Comment by nucatus | Hacker News Reader

Comment by nucatus | Hacker News Reader

As long there is no consistent and measurable value to back the cryptocurrency, the word "currency" in that construction is senseless. Who is buying goods or services using bitcoins? Anyone? That is just because nobody wants to sell something using a mega-volatile "currency", unless they want to speculate. The problem in the economy is that basic trading IS NOT speculative. Both, the seller and the buyer of goods and services have a strong understanding of what the value of their goods and services will be in one year in a currency, when that is denominated to a universally accepted value.

At this point, cryptocurrencies are just tradable speculative assets. They are not first-class-citizen currencies due to the major flaw exposed above.

No government in this world will ever give up the power to control its currency through this body called "the central bank".

The only one condition to make this a true currency that is out of the hands of the central banks is that EVERYBODY in this world will give up their currency and adopt ONE AND VERY SAME cryptocurrency. Since this is not a plan a government is willing to accept, they won't accept the cryptocurrencies either, since governments are the biggest money handlers.

If that is not possible, and very likely not to be, having a central bank to control a cryptocurrency cancels the very important and crucial attribute of the cryptocurrencies – the decentralization and the distributiveness – defeating its purpose.

> Who is buying goods or services using bitcoins? Anyone?

Excuse me, I am. Expedia, Cheap Air, NewEgg, Microsoft, Dell and lots of other merchants accept it and I used them.

Yes, they sell you in bitcoins at a spot value to dollar, or so. Technically, you are using the dollars to pay using the BTC as an intermediate "currency". On top of that, you are paying some extra money to cover the exchange rate risk, which is quite high for BTC.

It is exactly like paying goods and services with, let's say, Apple stocks, only that the price will always fluctuate depending on the DOLLAR quotation of the Apple stock at the time of the payment.

Yeah, but these dollars don't have to pass through your bank account anymore, so you're pretty safe with not paying taxes on them.

The prices aren't set in Bitcoin though. It's just a pass-through for dollars. When an employer and employee agree to base a salary in Bitcoin I will call it a currency, until then, I agree with OP that it is just a speculative asset.

>> Who is buying goods or services using bitcoins? Anyone? That is just because nobody wants to sell something using a mega-volatile "currency", unless they want to speculate...

There's some truth to that in terms of merchant acceptance of BTC not being widespread (even though from a merchant perspective BTC is very attractive compared to regular methods of payments).

That said - couple of comments. 1. All of the "enterprise" type BTC payment acceptance systems that I'm aware of end up with fiat currency transferred to merchant's bank. They typically don't keep BTC balance. So the "speculation" point isn't really valid.

2. This ^^^ is one of the biggest hurdles in the way of a more widespread BTC acceptance. Banks are very suspicious of BTC-originating TXs for various reasons (AML, regulatory compliance etc) so it's not an easy thing to set up an end-to-end payment acceptance flow with BTC from that perspective.

All these merchants are using a spot rate of the BTC to dollars or other traditional, universally accepted currencies. They are not using the BTC to price their goods and services, but they use the BTC as an extra form of payment.

At the end of the day, those BTC are exchanged into dollars, or even right away, making the the dollar the de-facto currency you used for purchasing the goods or services.

If they'd keep BTC balance, it wouldn't ease up any hurdles - the AML&other compliance issues aren't set by banks, but by regulations which apply to everyone doing significant amounts of trade.

If the merchant receives the funds in a fiat currency account in a bank, then the bank worries about AML and related issues so that the merchant wouldn't have to do that - receiving money to a regulated financial institution exempts your business from most of these regulations, but if merchants such as NewEgg, Expedia, CheapAir and others would accept BTC "directly", then the same rules as for cash transaction would apply, namely, they are responsible for ensuring that high value transactions or repeated low value transactions that add up to a lot of value cannot be anonymous, they become responsible from enforcing KYC (know your customer) requirements, they become responsible for any laundering done through their channel if someone finds a way to do this, etc.

The only way how a legitimate business can deal with cryptocurrency (or cash) in large volumes is if they can ensure that the expected benefits of cryptocurrency (unrestricted ability of anonymous/pseudonymous trade) don't get used. The only high-value goods that get sold/bought with BTC are illegal items. The regulations don't affect selling coffee for BTC (but high transaction fees do), but if you want to do serious transactions - transfer wealth, buy lots of electronics, cars or real estate, settle financial deals or stock purchases - then that won't work with anonymous cryptocurrency unless you have appropriate paperwork documenting how you got it, or are ready to pay extra tax (you know that if you bought BTC for $10/coin and sell it for $1000/coin, then the difference is taxable income, right?). It's the same manner as allowing your customers to pay for stuff with a briefcase of cash - you can do that, but you'd need to report the transaction, identify the customer, and that customer would either have a clear source for that briefcase of cash or would have a talk with IRS.

>> If they'd keep BTC balance, it wouldn't ease up any hurdles

That's the thing - they don't want to keep BTC balance which means merchants or their payment processors have to deal with the banks who are very reluctant to deal with BTC-originating payments which is a pretty significant obstacle in the way of BTC payments becoming more mainstream.

True. Central banks and politicians spent so much time and energy getting rid of gold. Why would statists accept widespread adoption of a cryptocurrency as a popular means of payment?

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