11

Loop means:

  • merchant will get delivered goods from producer in BTC
  • customer will buy goods from merchant in BTC
  • factory worker will get salary as BTC (at least in parts)

At this loop there is no necessity to exchange BTC to local currencies and vice versa.

Is there any producer at any country known that can pay salaries legal in BTC?

If not, how can we achieve this closed loop?

3

Closed vs open loop isn't a black or white definition. For example even in the US were you have significant velocity of money companies buy parts in other currencies (from other countries), consumers imports goods manufactured overseas, and investors buy foreign stocks.

So there is no such thing as a completely closed loop. I think what you are asking is what can be done to keep transactions in BTC either perpetually or for longer (before being cashed into fiat). Unfortunately that is a slow process. There is no grand over arching plan rather each individual seller increases the potential to the currency to be recirculated more before being exchanged.

I see three major factors determine how likely acquirers of BTC will keep the BTC over selling for fiat currencies: 1) Availability of goods. The more goods and services available in BTC the more valuable the currency is relative to fiat currencies and the more likely someone who acquires BTC will keep them.

2) Value of goods. If goods are sold in BTC at a discount that will increase the value of BTC. If good are sold in BTC at a premium that discounts the value of BTC.

3) Price stability. The more volatile the price the more risk of losing purchasing power by holding BTC. That will reduce the likelihood that an acquirer of BTC keeps those BTC over more stable currencies.

There are no easy answers to the problem of increasing the length of BTC loop as BTC isn't a planned economy. As an individual the best thing you can do is to offer goods or services in BTC and look for merchants who do the same.

3

Silk Road is somewhat a closed cash flow loop, as they are hiring now.

  • I doubt they pay their server costs in BTC. – o0'. Nov 10 '11 at 16:32
  • 1
    Yes they do. They also pay employers and ads in Bitcoin. – Mascarpone Nov 10 '11 at 17:38
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    Sorry, link? It would be interesting if a hosting provider really accepted BTC... – o0'. Nov 11 '11 at 8:22
2

As of now there is no tools that helps a company to make automatic salary payments in BTC. I think such system would save a lot of money for a company and encourage closed loop of BTC cycling between merchant and customer.

1

There is no realistic possibility of a closed loop forming in the real economy at this early stage, given how few, relative to the world population, and widely distributed (as opposed to concentrated in one geographical location) bitcoin users are right now.

A closed loop could form in a virtual world like an OpenSim (the software that runs Second Life) world though since these are to a large extent closed economies, and need to use a virtual currency any way.

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