[MarchHare]

Originally Posted by Rathji

The value in BTC is that you can trade it for goods or services.

If you can't see the value in that, then why do you go to work every day and get dollars that you can do something useless like trade for goods or services.

I could see your point if you couldn't buy things, or get money for BTC, but the fact that you can, gives it value. To argue otherwise seems a little foolish to me.

Aside from the criminal underground who use Bitcoins for money laundering purposes, who exactly is exchanging BTC for goods and services? According to published research*, virtually nobody is using BTC like a currency. And why would they, when its value fluctuates so wildly?

*Source 1: http://www.businessinsider.com/why-b...charts-2013-12

Why would anyone use their bitcoins to buy things when those bitcoins might double in value in a day—or hour—or two?

They wouldn't. Researchers found that 64 percent of bitcoins are in accounts that have never been used. And the ones that are being used aren't being used more. You can see that in the chart below from Jason Kuznicki, which looks at the dollar value of all bitcoin transactions each day divided by the dollar value of all bitcoins each day. It's hard to see any pattern here—and that's the point. If people were using bitcoins more, this ratio would be going up. It's not.

Bitcoin won't work as a currency as long as it's so deflationary. Why spend bitcoins today when they might be worth much more tomorrow? The only reason would be to buy or do things online that you can't buy or do with dollars (or euros or yuan)—something illegal. Now, black markets can be big markets, especially when it comes to evading capital controls, but not so big that Bitcoin would ever become more than a niche "currency."

*Source 2: http://www.theatlantic.com/business/...rrency/281625/

What's revolutionary is that it's a payments system with no third-party, like a credit card company, standing in between buyers and sellers. See, any time you buy something, it's a minor leap of faith. You choose to believe that the seller will deliver as promised—and if they don't, you want your money back. That's where financial intermediaries like credit card companies and Paypal come in. They make sure buyers and sellers are both trustworthy, and handle any disputes.

Now, it's nice to be able to get your money back if things go wrong, but that's not free. The middlemen take their cut. Bitcoin, though, has no middlemen. It's just a decentralized peer-to-peer system. So you can't get your bitcoins back if things go wrong, but there won't be any transaction fees. The question is whether non-enthusiasts will think this trade-off is worth it.

Actually, the question is whether anyone will actually use bitcoins to buy things at all. It's not clear why they would when its value can go from $500 to $900 in a matter of hours. Nor when so many people treat it as an inflation hedge. They think of Bitcoin more as an investment than as money. Indeed, researchers from the University of California-San Diego and George Mason University found that 64 percent of all bitcoins are being hoarded in accounts that have never been spent. And of the bitcoins that are being spent, a full 60 percent are on the gambling site Satoshi Dice.