Drug Site Silk Road Says It Will Survive Bitcoin's Volatility 293
Sparrowvsrevolution writes "Bitcoin's recent spike and then collapse in value has convinced many that it's too unstable to use as a practical currency. But not the founder of Silk Road, the black market drug site that exclusively accepts Bitcoin in exchange for heroin, cocaine and practically every other drug imaginable. Silk Road's creator, who calls himself the Dread Pirate Roberts, broke his usual media silence to issue a short statement that Silk Road will survive Bitcoin's bubble and bust. The market's prices are generally pegged to the dollar, with prices in Bitcoin fluctuating to account for movements in the exchange rate. And Roberts explained that vendors on the site have the option to also hedge the Bitcoins that buyers place in escrow for their products, so that they can't lose money due to Bitcoin's volatility while the drugs are in the mail. As a result, only about 1,000 of the site's more than 11,000 product listings were taken down during the recent crash."
I sell actual things in Bitcoin (Score:3, Interesting)
I sell physical goods and accept Bitcoin as a payment method. The volatility doesn't bug me at all. While it's only a tiny percentage of overall sales, it's still exciting to see a currency that can actually become a true bartering agent that is freed of non-market forces.
If a seller is concerned with volatility, they should consider not selling their received BTC for fiat currency. It's the number of "we accept bitcoin" sites that accept currency and then immediately convert it to fiat that is one reason for the downward pressure.
I blogged about it the other day, in how I wish governments would just make BTC to fiat currency transactions illegal [2abd.com]. It would be a great step in reducing volatility and decoupling BTC from the regulated markets.
There is still need for a decentralised exchange (Score:4, Interesting)
With the very recent forceful closing of the BitFloor BitCoin exchange, and the inavailability of bitcoin-24, another (european) exchange, there seems to be a crackdown on BitC exchanges going on.
What is needed, is a decentralised method for trading BitCs for other currencies, or else BitCoins can be made to be worthless by shutting down the current centralised, easily identified exchanges. I'd suggest Ripple but that technical solution seems to be going nowhere at the moment, alas.
Re:I sell actual things in Bitcoin (Score:2, Interesting)
Since my financial stability for the future doesn't correlate with income nor even profit, I think my risk is pretty low. Even if volatility continues, and even if my businesses took in 50% of their revenues in BTC, I still wouldn't see any actual harm. The businesses have been around for decades, and they're self-sufficient and stable.
Converting BTC to fiat currency puts a sell-pressure on BTC. Holding BTC would reduce the selling supply, thereby reducing volatility from the sell side. It's the same with dollars: I hoard my dollars in cash "under the mattress" rather than put it in a bank to get loaned out as debt (money multiplier effect).
The "market forces" in BTC right now are pretty unique because only a small number of BTC holders are actually transacting. Most people are "long game speculators", and are neither buying things with BTC nor selling it to liquidate for fiat currency. As the number of BTC users goes up (which will likely happen when volatility is reduced), I believe we'll see a more stable platform.
Re: In the other corner ... (Score:2, Interesting)
Uhh. There were a flaming ton of bank crashes during that time, and still more until the dollar was decoupled from metal prices.
The Age of Gold was no golden age, financially speaking. It also gave too much financial sway to gold producers (mine owners) who could control the rate of production and have disproportionate power over financial markets because of this.
There is a great explanation. (Score:5, Interesting)
There is no obvious explanation for why the digital currency has fallen so far and so fast, although the market correcting after such a huge rise might be a good explanation.
The price of bitcoin rose much higher than the cost to mine bitcoins (i.e. price of computers and electricity). While some people got caught up in speculating, others saw this and started mining and selling instead, causing a crash. Bitcoins are volatile because people don't understand it yet. If they did, they'd realize that the value can not go far above the price of mining. Having said that, the price of mining is continually going up.
Once a few websites start publishing indices of the average cost of mining a bitcoin at any given time, I think that will keep this sort of speculation in check.
U.S. currency is printed on paper (Score:4, Interesting)
It's cloth, actually. Currency isn't printed on paper, it's roughly 75% cotton, 25% linen.
U.S. currency is printed on paper
Cloth [wikipedia.org] is a flexible woven material consisting of a network of natural or artificial fibres often referred to as thread or yarn.
Paper can be made of many things including cotton and linen. Paper [wikipedia.org] is a thin material mainly used for writing upon, printing upon, drawing or for packaging. It is produced by pressing together moist fibers, typically cellulose pulp derived from wood, rags or grasses, and drying them into flexible sheets.
Re:Speculation (Score:5, Interesting)
Equality of results (not equality of opportunity) which is their version of "Utopia", and impossible, and tyranny of a sort. It punishes success, rewards failure, by definition.
Depends on your understanding of equal opportunity, let's take college education as an example. Is it "equal opportunity" if the B-grade son of a minimum wage worker goes to college and the C-grade son of a millionaire doesn't get in? Or is it that they both had the "equal opportunity" to pay Harvard $40,000/year in tuition? If a teenage kid develops a serious condition before he's had any chance to pay for his own medical insurance does he deserve the same quality of life if he's the son of a minimum wage work or a millionaire? Or is it equal opportunity that their parents both had "equal opportunity" to pay for an insurance with good coverage? The words are the same but the meaning is very different.
The plan economy died with the Soviet Union decades ago and despite the rumors of socialism in Europe doctors are paid very different than burger flippers, there is competition to provide many if not most goods and services. The difference is the cost is often shifted from the user to the tax payer, particularly at the lowest end to provide universal services to those who can't afford them. But I wouldn't call giving someone who's fallen down help getting up rewarding failure, whether they tripped on their own shoelaces or got pushed to the gutter. Then again offers to bring a mattress, food and water so they can stay down more comfortable might. Unless they have broken legs, in which case they don't need tough love to pull them back on their feet but real help to recover. And some can't recover, but we can give them a decent life.
It's easy to become a capitalist when you're on the winning side of the equation. I'm not so selfish to believe that I "deserve" a better life than an Indian or Chinese or worse a third world country but if you lay out of a plan to average the standard of living across the world then hell yeah expect opposition. The rich want to stay rich, whether it was earned fair... meh, like anyone chose to be born a son of a poor, non-literate sheep herder in Africa or not. I've run into many people with various physical and mental disabilities and the only thing I can say is that I'm happy to be relatively healthy. You're right, I'm quite probably going to be a net tax contributor unless I happen to live to 100+ or have some hyper-expensive medical issues down the road. I still think I got the better end of that deal.