1

I feel I may have been cheated by Bitcoin Block Explorer whose URL is http://blockchain.info

Here's the background:

I am using the online wallet provided by Bitcoin Block Explorer. It contains 1.5 BTC.

According to the website http://blockchain.info/stats, the weighted average price is 134.19 USD for 1 BTC on September 11. It means that my 1.5 BTC is worth 201.29 USD.

However after logging in to my wallet, on the top right-hand corner, the USD equivalent shows 186.18 USD. It means the weighted average price is 124.12 USD.

Could some experienced guy explain to me the discrepancy?

Added a second question

After going through the comments posted here, a second question comes to mind.

An online merchant gives his customers the option of paying using one of the following methods: Visa, PayPal or Bitcoins.

The price of the product is 50 Euros if the buyer uses Visa or PayPal to pay but 0.52 BTC if he chooses the Bitcoin payment system.

According to some posters here, Bitcoin/USD rates vary across exchanges.

My question is: if I am the customer, how can I be sure that I am not overcharged if I use Bitcoins to pay? (0.52 BTC may worth more than 50 Euros)

  • Hello user5556, usually it is better to ask follow-up questions either in the comments or as new questions, depending on how much different from the original question they are. In this case I think it might have been better if you asked a new question, because it goes significantly beyond the two answers that already exist. – Murch Sep 12 '13 at 21:32
  • To answer your question, 1) with the Bitcoin network growing up and the exchanges becoming more accessible and competitive, arbitrage should mostly eliminate differences in the exchange rate on different exchanges. 2) There are different websites that offer a Price Index, for example yesterday CoinDesk announced their new Bitcoin Price Index. Long-term one of the Price Indexes will gain more traction than others and become Bitcoin's "Dow-Jones". – Murch Sep 12 '13 at 21:36
  • @Murch, is probably right -- probably would have been a bit better as a follow up question. – John Henry Sep 14 '13 at 21:30
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Bitcoins are traded on many different exchanges. The prices are varying constantly just like any currency. As an example: at this time three rates are Mt.Gox - $143.0983; CampBX - $125.8000; and BTC-E - $124.0000 (all USD). As I learn more, and become familiar with the exchanges, I may try some arbitrage. I have a feeling there are problems, or people would be doing it now, and all the exchanges would be more in line with each other.

  • I didn't know that BTC/USD rates vary across exchanges. What this means is that for the global financial community, Bitcoins can never become a global currency (fiat currency) unless there is a uniform conversion rate (I mean BTC/USD). – user5556 Sep 11 '13 at 23:58
  • I thought about arbitrage too. But the reason MtGox is so high right now is that people are having great difficulty withdrawing USD from their accounts there. This inconvenience and the risk that you might never get your USD devalues the USD in a MtGox account, meaning that BTC trades higher. You can't call it arbitrage if there's risk. – Nate Eldredge Sep 12 '13 at 1:28
  • @user5556 - Every commodity, ETF, equity, trades on numerous exchanges and there are differences all over the world all day. As more Bitcoin transactions and trading occurs the differences will decrease. – DcShank Sep 12 '13 at 1:50
  • @Nate - Arbitrage risks are never zero. :-) As long as I know I will eventually get my money, MtGox still may serve as a vehicle for profits. – DcShank Sep 12 '13 at 1:51
  • @DcShank: As long as I know I will eventually get my money: Ah, but do you? – Nate Eldredge Sep 12 '13 at 2:15
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It looks like blockchain.info is using different conversion rates in different places. Why they are doing this (and where they are getting their data) is really something only the owners know.

I'd like to thank you for bringing this to our attention; however as blockchain.info is an important source of data for the entire community and it's important that we are aware of discrepancies like this.

As for the second part, the answer lies in the field of economics. The truth is the price of things -- that is, what people are willing to give up for something else -- is constantly changing throughout the world, though you may not notice it locally, especially if you are used to a fixed pricing system as is used in most of the western world. In a way, our financial systems are built to mask this fluctuation, but bitcoin is new and our financials systems simply aren't built to cope with it, thus we are currently seeing a lot of unusual market phenomena involving it.

Bitcoin, like all things, actually, doesn't really have a "fixed price" -- just how much, on average a bunch of people are willing to sell it for. The price that you see on the web is actually based on an average of what many people have posted on many exchanges as their own individual bids that they are willing to share and for how much. Different sites read different bids and possibly use different methods of calculating this average, so this is why you see varying prices in various places.

It should also be noted that a person may sell different amounts of bitcoin for different prices, say 10 BTC for $100 and 20 BTC for $180 (A 10% discount for buying double!). This can also affect changes in price.

Now, since bitcoin's price isn't fixed, you kind of have to throw the idea of "overcharging" out the window. Let's say you buy a bitcoin for $100 and I buy one for $90. Were you overcharged by $10? Perhaps. Or perhaps tomorrow someone may offer you $150 for that bitcoin. It looks like you may have been undercharged by $50. Again, since there is no real fixed price, and what people are charging for it varies so much, the idea of "overcharging" doesn't really make sense. However...

My best advice to avoid "overcharging" is just to be diligent search around for what ever is cheapest, but also be aware of what's most convenient for you.

Coinbase.com is fairly cheap, but it currently it takes about a month before you get full access to instantly purchase bitcoin. There are faster methods, but they are usually on the expensive side and I would generally avoid them after spending you month on Coinbase.

MtGox.com (as I've been informed) suffers from having both a high price and along wait to get money out of it, although their high sell price is appealing to some, such they are willing to forgo the inconvenience.

LocalBitcoins.com and Satoshi Squares (tf you can find or start one) are also good options to meet up and trade bitcons. Here, you may actually be able to negotiate face to face to ensure that you're getting a good price.

  • I am equally surprised that Bitcoin Block Explorer (a.k.a. Blockchain.info) does not host a forum for their members. (I consider myself a member as I opened an online wallet with them) That's the reason I made the original post on this StackExchange forum. – user5556 Sep 12 '13 at 0:00
  • :I have added a second question. May I have your answer to it? Thanks in advance. – user5556 Sep 12 '13 at 19:50
  • @user5556: That's the thing: This is not a forum, it works quite a bit different. :) Stackexchange facilitates getting answers to question, it isn't a good tool for discussions (which is the domain of forums). See the about for a better explanation, if you are curious. – Murch Sep 13 '13 at 13:42
  • @John Henry :Thank you so much, pal. I think I am more educated now than before. – user5556 Sep 13 '13 at 20:56
  • @user5556 no problem :). Pay it forward. – John Henry Sep 14 '13 at 21:28

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