Locavore Bitcoin City

Some  rambling thought on bitcoin from a small city standpoint.  This really rambles.

Bitcoins are being held as an investment -- by those that dare to do so.  The upside is big.

To be a currency is has to be used in trade.  Entities buying and selling in Bitcoin.

Entities:  People and businesses trading.  It is going to be a slow process initiated by those merchants willing to try something new, with some risk.  Payments received on sales can be immediately converted at the going exchange rare to dollars.  Alternately they can be held and a used as payment by merchants to other merchants that supply them.  To the extent that a significant portion of trade among merchants is entirely within the domain of the city.

What if the Bitcoin currency exchange domain was a small city where the merchants agreed to sell in Bitcoin and then use Bitcoin as a community based money among themselves for participating businesses.  The risk is accepting the rate of exchange difference when there is a loss over the period bitcoin is held.  Or realizing a gain?

Risk/Reward.  That is what business is all about.

Business converting Bitcoin to dollars upon receipt of payment would drain bitcoin from the community.  To sustain the community, businesses would have to agree to spend the bitcoin they received among themselves and not convert it.  It would be hard to abide by that agreement when the value of bitcoin is falling dramatically.

Sounds like a rock and a hard place.

In practice it appears that merchants selling in bitcoin are giving a discount for bitcoin to attract business.  If it is worth it.

What mechanism would make bitcoin work well as a community money if  business in the community agreed to accept it?

Bitcoin offers anonymous transactions.  What if businesses all used a fixed publicly known address among community businesses that agreed to accept bitcoin and also agreed that they would deal in bitcoin with those businesses in the community participating in the bitcoin agreement.  Not to the exclusion of dealing with other businesses but to the inclusion of dealing with participating businesses with bitcoin.  Participating business would have to agree that they would not convert bitcoin to dollars except with other bitcoin participating merchants.  All participating merchants would be dealing in both bitcoin and dolalrs.  The block chain would show payment to any entity that was not participating in the bitcoin merchant community agreement.   Sounds like an impossible situation to design and control.

On the other hand, if there is great bitcoin appreciation over time then a community would realize gains in the pool of bitcoin circulating among local business.   Some portion of Windfall gain might be distributed back to the community by participating business in some way.  It could be redistributed back to the precisely to those consumers that payed in bitcoin  to participating businesses?

Is that possible to go back into the block chain to identify those customers that were due some return of bitcoin based on an increase in the value of bitcoin over time.???  If due to customers might it be paid back as a discount to future purchases?

Is this total fantasy thinking?  Certainly.  That is one of the beauties of bitcoin.  It opens so many possibilities.

If customers speculated that using bitcoin for purchases from participating merchant would return "dividends" in the future as bitcoin gained value might they be more inclined to part with bitcoin than to hoard it?  Wouldn't that be a reversal to socialize the gains but privatize the loss?  What business is going to offer to do that or afford to do that?  It is contrary to the bitcoin model that dictates that all payments are final.  No future sharing of loss or gains due to change in bitcoin value. 

Sounds impossible but so did bitcoin sould like that in the first place until a scheme was devised to make it possible.

Somehow something must be done to stimulate the use of bitcoin as a currency not a hoarding of asset.

A modern "Tale of Two Cities" One that took a chance on bitcoin as a community money and one that did not and remained on the old established money system.  How might each fare in the future?

Might the Tale of Two Cities be the Tale of Two Countries?

If one city that used bitcoin by design found itself to have a large accumulated collective pool of bitcoin in the community and the value of bitcoin had increased dramatically they would be far more fortunate than a default city that did not decide by design to deal in bitcoin.  On the other hand......Its risk.

Might the Tale of Two Cities be the Tale of Two People?

One person converts early to bitcoin, the other does not.  The person using bitcoin is working from an account that has bitcoin in it as a revolving fund to receive and pay out bitcoin transactions.  As the value of bitcoin increases over time, the person converting to bitcoin early, at a low conversion rate, realizes an increase of relative value of the revolving bitcoin fund over the value of having remained in dollars in a bank account.

The Tale of Two Entities scales to whatever level of magnitude the two entities are.  What if the two entities chosen for example are the USA and China?

He who has the most bitcoin wins------or loses.

Where would you bet your bitcoin or dollars?

Locavore Bitcoin Money?

Community money systems are looking a bitcoin and trying to determine how it may integrate with community money.

Bitcoin is a global community money system.  The communities, whatever their size such as the European Community, the USA, China or Cyprus, or any smaller "community unit" all the way down to the individual person will gain or lose substantially depending on when they convert to bitcoin from a national currency.  When the tipping point comes and the world sees which way the wind of change is blowing for bitcoin it is fascinating to speculate exactly what will happen because the backbone of bitcoin is the internet.

Is that what the internet kill switch is for?