Bitcoin downfall MT Gox shut down.

[TimG]

people will not need to use banks to hold their money and make different kinds of transactions.

Sure they will. The overwhelming majority of businesses will do business and pay taxes based on the home currency. They may allow people to use bitcoin just like many Canadian retailers allow US dollars but the exchange rate is really bad. You will likely be better off using the home currency.

no more interest and no more bank fees to collect.

You pay fees for bitcoins. The fee structure is currently subsidized by issuing new coins to processors. Eventually those subsidies will end and bitcoin fees will rise accordingly. Also bitcoin processors are for profit businesses - they will raise rates as much as competition allows.

one of the beauties of bitcoin is that it can skip the traditional middle men or start using other middle men, instead of banks.

That is not really a benefit unless one has an irrational hatred of companies called banks. You cannot build a currency on irrational hatred - there has to a rational benefit and the incremental benefit is pretty small. Edited March 3, 2014 by TimG

[dre]

I'm following TimG's argument but not yours. Why should they be concerned ? Is somebody lending bitcoins interest free or something ?

So you didnt read the thread? Its patently obvious why banks that make money exclusively from the demand for fiat currency and their ability to create it, would be concerned about the growth of alternative forms of currency.

Whats hard to understand about that? Do you HONESTLY not get it?

[TimG]

So you didnt read the thread? Its patently obvious why banks that make money exclusively from the demand for fiat currency and their ability to create it, would be concerned about the growth of alternative forms of currency.

The point that you don't seem to get is the are not enough bitcoins to meet the demand for currency and if people want to borrow money for their homes and businesses they will always be better off getting a loan at their local bank in their local fiat currency.

The only role that bitcoin could play is as a replacement for credit cards in online transactions, however, it is not clear that there is any real cost advantage over the long term once processors are not paid by printing bitcoins. The fact that your transaction records are public knowledge is also a real turn off for bitcoin.

[dre]

The point that you don't seem to get is the are not enough bitcoins to meet the demand for currency and if people want to borrow money for their homes and businesses they will always be better off getting a loan at their local bank in their local fiat currency.

That entirely depends on the value of a bitcoin, if demand became widespread. Its not an argument at all against what I said to Mike.

Edited March 4, 2014 by dre

[TimG]

That entirely depends on the value of a bitcoin, if demand became widespread. Its not an argument at all against what I said to Mike.

You are arguing that to be useful in the long term the value of bitcoins must continuously rise. Except that would be a huge disincentive for borrowers. If you are borrowing money the last thing you want is a debt burden that rises over time. In the meantime, you have banks offering loans in fiat currencies which depreciate over time. It would not be rational to borrow money in bitcoins.

IOW - it addresses the argument you made to Mike by pointing out that bitcoin cannot replace the lending services offered by banks so it is no threat to those businesses. The role bitcoin plays is limit to being alternative to debit or credit for transactions but it may not necessarily be cheaper in the long run.

Edited March 4, 2014 by TimG

[dre]

Youre just posting nonsense again, and not reading what you are replying to.

Here it is...

Its patently obvious why banks that make money exclusively from the demand for fiat currency and their ability to create it, would be concerned about the growth of alternative forms of currency.

[TimG]

Youre just posting nonsense again, and not reading what you are replying to.

It's not nonsense. You just can't seem to understand that to be a threat to the loan business of commercial banks bitcoin would have to be a viable medium for providing loans. I have given you several concrete reasons why bitcoin is not a viable mass market medium for providing loans nor is it likely ever to be. You have not attempted to rebut those points.

[dre]

It's not nonsense. You just can't seem to understand that to be a threat to the loan business of commercial banks bitcoin would have to be a viable medium for providing loans. I have given you several concrete reasons why bitcoin is not a viable mass market medium for providing loans nor is it likely ever to be. You have not attempted to rebut those points.

You have no idea what Bitcoin, or other alternative currency schemes will turn into to. And none of them have to turn the banking industry upside down, they just have to reduce demand for national currency or become a popular hedge. And the biggest threat is that people are starting to understand how much money commercial banks siphon from the economy and are looking for other options.

Edited March 4, 2014 by dre

[TimG]

And none of them have to turn the banking industry upside down, they just have to reduce demand for national currency or become a popular hedge.

Bitcoin trades 80 to 100 million USD per day. The global currency markets trade 4,000,000 million USD per day. Gold trades 4,000 million USD a day. Bitcoin has a long way to go before it is anything other than a rounding error. Even then, it is just another commodity like gold that attracts people looking to speculate. Gold has not over turned the global banking industry and there is no reason to believe bitcoin or any other crypto currency will have any more of an impact.

And the biggest threat is that people are starting to understand how much money commercial banks siphon from the economy and are looking for other options.

People have been bitching about Canada's six big banks for decades and most people have to choice to go a credit union. Yet most just bitch and stay with their bank. IOW - opinion polls mean nothing. Edited March 4, 2014 by TimG

[bud]

Bitcoin trades 80 to 100 million USD per day. The global currency markets trade 4,000,000 million USD per day. Gold trades 4,000 million USD a day. Bitcoin has a long way to go before it is anything other than a rounding error. Even then, it is just another commodity like gold that attracts people looking to speculate. Gold has not over turned the global banking industry and there is no reason to believe bitcoin or any other crypto currency will have any more of an impact.

here is another one of your errors in trying to describe and compare bitcoin.

not many people trade gold for services. you can't just instantly pay someone by clicking a button, without any bank fees, with gold or other currencies. the bitcoin stays in your own wallet and if you do choose to, you can keep at an exchange.

the rate of usage and growth continues to climb. we're early in the life of bitcoin. no amount of bitterness and disdain for something new and different will change the fact that bitcoin usage is growing at a high rate, in a consistent matter.

[Michael Hardner]

So you didnt read the thread? Its patently obvious why banks that make money exclusively from the demand for fiat currency and their ability to create it, would be concerned about the growth of alternative forms of currency.

Whats hard to understand about that? Do you HONESTLY not get it?

IOW - it addresses the argument you made to Mike by pointing out that bitcoin cannot replace the lending services offered by banks so it is no threat to those businesses. The role bitcoin plays is limit to being alternative to debit or credit for transactions but it may not necessarily be cheaper in the long run.

Really just trying to follow here. If people want to borrow bitcoins, can't the banks just create Canadian dollars, then convert to bitcoins ?

If people want to borrow, don't they just go for the lowest interest rate and terms of payback - including whether their payments will fluctuate due to valuations ?

[TimG]

Really just trying to follow here. If people want to borrow bitcoins, can't the banks just create Canadian dollars, then convert to bitcoins?

I guess but why? The banks create a liability in CDN$ and would need a huge profit margin to compensate them for taking a risk on bitcoin exchange rates. I can't imagine that anyone would consider this to be a good deal compared to taking the same loan in CDN. This also does not cut the banks out the picture which dre and others seem to think is plausible.

If people want to borrow, don't they just go for the lowest interest rate and terms of payback - including whether their payments will fluctuate due to valuations ?

The basic issue with bitcoins and loans is the limited supply of bitcoin because it means the price of bitcoin must rise over time (if you assume its adoption will grow). This means the real value of a bitcoin loan rises over time which has to be factored into an interest rate calculations. This significantly increases the risk unless you are paid in bitcoins.

To give you an idea of this cost lets assume that over the next 40 years bitcoin is used as much as the CDN$ then its price would have to rise to $100,000 to match the supply of CDN$ today. This works out to an equivalent interest rate of 15% per year and this is in addition to any interest charged on the bitcoin loan plus any transaction fees.

To contrast, loans in fiat currencies are 2-5% above the inflation rate. The only way for bitcoin loans to compete would be to offer negative interest rates.

These calculations, of course, depend on widespread bitcoin adoption. If you assume that bitcoin will not be adopted then a bitcoin loan could be a good deal but that also argues against the idea that bitcoin will grow beyond the niche commodity it is today.

Edited March 4, 2014 by TimG

[Michael Hardner]

This also does not cut the banks out the picture which dre and others seem to think is plausible.

The first part of your post makes sense with what you posted below. As for not cutting out the banks - yes, that was why I asked. I'm still trying to see how the banks are cut out.

Maybe the answer is "if bitcoin stabilizes and they can undercut the bank's overhead"... but that assumes that there aren't extra costs and risks that the bitcoin exchanges (?) have to cover.

The basic issue with bitcoins and loans is the limited supply of bitcoin

Ok - I'm trying to reconcile this idea with the idea that bitcoins are also "mined" - thereby increasing the supply ?

The idea that bitcoin will turn the banking world on its end seems to me to assume that there is a cabal of people controlling the money markets. There certainly are insiders, I suppose, but it's a market so there's only so much control there from what I understand.

[TimG]

Ok - I'm trying to reconcile this idea with the idea that bitcoins are also "mined" - thereby increasing the supply ?

The bitcoin algorithm subsidizes transaction processing by issuing new bitcoins to processors. These subsidies, by design, do not last forever and the maximum supply of bitcoins should max out at about 21 million.

The idea that bitcoin will turn the banking world on its end seems to me to assume that there is a cabal of people controlling the money markets.

Not really. The idea just does not take into account how loans work and how a growing money supply reduces the cost of loans in fiat currencies (which is why they are used) . Bitcoin fans only seem to consider savings side of the banking business. Edited March 4, 2014 by TimG

[GostHacked]

It's not nonsense. You just can't seem to understand that to be a threat to the loan business of commercial banks bitcoin would have to be a viable medium for providing loans. I have given you several concrete reasons why bitcoin is not a viable mass market medium for providing loans nor is it likely ever to be. You have not attempted to rebut those points.

Bitcoin is not about providing loans. That was never it's intention. Loans only come about because of fractional reserve banking on fiat money. Bitcoin is designed to never be susceptible to fractional reserve banking.

[GostHacked]

But we have another theft and a shutdown of an exchange.

http://www.cbc.ca/news/business/bitcoin-bank-flexcoin-shuts-down-after-600-000-theft-1.2559018

[TimG]

Bitcoin is not about providing loans. That was never it's intention. Loans only come about because of fractional reserve banking on fiat money. Bitcoin is designed to never be susceptible to fractional reserve banking.

That is fine. But you are basically agreeing that bitcoin is no threat to the banks' loan business. The 'threat' only comes from transaction processing but the banks could easily muscle into that business and use their existing networks to undermine the smaller players. Edited March 4, 2014 by TimG

[GostHacked]

That is fine. But you are basically agreeing that bitcoin is no threat to the bank's loan business. The 'threat' only comes from transaction processing but the banks could easily muscle into that business and use their existing networks to undermine the smaller players.

I did not make the specification of the loan business portion of banks. I was referring to the general threat to the banks by offering an alternative to the banks. When your argument started to fail, you then made the specification about the loan business portion of banks. And your last sentence is one of my concerns as well.

The banks cannot muscle in on it, because Bitcoin does not work like fiat money that uses fractional reserve banking. The only way to make money on Bitcoin is speculation. Other than that, it was never about making money, it was about offering an alternative that does not deal with the banks.

Bitcoin users do not want to deal with the banks.

[TimG]

I did not make the specification of the loan business portion of banks.

You didn't but dre did.

The only way to make money on Bitcoin is speculation.

Wrong. Bitcoin requires a massive computing infrastructure for processing the BlockChain. The people providing this infrastructure make money from transaction fees. Banks can make money doing this too. The current fees for Bitcoin transactions are between 0.50 to 1.00 USD per transaction which makes it more expensive than a debit card for most people.

https://en.bitcoin.it/wiki/Transaction_fees

Note that a typical transaction is 500 bytes, so the typical transaction fee for low-priority transactions is 0.1 mBTC (0.0001 BTC), regardless of the number of bitcoins sent.

That said, it costs $40-80 per international wire transfer (including sender and receiver costs) so Bitcoin has the potential to really impact this part of the business but the limited supply of Bitcoins likely means too much volatility for most people.

Edited March 4, 2014 by TimG

[GostHacked]

You didn't but dre did.

Wrong. Bitcoin requires a massive computing infrastructure for processing the BlockChain. The people providing this infrastructure make money from transaction fees. Banks can make money doing this too. The current fees for Bitcoin transactions are between 0.50 to 1.00 USD per transaction which makes it more expensive than a debit card for most people.

https://en.bitcoin.it/wiki/Transaction_fees

That is only if you chose to use one of the exchanges or online storage sites. I do not encourage those sites. I encourage people to use and manage their Bitcoins on their own. The sites cannot guarantee that the Bitcoins will still be there. Just like the banks cannot guarantee that your money will be there. And you can tell me it is government insured, but that does not make me feel any better.

Once an economic crisis hits a country and the currency, there is nothing stopping the government to go into those bank accounts and take or seize everything. Various examples of just that recently, Greece comes to mind.

Destroyed or lost bitcoins through various means, can not be recovered.

It's not a fiat currency, so the banks really don't know how to make money on it because they wont be able to conjure more bitcoins into existence. The banks CANNOT increase the Bitcoin supply. If they say they can, then they have been able to manipulate the algorithm code to do just that. And with it being decentralized, it cannot happen.

Bitcoin and fiat money are two completely different types of currencies.

[TimG]

That is only if you chose to use one of the exchanges or online storage sites.

No. Bitcoin depends on the maintenance of the BlockChain. This has nothing to do with where you store the BitCoins. If you trade bitcoins you have to pay the fee.

[Bonam]

That is only if you chose to use one of the exchanges or online storage sites.

No. A normal bitcoin transaction through the bitcoin client on your computer or through any online wallet (not exchange) has a transaction fee. It's closer to $0.06 at current prices not the $0.50-$1.00 that TimG mentioned, but it's there.

[GostHacked]

No. Bitcoin depends on the maintenance of the BlockChain. This has nothing to do with where you store the BitCoins. If you trade bitcoins you have to pay the fee.

ONLY if you use one of those exchanges. I can send you bitcoins directly without dealing with any exchange and without any fees. You're error seems to still be that you are viewing it as a centralized currency.

[Bonam]

ONLY if you use one of those exchanges. I can send you bitcoins directly without dealing with any exchange and without any fees. You're error seems to still be that you are viewing it as a centralized currency.

You're wrong. If you try to place the transaction without the minimum recommended fee, it will take days to get processed, if ever. The vast majority of bitcoin miners only include transactions in their blocks that obey the minimum fee rules included by default in the bitcoinqt client. If the miners don't include your transaction in their blocks, it will never get any confirms, and thus never be processed.

Have you actually used bitcoins for any transactions?

Edited March 4, 2014 by Bonam

[GostHacked]

No. A normal bitcoin transaction through the bitcoin client on your computer or through any online wallet (not exchange) has a transaction fee. It's closer to $0.06 at current prices not the $0.50-$1.00 that TimG mentioned, but it's there.

It looks like a ponzi scheme to me. I never got into it simply because of technological reasons. But another main reason was how volatile it was. The price won't settle down unless more coins are mined and used.

But the whole system can work without these exchange sites.