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The price of bitcoins fluctuates rapidly against other currencies. If I were to go to a restaurant and pay for a meal in bitcoins the price at the start of the meal would almost certainly be different by the end of the meal. In fact I have heard of this behavior happening in countries undergoing hyperinflation.

So how should I charge a client for a service when price of bitcoins change? How should you pay employees an hourly rate in bitcoins when the price changes for each hour?

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    For many years here in israel rent was quoted in dollars but paid in shekels at the current day's exchange rate. So you could quote the price in dollars and ask to be paid in bitcoin at the rate on some well known exchange – Zachary K Sep 7 '12 at 8:37
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For the scenario of a retail or ecommerce purchase, one approach is to have an expiration on the price quotes. For example, when a merchant uses BitPay, the invoice is good for 15 minutes. If the funds aren't received, then the payment is recalculated as-of the time it arrives and if it overpaid, the customer gets a refund and if it was underpaid the customer has to send more funds.

Also, you can pad the exchange rate to your favor a little so that while some transactions lose value because of a change in the exchange rate, others will be in your favor but when you net it (overall gains minus losses) it ends up about a wash or a small gain.

Coming up with the pad amount can be aided by using a calculation that looks at recent volatility.

As far as contractors, you would want to contract that in advance. So if both parties agree to a contract at a certain rate quoted in BTCs, then that is the agreed upon rate that is paid.

For salaries, you probably want to establish that in terms of fiat, and only after withholding for taxes and other deductions only them convert the net check amount into bitcoins at the prevailing rate at the time.

A company that has BTC-denominated contracts may want to hedge against exchange rate risk by either acquiring sufficient coins in advance, or using derivatives (e.g., CALL options or futures contracts).

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In a perfect world, and if you consider Bitcoin a true currency, then the only price that matters is the amount you value your work in relation to what you can buy and do with the currency. But of course, since you currently can't use Bitcoin to pay the necessities of business like rent, electric bill and phone bills, the problem you mention is real.

The only real advice I can give is to watch the market for points of stabilization and price your coins according to what you believe the real market value of a coin is going to be at the time you will need to convert them to pay your bills. Also, you should carry enough cash reserves in a more liquid currency to cover you in times when coins are lower than expected. In those months, use your cash reserves. When coins are high, sell extra to replenish cash reserves.

A safe bet right now IMO would be to value a coin at about $10. That seems to be a recent plateau that makes sense and with adequate cash reserves, you should be able to float the spikes and dips without a problem. Of course, keep your eye on the exchanges for movements and if there seems to be a longer plateau and your reserves are getting low, then you will probably have to revalue your work.

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    If you're still valuing BTC at $10 I'll pay you $12.50 for each one. ;) – goodguys_activate Apr 10 '13 at 13:45
  • @makerofthings7 Wait a day or two, and we are there again... – glglgl Apr 10 '13 at 20:24
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Put the price in USD (or local currency). Let them pay in BTC at true rate in the moment they pay. In some occations it may be wise even to give a discount when paying with BTC.

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