BitCoin Gets a Futures Market 467
fireballrus writes "There is one more way to use your BitCoins rather than buying weed or socks. Recently, a Bitcoin Exchange called ICBIT quietly introduced a futures market, obviously using Bitcoins as its main currency. Gold futures trade roughly at 137 BTC/tr.oz and Sweet Crude Oil at 7.3 BTC/bbl. This may play a positive role in the Bitcoin economy which needs more ways to actually use coins instead of mining them." While this sounds intriguing, I'd like to hear a good case for why BitCoin makes sense in this context.
Not sure I follow. (Score:3, Insightful)
Re:I put bitcoin.com in my HOSTS file (Score:1, Insightful)
Re:Not sure I follow. (Score:4, Insightful)
So you use this, and you either lose or gain bitcoins. That seems like a circular system where bitcons beget bitcoins. That is NOT a "use" for bitcoins, not when the end result is ideally more bitcoins.
You don't get it? Really? Seriously?
Replace the word "bitcoins" with "dollars" in your above statement, and you'll see it suddenly makes perfect sense.
Of course, it makes about as much "sense" as printing billions more dollars in order to fix what's currently broken, but hey what do you expect when greedy fuckers are in charge with zero regulation...
And I expect nothing less out of the bitcoin world.
It ain't the zero regulation that caused the problem - the problem was over-regulation where the regulations were written with government-industry collusion to protect the interests of the big players and screw everyone else.
Of course, that always is going to happen when you get powerful self-serving governments and large corporations. Amazingly, adding lots of government regulations didn't work - look at how now Obama is letting Wall Street get away with literal theft. John Corzine and a few billion disappearing dollars ring any bells?
Be a helluva lot better in the long run to get the government OUT of picayune regulation, let the crooked banks actually FAIL, and toss the crooks in jail.
But we're a few hundred million dollars a year in bribes, errr, campaign contributions from that ever happening.
And don't kid yourself - Obama got more money from Wall Street than McCain did.
Re:Not sure I follow... (Score:4, Insightful)
And?
The difference is most people WILL take USD, and most WILL NOT take Bitcoins.
Gold, whiskey, shiny rocks or shells... the value is set by those who will honor it. The more that do, the more useful it is.
Re:What's the exchange rate to dead squirrels? (Score:2, Insightful)
SRSly, Slashdot, it's a joke currency used by a few fantasists and dreamers
All currencies are ethereal, the difference is belief that it has value.
Think of it this way. I can go into a shop, with a selection of rectangular pieces of paper with fancy designs on them, and I can come out with food, cigarettes, or a laptop, or a television. Why would anyone trade something useful like a laptop, or a basic necessity like food, for some fancy bits of paper? Simple: we all believe the paper has value. You think it does, the shop thinks it does, and so on.
If you want to talk about digital currency, its even more ethereal. You're attributing value to nothing more than a number.
Say there's $100.00 in your bank account, and for the sake of argument its represented as a cell on a spreadsheet at the bank. What is the difference between that $100.00 in the banks DB over say, opening a file and writing $100.00 in the first cell. Again, value. Both figures are identical. The way of storing them is identical. They are the same in every way.
The difference is belief means their cell in the DB is worth something, and yours isn't.
Then you realise central banks create money by nothing more than writing enormous numbers in the cells of spreadsheets.
The only way something stops becoming a currency is when no-one believes in the value of it. Likewise, belief creates currency.
Re:Question for economics wonks (Score:4, Insightful)
Fine.
I have yet to encounter a business which uses BitCoins as a means of payment. They must exist and I could look them up, but I have yet to encounter one as part of my regular Internet usage. None of the big businesses use it, none of the smaller businesses use it, even geeky sites don't use it. This makes BitCoins rather pointless compared to regular coin.
Also, perhaps more importantly, BitCoins has yet to prove itself. Why invest in a shakey implementation of an Internet-based currency when so many other attempts died before it? I'm not going to touch it unless I actually see mainstream usage.
Simply put - I have nothing to lose by not bothering with BitCoins. I also have very little to gain, if anything at the moment, if I did. It's just not worth the time.
Why all the hostility? (Score:5, Insightful)
Get over the hype and take Bitcoin for what it really is: a fascinating experiment that has, so far, withstood the amazing barrage of publicity, hacking attempts, legal uncertainties, and remains valuable for reasons completely contrary to everyone that says it's worthless. It may become worthless one day, but consider the possibility that Bitcoin is disproving all your wildly oversimplified assumptions about what makes something valuable. It is completely different, and there's plenty of reasons to believe that it could succeed as much as it could fail.
Why does gold have value? Nothing is backing gold. Yet it has value, mainly because of its properties: scarcity, fungibility, density, beauty, etc. Bitcoin is really quite similar but some different properties. Ease of transfer over the internet, fungibility, scarcity, storage efficiency, near-anonymity and built-in escrow.
I don't think it's any more ludicrous for Bitcoin to have value than it is for gold to have value. And in the end, when I want to sell WoW weapons, buy webserver space, or play a few games of poker online, why would I use gold, credit card or paypal, which all require me to remember log-in creditials, give away information and/or pay a bunch of third party fees. There's plenty of value in being able to pay people across the world, instantaneously, without sacrificing your privacy, and without paying any fees. Why is that not valuable? Seriously... quit focusing on the get-rich-quick kids, and start appreciating Bitcoin for it's unique properties and philosophy.
Re:What's the exchange rate to dead squirrels? (Score:2, Insightful)
there is a standing army behind the value of the American dollar. as long as that is true, the abstract representation of value that is the meaning of currency is as real as you ever will get. and that standing army makes a hell of a difference
Sophilistic bullshit (Score:2, Insightful)
Re:Question for economics wonks (Score:5, Insightful)
Incorrect. The major currencies, especially the dollar, are based on the threat of extreme violence. If you live in America, 1) you are forced to accept dollars at face value for services and trades. And 2) you are not allowed to counterfeit them. If you try, expect black SUV and helicopters, people breaking down your door at 6am, being slapped around a bit, and then put in jail for a good chunk of your remaining life.
As a gauge of current popular interest, the fact that not a lot of people are actually using them for anything is a big negative. Slashdot should be reporting things that interest its readership.
Nice strawman. Real currencies are recognized and backed by governments, bitcoin is only a pretend currency, like monopoly money. It may in fact be illegal, if it tries to substitute for legal tender, in various parts of the world.
No, bitcoins are like property, and can be stolen like property. That means they can have value, but it doesn't make them like money.
Re:Question for economics wonks (Score:5, Insightful)
The US dollar is the only currency you can pay US taxes with and the only currency the US government issues debt in, so as long as the US government exists, there is a guaranteed demand for US dollars.
I know, I know, "But the US is about to implode any day now!" And if it does, the entire world economy will go with it. BitCoin depends on the Internet and the Internet depends on a functioning economy. BitCoins won't do you any good if your ISP and your power company are bankrupt.
So in any realistic scenario where BitCoins have value, so does the US dollar. However, it's entirely plausible that BitCoin will fail but not the dollar. Congress could prevent law-abiding businesses from dealing in BitCoins, shutting down the major exchanges and effectively isolating BitCoin from the traditional financial system. The illicit market would still exist, so you'd still be able to convert cash to BitCoins to buy drugs with... but most people will just buy drugs with the cash directly.
Re:Question for economics wonks (Score:5, Insightful)
If you have more expenses because you bought more things, which needed to be produced, then you print more dollars. Hence dollars increase more or less as GDP increases.
The entity responsible for printing those dollars gets something for nothing. They print millions of dollars (for essentially no cost), and exchange those for goods and services. They didn't work hard to earn those dollars.
This is inflation... it isn't "useful", and it makes your dollars go down in value over time. The only real good thing about inflation is that in limited amounts, it encourages spending instead of hoarding.
Bitcoins are not actually generated by doing useful work and even worse the system is made to reward disproportionately the early adopters of the system.
Dollars are also not generated by doing useful work. They are generated by a printing press, which is not doing anything inherently useful. I don't really see why rewarding early adopters is a bad thing.
Look at their predicted number of bitcoins in the system to figure it out yourself.
Bitcoins can be subdivided to 8 decimal places, or currently about 1/100,000th of a cent in US dollars. Any deflation that occurs can be handled well into the future.
Re:This is great news! (Score:5, Insightful)
Futures and derivatives are NOT "capitalism". They are gambling. Pure and simple. This has been one of the main downfalls of banks and Wall Street, directly contributing to the 2008 debacle.
We should not base our economy on fake money. Investment is fine. And all investment is "gambling" to a certain extent... at least if it's done honestly.
BUT... speculation and derivatives are PURE gambling. It's nothing more than a government-sponsored casino.
Re:Question for economics wonks (Score:3, Insightful)
>This is inflation... it isn't "useful", and it makes your dollars go down in value over time. The only real good thing about inflation is that in limited amounts, it encourages spending instead of hoarding.
You just wave this away as if it doesn't matter, while it's the biggest flaw of Bitcoin.
Hoarding? Bitcoins have massive built in deflation. Should they ever start becoming popular, the only sensible thing would be to hoard them because there are so few to cover so much. There is only a possible 21 million bitcoins, after that, no more. The world GDP is $70Trillion, meaning if you instantly substituted bitcoins for the entire world's economies, each bitcoin would have to be worth $3.3Million. Why would you even spend a single bitcoin?
Also, deflation kills economies. It's the /worst/ thing to happen in a recession. It accelerates decline by making loans too expensive. Businesses need loans to buy capital equipment, start new projects, and such, and in deflationary times, you wind up paying back with money that becomes worth more as time goes on, on top of the interest you're paying. Same goes for buying houses and durable goods. People don't spend when they can get "more" by simply not spending, and that's with even "mild" single-digit deflation. Economies grind to a standstill.
Bitcoin's wild built-in deflation would make it completely unusable for capital equipment purchases, real-estate, and durable goods.
This is basic entry-level economics. And this is why Bitcoin is nonsense.
--
BMO
Re:This is great news! (Score:5, Insightful)
Re:This is great news! (Score:3, Insightful)
Futures are gambling.. Are you serious? Do you know what futures are?
A farmer grows x bushels of corn that will be harvest 6 months from now. He asks people who need corn 6 months from now to sign a contract for it, so he has someone to sell the corn to, and he knows the price he will receive for it.
That is a futures contract.
How is that gambling?
Maybe you shouldn't throw around terms you don't know. It gets in the way of the adults having an informative discussion.
Re:This is great news! (Score:4, Insightful)
"Um... no, you're wrong. They are insurance."
Um... no, I'm not wrong. Insurance IS gambling.
Missing the point: financial stability. (Score:4, Insightful)
I haven't found a single post that doesn't miss the point.
Being able to buy/sell futures of commodities such as oil ties the bit coin to the real world in a way we haven't seen before. A potential user of bitcoins may be put off by the volatile nature of the value of the bitcoin itself, but if he can pin it down to the value of oil or gold by trading those futures, it makes holding bitcoins a much more sensible, or at least much less financially treacherous prospect.
Imagine... I could sell 1000 USD and buy 100 bitcoins (no idea how this compares to the real exchange rate, bear with me...)
I could then, with my 100 bitcoins, buy gold futures. Even if the value of a bitcoin plummetted meanwhile, I'd be making all that money back as the price of gold (expressed in bitcoins) skyrocketed. I'd be essentially immune to the fickle price of a bitcoin and merely invested in gold. I could further stabilise my finances by SELLING gold futures in USD. If I did this right away, for a small cost, I would essentially have pegged the value of my bitcoins at 1 per every 10 USD.
The creators of bitcoin have been very smart to introduce this market. It enables the use of bitcoins without the fear of volatile price moves. Surely the biggest barrier to entry for most potential users.
Re:What's the exchange rate to dead squirrels? (Score:5, Insightful)
So if someone refuses to accept my dollars I can call in an airstrike on them?
Well, Saddam Hussein was planning to switch to the Euro [time.com]....
Re:This is great news! (Score:2, Insightful)
Requests by the federal government to increase lending on riskier mortgages came ten years before the banks started doing so in earnest. It took a considerable amount of advance work on neutering regulating agencies (and repeal of glass-steagall), such that banks could bury those toxic assets in misrated financial instruments, and insure all of it blindly with companies like AIG.
Re:Not sure I follow... (Score:4, Insightful)
Re:This is great news! (Score:4, Insightful)
It's gambling when the guy selling the contract isn't growing the corn and the guy buying the contract doesn't plan on using it.