For the first time, I have started messing around with BitCoin. I say “messing around” because my investment in it is pretty small at this point: I own a total of 4.237222btc. Of course, the moment that I did buy in (even if it was a minimal buy in) the value relative to the USD went down.
Fortunately, it wasn’t a horrible down-turn. Only about $2USD. I fully expect to recover that value some day. And honestly, it wasn’t a purchase that I made purely for trading purposes. Nor is it immediately for purchasing anything.
No, in fact, it was my first dalliance into the BitCoin market just so I could gain experience with it beyond the fraction of a btc that had been sitting in my person wallet for a couple of months now from contributions (thank you Ryno and Salty). So far, I would say it has been an okay experience, although I really need to get verified with my exchange of choice so I can do some more with it (like moving the coins to my personal wallet).
The fact is, I am looking to start a project fairly soon, and I am considering making it a BitCoin based project. But herein lies several parts of the conundrums. First, I wanted to use BitCoin to get away from banking overhead. This isn’t just from the standpoint of service charges, but more from a procedural standpoint. It’s a lot less encumbering to use BitCoin purely from a mathematical standpoint than it is to use other currencies that have additional fees and things that have to be calculated and handled during a transaction.
Plus, I want to do something that is a bit unique. I want a way to automate some parts of the transaction process that haven’t been done before (to the best of my knowledge), and BitCoin’s purely algorithmic nature fits this need nicely. (I’m un-willing to diverge the details at this point, but let’s just say that it will make some things a little more difficult on one side, but a lot better on the other side. So I’m looking at the positives as outweighing the negatives. I will add, when I develop the code needed for this functionality, I won’t be keeping it locked up. I fully believe in making code available for many, many reasons.)
So, I have a motive for buying into BitCoin at this point.
The conundrum that I have encountered is this: I want to run this project purely on BitCoin. This means that I would do everything in BitCoin, from buying services I need to setup and maintain the project, to setting up a virtual storefront. And that’s where the conundrum comes in.
I plan to have vendors providing services or products, which I want to be BitCoin based. However, the volatility of BitCoin pricing makes it a bit more complicated. As I noted, I took a $2USD hit immediately after purchasing some BitCoins. That kind of fluctuation I don’t believe would be an issue for most vendors. However, some of the really wild swings that we’ve seen in the market (such as the spikes we saw back in April-May), might be cause for concern. Such market swings could make it really difficult for vendors to reliably value their goods.
The obvious solution would be to pin the pricing of the goods to another currency. And, I have seen stores that do adjust their pricing automatically to match market trading (a really nice feature of those stores, IMO). However, that is precisely what I want to avoid. When I say I want this to be BitCoin based, I want it to be purely BitCoin based, and not treat BitCoin as a store of value relative to another currency.
That being the case, my thought is that I would allow the vendors to control the pricing of their products or services. However, I don’t want to have vendors running into the system all the time to adjust their pricing because of small $1 or $2USD swings in the market. At which point I start thinking that maybe there needs to be some constraints on price adjustments. Like only allowing a price to be adjusted if the market has shifted X percent since the price was last set. But, that brings me back to the idea that vendors would be pinning the value of their wares to a currency other than BitCoin.
Another method would be to say that the prices can be adjusted, but only a certain number of times, over a certain period. (For example, four adjustments over a month, or basically once a week). But that, I suspect might alienate vendors if there are large market swings that they are unable to adjust for.
The third option would be to do a hybrid of the two ideas above. Allow X number of adjustments, but allow for additional adjustment based on large market swings. This would be the most flexible for the vendor, but it would also be the most complicated and difficult to understand. (And really suffers from that currency “pinning” issue I have a serious dislike for.)
A fourth option I just thought of. Allow for adjustments all the time, and then generating a report that would allow the vendor to see what the current value of their goods or services is in another currency. Try to use the report to discourage adjusting prices unless there is a major market swing.
I really don’t know which option to go with. But, at this point, it’s kind of putting the cart before the horse since I am still in the planning stages. This is just one of those finer details that my mind has been obsessed with for a while now.
So, back to my current investment in BitCoin. It’s definitely not going away anytime soon. I may start making more active use of BitCoin for making purchases through something like BitCoin Store or one of the other sites (I’ve seen several decent looking retailers). And, there is also the upcoming holidays, so I might use something like Gyft for some holiday presents.
The things I won’t be doing: gambling or going to the Silk Road. Even though gambling is possible, it’s still illegal here in the United States. And, I don’t have any need for a place like Silk Road. So, with my project idea rolling around in my mind, I don’t need any attention that could be negative.
One way or another, I am trying to become more active in the BitCoin market. I think it has a lot to offer, as obviously thousands of others thing. I’ll be investing more soon.