This Whole Bitcoin Thing Could Be Big, Says Bank of America 276
Nerval's Lobster writes "Bank of America has issued a research report suggesting that the crypto-currency Bitcoin could become 'a major means of payment for e-commerce' on its way to emerging as 'a serious competitor to traditional money transfer providers.' The bank attaches a 'maximum market capitalization' of Bitcoin at roughly $1,300, based on its position as a 'major player in both e-commerce and money transfer' as well as 'a significant store of value with a reputation close to silver.' Bitcoin has come close to exceeding that theoretical ceiling in recent weeks, although its valuation dove today after the People's Bank of China decided to declare it a volatile 'currency' without real legal status; that financial institution is also concerned about its use in money laundering and black markets. Bank of America sees Bitcoins' advantages as low transaction costs, its finite supply (which will protect its value), and its increasing attractiveness as an alternative to 'traditional' cash. As with the People's Bank of China, however, the bank sees the currency's extreme volatility and lack of legal backing as a bad thing, and frowns at the possibility that regulators could step in and increase transaction costs. 'A 50 minute wait before payment receipt confirmation is received will prohibit wider use,' the report adds. 'This is less of an issue for two parties that know each other because they trust the other will not double spend, but when dealing with an anonymous counterparty this creates a high level of unhedgeable risk.' Without a 'central counterparty' to verify transactions and thus mitigate that risk, Bitcoin could fail to break into wider use."
Of course it could be big. (Score:5, Informative)
Are they the only one ? (Score:5, Insightful)
Bank of America is always looking for new ways to screw over their "customers", be it through fees, lying, or trying to steal their (paid off) houses through foreclosure (and blaming it on "computer error" when caught). They're probably drooling like hungry dogs over all the ways they can fleece people with Bitcoin...
I'm afraid that Bank of America is not the ONLY bank which screws their customers.
In fact, I have yet to find a bank which has failed to screw their customers.
Re: (Score:3, Insightful)
Re: (Score:2)
I think you mean “mutual” if we are going to compare apples to apples and not to oranges. I have not read the brief, but I am going to assume that it was issued by the investment bank side, a.k.a. the stocks and bond people, a.k.a. Merrill Lynch. These people don’t offer much in the way of traditional banking services.
On the investment side you choices are pretty limited. There are mutual which are member owned. And don’t confuse mutual with mutual funds. Fidelity is a for profit cor
Re: (Score:2, Funny)
The best thing about credit unions versus other banks is that, for the low cost of a mirror, you can look one of the owners in the eye and say "you're an asshole!"
Re:Are they the only one ? (Score:5, Funny)
BoA, Wells Fargo, and Chase are the douche banks. Most banks will do better but not much, but some are pretty good.
I'm with USAA myself - haven't ever had to pay a single fee for anything I get from them. My checking account even yields interest, and features that the 3 douches charge money for are included for free. USAA was actually the first bank to offer deposits using smartphones in fact, and it always has been free.
Re: (Score:2)
They fill a role as good as anyone, but not better than anyone else really. I mean
Re: (Score:2)
Dude. I'm as libertarian as they come, but your anger is misplaced. USAA is a credit union: think "coop" vs. "typical for-profit entity".
Coops have membership requirements. So do credit unions. These can be almost anything... USAA was founded for military personnel and their families, which is why you don't qualify. Other credit unions have different requirements... I know one around here is for "residents of xyz county".
The reason USAA and many other credit unions are so awesome is that they are managed fo
Re: (Score:3)
Bank of America is always looking for new ways to screw over their "customers", be it through fees, lying, or trying to steal their (paid off) houses through foreclosure (and blaming it on "computer error" when caught). They're probably drooling like hungry dogs over all the ways they can fleece people with Bitcoin...
I'm afraid that Bank of America is not the ONLY bank which screws their customers.
In fact, I have yet to find a bank which has failed to screw their customers.
I've never seen USAA do it. I'll be a customer for life. From their insurance products to their banking and my mortgage they've always acted with nothing but the highest standards of customer service.
Re: (Score:2)
I've never seen USAA do it. I'll be a customer for life. From their insurance products to their banking and my mortgage they've always acted with nothing but the highest standards of customer service.
My understanding is that USAA is a Federal Savings Bank, a savings and loan association federally chartered in the United States, which is different than how other banks are chartered. That's why they haven't screwed you like a regular bank would have!
Re: (Score:2)
I'm afraid that Bank of America is not the ONLY bank which screws their customers.
In fact, I have yet to find a bank which has failed to screw their customers.
My piggy bank has always been good to me. No interest, but no fees either. Seems fair enough.
Re: (Score:2)
I guess you don't live in a country that is running the presses until they glow red hot. Where is that?
Re: (Score:2)
BoA was one of the more responsible players. They were conservative and had cash so when the shit hit the fan they had the spare cash to buy Merrill Lynch and Countrywide, to institutions that were not responsible and in Countrywide perhaps criminal. BoA is currently regretting the purchase of that one.
Re: (Score:2, Interesting)
yes, bofa is a bank, and they will do anything to make a profit a long as it does not cause them lose customers or take on legal fees to the point that they do not profit from their fleecing ways... up to this point their primary competitors are just as 'fleecy' as they are and the customers are stuck with the same fleecing habits wherever they go
bofa seems to be recognizing that bitcoin could become a non-fleecy competitor to their market and they are laying down the claim that good old American Dollars tr
Re:Of course it could be big. (Score:5, Insightful)
I can't put my finger on why, exactly, but the whole pushing a cashless society thing really makes me uneasy. Especially things like http://betterthancash.org/ [betterthancash.org] , which is targeted at the poor and developing countries. I realize that much or even most of our current financial lives are carried out digitally, but when it comes down to it the only thing better than cold hard cash that can not be directly seized from you, subjected to computer or human errors, or denied to you during emergencies are things with intrinsic value (gold, silver and other items mankind puts real value into as a thing unto itself). When people like Bill Gates, Citi, BofA, the United Nations, Mastercard, and Visa are all on board the "physical money is bad" train, I don't trust it one fucking bit.
Re:Of course it could be big. (Score:4, Insightful)
Thank you for including good ole Bill on that list. As an igtheist, it really riles me when he is held up as being altruistic. Noone who promotes Monsanto is doing anything positive for the world.
Re:Of course it could be big. (Score:5, Funny)
Bank of America is always looking for new ways to screw over their "customers", be it through fees, lying, or trying to steal their (paid off) houses through foreclosure (and blaming it on "computer error" when caught). They're probably drooling like hungry dogs over all the ways they can fleece people with Bitcoin...
That's what I found funny about the article. BofA thinks bitcoin could end up with "a reputation close to silver." and all I can think is "As opposed to Bank of America, which has a reputation close to shit, cancer, and child molesters."
we've all been here before (Score:5, Insightful)
“I can calculate the motion of heavenly bodies but not the madness of people.” -Sir Isaac Newton after losing a fortune in the South Sea Company bubble.
Replacement for cash not bank accounts (Score:2)
One thing that I don't think is usually appreciated is that Bitcoin isn't necessarily a replacement for a bank account. It's supposed to be a replacement for *cash*. Bitcoins can be stored in a wallet, lost, stolen, and handed to the wrong person just like cash can, except with the added advantage (danger) that I can transfer it to anyone on the planet almost seamlessly. Credit cards, bank accounts, etc. that offer me asset protection and such will be just as useful for Bitcoins as they are for cash, but th
Re: (Score:2)
No its like gold which is a way to get rich.
It is not worth the risk to use it like cash. It is worth it to gain more of it though
Re: (Score:2)
Re: (Score:2)
The deflationary part pretty much assures that. I do think that some of the other cryptocurrencies that incorporate a simply determined inflation rate are more likely to achieve a stable value.
Re: (Score:2)
you can chop the coins up to a certain pretty high point - and bitcoins had an inflation rate of sorts built in, the mining itself.
but with any cryptocurrency since the value is determined by what people are willing to trade it at, you can't just have a "simply determined inflation rate".
Re: (Score:3)
I do think that some of the other cryptocurrencies that incorporate a simply determined inflation rate are more likely to achieve a stable value.
Perhaps.... banks such as BOFA; should love a deflationary cryptocurrency; if that is indeed what Bitcoin turns out to be. The problem is; much economic activity is unlikely to happen, if the currency is indeed deflationary
For folks borrowing money (E.g. Borrowing Bitcoins) ---- many consumers with credit cards;
A deflationary currency sucks, because over
Re: (Score:2)
Most of the time you are baying back more money in real terms than the money you borrowed -- it just depends on the APR of the loan.
An APR of %0 in bitcoins based against a 2% USD inflation would be a equivalent to a 4% APR in USD against the same inflation rate.
BTC can't replace "cash" (Score:2)
You're mistaken there. BTC is simply an electronic record of a sum. BTC is not hard currency.
You can't use BTC for any non-electronic transaction. That's alot of transactions.
That's not a replacement at all. BTC can't replace currency...unless it *becomes* a physical currency.
Re:BTC can't replace "cash" (Score:4, Insightful)
> You can't use BTC for any non-electronic transaction. That's alot of transactions.
You can, if you're really good at doing math in your head.
Seriously, though, you can use tricks to print redeemable coins on bits of paper. Using these, you can make transactions enitrely offline... but since the recipient can't know that the paper is worth anything until he uses a computer to check it, you need a bit of trust.
Since these days even poor people prioritize getting a cell phone, there's really little need for non-electronic transactions.
an IOU isn't taken as cash (Score:3)
c'mon man...
that's not a replacement for cash
that's the same as an IOU...whether you use BTC or $$$ for the units of the IOU doesn't matter it's still just a fucking IOU
until you can pay bills, taxes, buy a hot dog at the corner vendor, etc with *non-electron
Not for cash but for valuable metals (Score:3)
Cash is a piece of paper that is only worth something if the issuer is still somebody. If you have one billion German Reichsmark, you have a piece of memorabilia, totally worthless. That is because the government that issued it declared it worthless.
Valuable metals are nothing more than shiny stuff. Yes, they are of some use in the industry because they tend to corrode very little and have a good electrical conductivity, but almost all their value is based on the fact that they are rare and we humans all a
Re:Replacement for cash not bank accounts (Score:4, Interesting)
Credit cards, bank accounts, etc. that offer me asset protection and such will be just as useful for Bitcoins as they are for cash, but they will be denominated in a currency independent of any given country.
That makes sense for joe average consumer. Let a third party "bank" do the heavy lifting of keeping your wallet and private keys; the bank is responsible for security and providing convenient access.
When you want to go to a store and buy something; you do something that directs your bank to execute the bitcoin transfer.
By the same token; you can go online, withdraw some bitcoins from your bank account to a local wallet -- and pay the vendor.
Re: (Score:3)
If it is a replacement for cash, its value should decrease over time to discourage people from hoarding it, and so keep the currency liquid.
It's official (Score:2, Troll)
Whelp, it's official. If Bank of America thinks it's a great investment, Bitcoin is going to expand rapidly to biggest bubble anyone has ever seen, and then murder several developed economies when it bursts. Look for the Countrywide Bitcoin Exchange coming soon!
Could be worse though, they haven't come out with a Beanie Baby Bitcoin yet...
Re:It's official (Score:5, Insightful)
I'm not going to argue that Bitcoin won't dip in value in the future, perhaps precipitously, but the fascinating thing about Bitcoin is that after that happens....it will still be there. They don't disappear, and other than signalling from other participants in the market, nothing will have changed about it.
Beanie babies fall apart. Penny stock companies go bankrupt. Tulip bulbs and all that eventually rot, burn, or get destroyed.
I don't think that persistent state is a trivial difference. Bitcoin will still be there, with a price history that will encourage speculators again. The Bitcoin network will be running on some networked computers on the planet for decades to come, no matter what. The net present value calculation for Bitcoin really does have to go out much much farther than almost any other object besides precious metals and gems.
Re: (Score:3, Interesting)
When the maximum number of bitcoins has been mined - who is going to have an incentive to run miners? At that point, nobody's going to compute hashes, and transaction chains won't be verified any longer. It works great as long as all those people out there dedicate their clock cycles to pounding out hashes. But without an incentive, it's all going to evaporate.
Re: (Score:2)
0.0001 BTC has become real money (Score:4, Informative)
Re: It's official (Score:5, Informative)
Re: It's official (Score:5, Interesting)
Miners will still receive the transaction fees for all the transactions included in the blocks they mine.
Transaction fees are key but there's a subtle issue here: while there are a finite number of bitcoins, there are an infinite number of (possible) digital currencies.
Sure, a few years from now bitcoin is going to be supported by transaction fees. But what happens when, say, Google, comes along with their own digital currency and offers lower (or even no) transaction fees? And what happens when (not if) someone develops a currency that is clearly technically superior to bitcoin - e.g. with a more (space) efficient mechanism to record transaction in the block chain.
One way or another there's eventually going to be another digital currency that is clearly superior to bitcoin. And people are going to start flocking to the hip new digital currency. So, not only will bitcoin be fundamentally inferior, it will also be losing value (i.e. massive inflation) - while the other currency will gaining value making it all that much more attractive.
That's not to say that there isn't a lot more money to be made it bitcoin before that happens - just that eventually someone's going to be left holding the bag (i.e. a whole lot of nearly worthless bitcoins.
Re:It's official (Score:5, Informative)
There's no particular reason to assume that bitcoin is the cryptocurrency that will win the future.
There are plenty of contenders and nothing to stop [large financial institution] from latching on to one of those.
Re:It's official (Score:4, Interesting)
Not to mention states. There has been talk of a government-run electronic payment infrastructure for a long time (why shouldn't there be one? After all, paper bills and coins are government-run payment infrastructure too).
But the owners of the private payment infrastructure (Visa, Mastercard, Paypal, banks) lobby against it with tooth and nail.
Now the little people, cryptographers, libertarians and online geeks, have actually managed to build up a decentralized payment infrastructure without government or corporate help. That's a damn impressive achievement, but one of the consequences is that it'll be harder for governments to sit on their behinds and let their own payment infrastructure remain in the 7th century.
Re: (Score:2)
People Aren't *That* Irrational (Score:5, Insightful)
Re: People Aren't *That* Irrational (Score:5, Informative)
I wonder if people who make the tulip comparison actually get what happened there. Tulips take years to grow, and can be multiplied. Suddenly a new type of tulip came into existence because of a viral interaction. A handful of rich traders (and some others trying to get in on the action) tried to corner that market, so the initial bulbs were extremely valuable. They took very large future options on them. Then at the height of the bubonic plague, the society temporarily collapsed and tulip prices went along with them. As it was mostly option contracts, they were largely not executed, so it didn't end up being a major issue. There are some lessons to learn there, but even if Bitcoin collapses, it will be completely different.
Re: People Aren't *That* Irrational (Score:4, Informative)
This is a bunch of non-sequitirs. "As it was mostly option contracts, they were largely not executed, so it didn't end up being a major issue." Really? The damage caused by tulipmania and so on has nothing to do with whether or not the options are executed. Even if they aren't, people spent money on those options contracts, and so lost massive amounts of money when the prices collapse. The characterisation of the prices collapsing due to 'the height of the bubonic plague' is also incorrect. The height of the bubonic plague was 200 years earlier in the 15th century, and plague outbreaks occurred before, during and after tulipmania.
Re: (Score:3)
How was this modded "informative" when it fails to give any accurate information ?
If you knew what you were talking about, you wouldn't pretend there was a corner of the tulip market at the time - which there wasn't. Instead there was monetary debasing due to the huge influx of precious metals from the Americas (thanks in no little part to the invention of amalgamation), causing inflation on a massive scale (in about a decade this region's entire money supply grew by half), and a flight of savings [mises.org] to evade
Re: (Score:2)
Stop and smell the tulips.
Ahh...the smell of old electronics [staticflickr.com]...
It was only a matter of time. (Score:4, Insightful)
Initially the Wall Street guys were against Bitcoin because they couldn't figure out how to make money off of it. But now they've studied it and studied it and studied it, and now you're seeing the results of the research - they've found ways to manipulate it in the same fashion as regular currency markets.
BoA is just the start - expect the rest of Wall Street to start investing heavily in Bitcoins as they try to eke out fractional coins on every transaction. And the Bitcoin infrastructure is near the point where it's "too big to fail" - even if it crashes, there's too much entrenched to abandon it completely, creating a perfect opportunity for the suits to actually acquire even more cheaply.
Oh yeah, they'll probably also find a way to do HFT using it, so get ready to parse billions of new entries in the blockchain. Don't underestimate the mathematical prowess of bankers - once they show interest, they've found ways to make money off it.
Hahaha!!! (Score:3)
(Please note, the above should not be construed as implicit endorsement of bitcoins; but merely an observation that so long as the rewards for gambling with other people's money are so good, people will find ways of doing risky things in basically any asset class.)
50 minutes? (Score:5, Insightful)
Re: (Score:3)
It depends on what type of service to move the money is used.
For ACH, the submitting bank sends their batch of transactions to the clearing house, the clearing house processes all the batches, and when the receiving bank picks up their processed batches. Typically it's a next-day service. The bank collects all the days requests, sends them at say 5PM. The clearing house processes them overnight. And the receiving bank pic
The biggest thing since... (Score:2)
Mortgage-backed securities!
I feel more confident already!
In other news... (Score:2)
Imagine that (Score:4, Insightful)
Bank of America saying that a "central counterparty" is required to verify the transaction and mitigate risk. Wonder if they have anyone in mind?
We should all like this Bitcoin *concept* (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 than anything else we know, and there's plenty of reasons to believe that it could succeed as much as it could fail. (and in many ways it has already succeeded as a proof-of-concept of the idea of decentralized currency)
Why does gold have value? Nothing is backing gold, and if it was for its material properties alone, its value would only be a fraction of $1,300/oz. Yet it maintains value because of its properties to behave as a transferable store of value: scarcity, fungibility, density, identifiability, etc. Bitcoin shares a lot of those qualities and adds some new ones: ease of transfer over the internet, negligible transfer fees, 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 credit cards or paypal, which all require me to remember log-in creditials, give away personal information to be [improperly] protected by a third-party and/or pay a bunch of 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?
When you want to bash Bitcoin by saying it has no intrinsic value, ask yourself this: "what other system of payment/transfers allows someone to move $10,000,000 worth of value, to or from anywhere in the world, 24/7, nearly instantaneously, without fees, can't be debased or printed, irreverible, and without anyone being able to freeze or seize it (without direct access to your wallet)?" Regardless of its downsides, that's pretty f***ing powerful. There's a reason it's "could be a big deal."
Re: (Score:2, Insightful)
...ask yourself this: "what other system of payment/transfers allows someone to...
An infinite number of them actually - but they haven't been invented yet. An optimistic future for bitcoin is that owning bitcoins becomes like owning foreign currency: a handful of major (digital) currency exchanges allow people to buy and sell from a selection of thousands of different competing digital currencies. A less optimistic future is that bitcoin goes the way the Mosaic web browser - a major player in the early days but now superseded by other, more capable, technology.
Re: (Score:2)
That's the thing - to be a confidence trick baited for geek it needs the window dressing to make it attractive for geeks. It's as if somebody read crytonomicon - saw the digital currency described there and then removed all the portions that made sense leaving only a shiny layer of tinfoil.
The whole "mining" thing is a distraction and a mechanism to force a pyramid structure. Those people buying mining rigs or farming compromised hosts now are missing the point th
Re: (Score:2)
But all the bashing of the Bitcoin concept is disappointing
All it amounts to is an individual holds an asset. They can transfer part or all of that asset to another individual without going through a governemnt monitored agency.
Ho hum
People have been using gold in exactly that way since humanity started bartering. The concept is thousands of years old. The only thing that is novel with Bitcoin is the implementation - not the concept. And we have yet to have all the problems, weakenesses and drawbacks of this system come to light. For the one thing we can guarante
Re: (Score:3)
When you want to bash Bitcoin by saying it has no intrinsic value, ask yourself this: "what other system of payment/transfers allows someone to move $10,000,000 worth of value, to or from anywhere in the world, 24/7, nearly instantaneously, without fees, can't be debased or printed, irreverible, and without anyone being able to freeze or seize it (without direct access to your wallet)?" Regardless of its downsides, that's pretty f***ing powerful. There's a reason it's "could be a big deal."
Except that value is entirely independent of the value of bitcoins themselves. It doesn't matter if I need to buy 1 BTC @ $10M or 1 billion BTC @ $0.01 and if you argue there's not actually 1 billion BTC, we could do it $100 at the time. It's a money scheme where it pays to get in early, which usually means it's bloody stupid to get in late. It's just not clear when "late" is just yet.
Re: (Score:2)
I share your sentiment but it's unfortunate this is the way the world has progressed.
People get hold of land when it's cheap, then a city is built around it. These landowners may have helped a bit to develop the city over generations, but ultimately it's the many other people who choose to come to the city and settled down that make the city a good place to live, and the land valuable. Early land owners reap the benefits of the increased economic activity on the land they own, then they become rich and powerful.
Yup, I like to tell people that Bitcoin is like any succesful business. You may have been one of the lucky first shareholders, but even if you're not, you can still use it for plenty of nice things, including profit. Also, while being an early adopter involves a lot of luck, there's also the obvious investment of time, effort and money into something that you believed in.
This isn't quite straightforward though, you may have been an early miner without contributing any code, but the act of mining itself i
Re: (Score:2)
You are solely focused on bitcoin as an investment opportunity rather than its intrinsic utility.
Sure, but as far as intrinsic utility is concerned it doesn't matter when I get involved with bitcoin ... well, in fact it does: right now the price instability and general uncertainty mean it is far better to not get involved, wait for all this nonsense to sort itself out and join the game once everything is settled, stable, and bitcoin is actually being used purely for its intrinsic utility. In other words, it's better for me to ignore it for a few more years at least.
Re: (Score:2)
Bitcoin has lots of value (Score:3, Interesting)
Americans or Europeans could probably not understand it, but in some countries in the world taxes are almost on confiscating levels, leaving nothing to people.
I send glasses to Argentina and they tax 15$ per item, way more than the 3$ it cost to make and send, then they tax again and again like crazy. End result is that what used to cost 9$ to the final customer now cost 100$.
This happens all around South America now, Venezuela, Bolivia...
The same happens with money transfer, governments consider money from the people their own, they tax it to death and they spend the money mostly on their own, using military force and police to subjugate them.
So bitcoins means the people could transfer money very easily and fast, without being watched so they could survive.
Again this is something that people in the first world can't really understand. Their "crisis" is a joke compared with what most of the people in the world have to life.
Re: (Score:3, Interesting)
Re: (Score:2)
If all the people paid what was an honest and reasonable proportion of tax, the "take" would be higher and the authorities would not have to extort monies from the few cases that they discovered and the low-hanging fruit (usually foreigners who were either brought up to be honest or don't know all the plays)
In those cases, Bitcoin is just another way of avoiding taxes, thus ma
Somebody bought some Bitcoins.... (Score:3)
Re: (Score:2)
Re: (Score:2)
Re:I understand how to value (Score:5, Interesting)
Honestly I find that one of the most interesting things about it. There is no intrinsic value. None! And yet it's indestructible* and peer to peer confirmed. Therefore (ultimately) the only cue anyone has to the value is what others value it at. Gold is sometimes considered to have become valuable for similar reasons. Sure, it's pretty, and that likely helped, but it doesn't have enough use to justify its value other than what everyone has previously valued it at.
* I can't say that with absolute certainty, given how software goes, but as a thought experiment it's fascinating.
Re:I understand how to value (Score:5, Insightful)
There is no such thing as intrinsic value to begin with. People place value in things.
Re:I understand how to value (Score:5, Insightful)
There is no such thing as intrinsic value to begin with. People place value in things.
Absolutely correct. However, it's that process of how humans value things that make it an interesting case. We have in our economy a network of things that have some generally agreed upon value. When people try to value something, they look at the activity its used for and the value of that activity within the current network, and so the value is subject to the changes in that object's use.
Ignoring mining, with Bitcoin there is no function within the current universe of things we value. The only cue I have is what others have previously valued it at, and what it is currently valued. I think that's very interesting, especially when you consider the kind of objects that humans have used as currency throughout history (gold, metals, durable objects like shells, etc.)
Re: (Score:3)
Ignoring mining, with Bitcoin there is no function within the current universe of things we value. The only cue I have is what others have previously valued it at, and what it is currently valued. I think that's very interesting, especially when you consider the kind of objects that humans have used as currency throughout history (gold, metals, durable objects like shells, etc.)
I don't see what's so novel about that, cash doesn't serve a function either. You might say it's to pay taxes but kings and lords knew how to take payment in real world goods. It's just a value token, there's no intrinsic value to small bits of paper in a post-collapse economy. If the price of something I like doubles, did it get more expensive or did my money become less worth? Potayto, potahto. Your money is only worth what it buys you.
Re: (Score:3)
Sure there is: accounting. Bitcoin is a distributed accounting system with access controls on account transactions. Every trader in history would find that valuable.
Re:I understand how to value (Score:4, Insightful)
There is no such thing as intrinsic value to begin with. People place value in things.
Capital-V "VALUE" is a purely mental abstraction, about which one can wax Platonic and ultimately empty; but the distinction between commodities or instruments with substantial utility (iron, aluminum, books, potatoes) and ones that are kept around mostly because they symbolize 'value' ($20 bills, gold, bitcoins) is arguably still relevant.
I don't entirely like the term 'intrinsic value', 'utility' might be closer; but some commodities are like D-list celebrities, who are famous primarily for their fame, and are valued primarily for their value, while others are valued because of the various purposes they serve. The lists overlap (gold, say, has a number of specialty applications in electronics; but would be extremely unlikely to command its present price if it had the same prestige as iron); but even when they do, the delta between the assigned value and the value in utility is usually pretty noticeable.
Re: (Score:3, Informative)
Intrinsic value means there's value placed on it other than it's secondary/exchange value. For instance, people buy gold because it's useful for electronics or jewelry. The dollar has no such uses, so it is said to have no intrinsic value.
Re: (Score:2, Insightful)
The US dollar has one unbeatable use: paying taxes. If you hoard gold and bitcoins, the sheriff of Nottingham is going to come after you for some US dollars.
Re: (Score:2)
At which point you sell some gold or bitcoins. Meanwhile the person who kept cash finds that their cash is now only worth 95% of what it was last year because King John is running the presses through the night.
Re: (Score:2)
Please go correct the wikipedia entry [wikipedia.org]. Some arsehole has typed in the wrong country name!
Re: (Score:3)
Errr – no, or not very much. About 5% of gold production goes into manufacturing. We could close down all gold mines and use our reserve for centuries before we would need to start mining again. About half is bought as bullion and about half is bought for jewelry – which for a lot of people is the same thing as bullion.
Re: (Score:3)
Some things we are very free to put value in, others we have very little freedom to. If I'm starving, I can't really choose to assign food no value. If I assign value to things wildly out of step with my fellow humans, I'm going to have a hard time ("Give me that sandwich? You can have my car!")
When something is of such a character that we pretty much have no choice in the value we assign it, and there's no plausible way it's going to change, we say that it has inherent or intrinsic value. Maybe a little sl
Re: (Score:3)
Intrinsic value certainly is real. A chicken has intrinsic value, it can feed me for days and I and everyone else I know likes to eat.
Re: (Score:2)
Gold plating (Score:2)
Therefore (ultimately) the only cue anyone has to the value is what others value it at. Gold is sometimes considered to have become valuable for similar reasons.
Apart from jewelry, gold is useful for plating electrical connectors.
Re: (Score:2)
Re: (Score:2)
That is not quite true – we can’t measure value but we can measure dollars. If I am promised to be paid $110 a year from now, and the time value of money for me is 10%, then the intrinsic is 100 – in dollars.
We may debate what value is and how that links to dollars. It can’t be measured directly, how to measure inflation / deflation, etc. However, currency (be it dollars, gold, of BitCoins) has no intrinsic value. If I have a 100 units of currency today, and I have a 100 units of cur
Re: (Score:2)
I didn't say it couldn't be lost or stolen. If it's stolen, it still exists. If it's lost, likewise, it still exists and could be found.
I could commit the wallet code to memory and destroy the hard drive it's on, and theoretically bring it back. If I lost it forever and a million monkeys figured out the code, it would have value in the system.
That's pretty dang indestructible.
Re: (Score:2)
Warning: only one copy existed, and it was on an encrypted hard drive with a 27 character key, and said hard drive was later reformatted and re-encrypted with a different key. (at the time litecoins were next to wor
Re:I understand how to value (Score:5, Insightful)
BofA's angle is probably the same as with your money. Charge you to hold it, charge you to transfer it, charge you to talk to a phone support rep about holding it or transferring it, and while holding it for you, gamble with it on the side.
Re: (Score:3)
Charge you to hold it
You mean, charge you to provide the service of holding it, which includes people, infrastructure, legal and regulatory costs, and more.
charge you to transfer it
You mean, charge you to provide the infrastructure, support, people, reporting, and security around transferring it.
charge you to talk to phone support rep
Right. Charge you for making a person's time available to you when they already provide no-charge mechanisms to get the same information by other means.
gamble with it on the side
Sure, interest rates are low right now. But where do you think interest comes from? How do you think loan
Re: (Score:3)
But where do you think interest comes from?
Are you kidding? The bank isn't the one paying interest! The grocery store doesn't make Frosted Flakes, either. Anyone who's paid on a loan knows exactly where interest comes from.
The bank doesn't create anything at all. It acts as a mediator between willing parties on both sides and then takes as large a cut as it can. If those parties instead cooperate, there's no need for a profit-seeking third party. That's the whole idea behind a credit union. Providing those same services in a wholly automated w
weird gateway currency (Score:4, Insightful)
I read through the report and it was weird to me as well...
I can't place it exactly...it had a 'Stepford Wives' sheen to it. It seemed fake.
It seems unthinkable to me, but BoA could be looking to be a BTC exchange like Mt. Gox or Bitpay.
It's all about controlling the gateways. BoA loves fees, and they'd make a ton of $$$ charging people to convert BTC to a currency of choice.
Until you can buy gas, groceries, and pay credit card, mortgage, and government fees/taxes with Bitcoin the true power and value of the currency is in controlling the gateway to **actual currency**
That's the final unavoidable pinch point where everyone has to "pay the man"
BoA wants to be that "man"
Re: (Score:2)
BoA is a household name as a bank (and everyone knows they are rotten to the core). That household name status would make people feel like bitcoin is more "real" though, since they can goto their neighborhood BoA to cash out or buy in, etc. This would be a huge step towards de-anonymizing BTC transactions - linking real humans to all those block chain transactions. Very very bad.
Re:I understand how to value (Score:4, Interesting)
Straight up money laundering no fucking about, be you Dictator, Gangland criminal, Corrupt politician, Bank of America is the bank for you, now with untraceable bitcoins and supercomputers to generate more ;D.
Re: (Score:3)
But Bitcoins are not shares. When you buy a Bitcoin you are not buying equity in the Bitcoin environment. Wonder what model BoA valuers have in mind for this. It weirds me out.
BoA's model means that they want to sell you BitCoin at $1300. Anytime a bank puts a price on anything it usually means they are looking to sell it at that price. Afterwards they'll probably short it, but that's another story.
Re:I understand how to value (Score:5, Informative)
When you buy a Bitcoin you are not buying equity in the Bitcoin environment. Wonder what model BoA valuers have in mind for this. It weirds me out.
Almost certainly they are using a Commodity Futures Contract model that is used for precious metals, oil/petroleum, wheat and so on, on places like the Chicago Board of Trade or the London Metals Exchange. With those, there is a finite new supply of "product" and for the vast majority of people dealing with them, there is no physical product - the contracts being traded are for future delivery of a specific quantity of a specific product on a specific date. The product will be delivered to a specified place, and it is the responsibility of the person receiving the product (the contract owner as of the contract maturity date/product delivery date) to move it from that delivery point to a storage location of their choice.
As such, the traders who buy and sell these contracts do not want to hold them until maturity, because they have no storage space, so they buy the contracts (for example) 12 months before the delivery date for a specified price, and sell them before maturity, hopefully for a profit.
With bitcoins, there are no physical deliverables, but in every other important sense they resemble these Commodities Futures contracts.
If they became widely accepted and centrally traded, with a central body guaranteeing transaction integrity (basic ESCROW systems would probably be the starting point for that), they would almost certainly be traded as a "standard" currency on FX markets (exchanging Bitcoins for US Dollars, Euros, Japanese Yen, etc.), but without that central body guaranteeing the transactions, they would probably be traded as Commodities Futures.
The "problem" with both of those routes is that there is heavy auditing on every stage of every transaction, so the anonymity aspect of Bitcoin goes right out of the window. The parties involved in any given transaction would be known and recorded, and even if those are brokers acting on behalf of the real Bitcoin owners, the brokers would still need to have records showing who the real owner is.
Re: (Score:2)
Dollars are not shares which pay dividends either, but BoA has somehow assigned as value to those, too.
Know your customer (Score:3)
Re: (Score:3)
Re: (Score:2)
Re: (Score:2)
Yeah, what BoA is saying is that *even if* Bitcoins were successful and popular in commerce, and as trusted as silver (which it's not), the prices it is commanding now is approaching the maximum of what it should be. Basically BoA is saying there is a huge bubble.
But hey, the Bitcoin pump-and-dumpers will push any lie that will nudge the prices up.
Re: (Score:2)
Already ONE single bitcoin is worth over $1000, so how do they get a total market cap of just $1300???
Obviously they are referring to the value of a single Bitcoin. Although that still doesn't explain their math.