[killyourheros]

I was a big opponent of bitcoin- still wouldn't use it for anything that matters- but there are some great use cases.

With government bans on online gambling bitcoin could really take over(that market). And, of course, there is the illegal drug trade.

When people say that "it's not backed by anything" all they need to do is fire up tor and take a peak at silkroad. It's backed by one of the most in-demand products ever.

[repsilat]

I wonder if it's liquid enough to do an "instant trade". Essentially, you could route (possibly international) financial transactions through BitCoin and avoid big fees by doing a buy on the buyer's side, transferring the coins to the seller, then having them sell the coins in their local currency.

The best part about this is that neither the buyer nor the seller needs to have the slightest interest in BitCoin and it doesn't matter at all if the value of the currency is reasonable so long as it's reasonably stable. Even better, neither side needs to know the other's bank details, just a throw-away BitCoin account number. This isn't just an IMT-killer, it's a PayPal killer as well.

Assuming the BitCoin market is more or less efficient relative to currency markets, and assuming those transactions could be cleared within ~1 day, you could absolutely kill the international transfer market (known for high fees, long delays and shitty exchange rates).

[bencoder]

This can be done but I believe it is a bit more expensive than via banks, since you have exchange fees and the spread as liquidity isn't quite high enough (assuming you want to transfer ASAP. If you are willing to wait on both sides you can do a lot better)

Example exchanging 500 GBP to EUR (via intersango at current rates):

Buy 104.6 BTC @ 4.76GBP Fees for instant trade: 0.95% = ~1 BTC. Balance: 103.6BTC

Sell 103.6BTC @ 5.8EUR = 600.88 eur Fees for instant trade: 0.95% = ~5.71. Balance: 595.17EUR

500 GBP went to 595.17EUR. Exchange rate: 1.19. (google tells me the exchange rate is about 1.26 at the moment, so this is quite poor)

[repsilat]

You're right, that's not good. I imagine it would get better if people started doing things like that in higher volumes, but that's a bit of a Catch 22.

Until then, there are a couple of mitigating factors:

- You may not get the market rate from anyone. The UK post office is only giving me a rate of 1.2260 to the Euro.

- If you need to pay a fee for a transfer it could be worthwhile for small amounts. The UK post office doesn't charge a fee, but it has a min transfer of £250. www.tranzfers.com charges £7 or $15AU. I've paid more elsewhere.

[pessimizer]

I've seen a lot worse at the airport. Assuming that people are using bitcoin for reasons other than a favorable exchange rate, 7 points isn't going to be a deal killer, or even a deal slower.

[kiba]

There's some report of an export business paying their supplier back in China in bitcoin. It's just a rumor though.

[jerguismi]

Bitcoin is pretty useless, since almost the only thing you can buy with it is illegal drugs and guns...

(btw. drugs & weapons are the second and third biggest international markets, food is the first.)

[dnlhoust]

I think the people looking to buy drugs and guns would disagree.

[Anderkent]

Pretty sure that was sarcasm.

[kolinko]

This is also my opinion. For me, BTC doesn't make sense when purchasing, say, computers. But for buying e-goods, MMO game items, or anything else where there are huge margins, it actually makes sense.

And yeah, it's backed by the Silk Road :)

[gokhan]

Referring to this: http://en.wikipedia.org/wiki/Silk_Road_(marketplace)

[Gormo]

When people say "it's not backed by anything", they need only compare it to mainstream currencies - they're not backed by anything anymore either.

[nhaehnle]

Government currencies have the benefit that the government creates demand for them by using it as denomination for tax debts. Non-government currencies have no such external creation of demand.

It's actually quite curious that Bitcoin was able to take off the way it did despite this lack of initial forced demand. I wonder which was more important: the fact that there are so many anti-government ideologues out there, the fact that Bitcoin can help with illegal transactions, or simply the fact that it's a neat technology. I'm certain all three played a role, perhaps to a different extent at different times.

[Gormo]

Independent currencies don't have that particular source of demand, but economies are made of much more than tax debts. And you could argue that overbearing policy itself creates demand for currencies that enable untaxable (and other illicit) transactions. Government itself could be said to encourage demand for both forms of currency.

I doubt that the 'neat technology' aspect contributes much to the exchange rate; or little more impact than coin and banknote collectors have on mainstream currencies. You don't need to put much money in, or participate in many transactions, in order to examine the technology itself.

[rockyleal]

https://en.bitcoin.it/wiki/Trade