Re: Bitcoin donation
On Fri, 31 Dec 2010 14:37:21 +0000, Ben Hutchings wrote:
> However, so far it does look like an exercise in crypto wanking and not
> a useful currency. There are currently about 1.3 million issued
> bitcoins (and the protocol limits the total number to only 21 million).
> The market value of a bitcoin is about USD 0.3 and there are no
> bitcoin-denominated bank accounts, bonds, etc., so the money supply is a
> mere USD 390,000.
If we can learn something from the currency markets, it is that the
relative value of a currency versus another is not fixed, and is
definitely not determined by the number of notes issued. It is determined
by demand for each currency, which is (in the long term), determined by
the relative value of the goods produced/exchanged in each currency and
the trade balance between them. In the short term, changes in the note
supply, currency speculation and other sorts of short-term sudden flows
can (temporarily) shift the market price.
However, the top value of 21 million can present a problem: if bitcoin
starts to become popular, it means more people are using it. If we assume
21 million people each earn in bitcoins the equivalent of 46000/12 ~=
3833 USD monthly (approx. the US GDP per capita), it means 1 bitcoin
would be worth 3833 USD. Thus, buying 1 USD worth of goods means spending
~ 0.00026 bitcoins. This would probably become problematic as numbers
that small can be hard to deal with in day to day usage.