee. This issue also affected gold coins, as they had value close to their face value - and that resulted in debasement of coins.

Unfortunately, BTC is not free. BTC costs a lot of money (electric power) to produce. This is a waste. This also results in a situation when nobody can offer BTC as a handy replacement for barter items, as you have to purchase the coin first - and the act of purchase of a coin has nothing to do with the exchange that the coin facilitates.

Here is an example, with barter and with BTC.

BARTER. Bob built a chair and wants to sell it. Alice wants to buy that chair. Bob needs a loaf of bread, and Alice just baked one. They exchange goods. Bob now has bread, and Alice can sit on her new chair. All the work was exchanged, and none were leaking to 3rd parties.

BTC. Bob built a chair and wants to sell it for 1 BTC. Alice wants to buy that chair for 1 BTC. However Alice does not have 1 BTC. Each BTC costs, in whatever money, close to its face value. Alice takes one loaf of bread to the exchange and procures one BTC from the miner Mike for that bread. Now Alice comes back and gives the 1 BTC to Bob, and collects her chair. Bob still wants his bread, and Alice doesn't have her bread anymore.

What would happen now in our "normal" economy? Bob would go to Mike the miner, give him 1 BTC, and take the bread. This would complete the exchange because the value of the token (paper money or iron/nickel coins) is nearly zero.

This is different in the BTC world. When Bob goes to Mike and offers him his BTC, Mike says that he already gave one half of his bread to the power company, and another half to the company that made a BTC mining machine for him. He has no bread to sell anymore!

You can see now that the high cost of the token is now sunk into tokens themselves. The society has to bear the extreme expense of calculating otherwise pointless and valueless numbers, just so they could be exchanged for very inexpensive goods. This is one of many issues that plague digital coins. To put it simply, digital money must be very inexpensive to generate and to process. BTC does not offer either - minting of coins is very expensive, and transfers of BTC require massive worldwide calculations. Compare with cash, which costs nothing to print and the only person who counts it is the clerk at the store. Plastic cash (cards) costs even less.

20 posted on 11/03/2015 1:39:40 PM PST by Greysard
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To: Greysard
The society has to bear the extreme expense of calculating otherwise pointless and valueless numbers, just so they could be exchanged for very inexpensive goods. This is one of many issues that plague digital coins.

Proof of work (= energy expenditure) is the price to pay to generate a trustless system. Therefore, IMO, the energy expended by PoW is an interesting offset to human malfeasance, conniving and greed.

Now, there might be other, more efficient ways to offset human pathology, but bitcoin's implementation is successful enough, at this time.

24 posted on 11/04/2015 6:21:00 AM PST by bkopto
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