Great article. Just one technical correction: not every Bitcoin address starts with a “1”, there’s also addresses starting with a “3”. These are known as multi-signature addresses.
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So the overall message I’m getting from the comments is that we should put our trust in the government, because they’re trustworthy.
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You make the assumption here that all bitcoin evangelists believe that it will someday supplant fiat currencies. Of course there are those holding such views, but most see it as a technological achievement, making it possible to transfer value around the world and service the needs of those without access to 1st world banking facilities. The remittance industry alone is an excellent use-case for bitcoin.
Also bitcoin is not deflationary by design as unlike gold it is infinitely divisible. Look at the system we currently have which fosters the endless cycle of money printing to service the interest on spiralling government debts…is that a better monetary system?
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Exactly, in any fork all you need to do is get enough people to agree to use your version of the code.
Millions, if Walmart started accepting it (as well as the older non-expanded Bitcoin), with big stickers saying “Bitcoin accepted”.
The infinite divisibility doesn’t stop BTC from being deflationary- it’s designed to stop frictional and denomination effects (and won’t necessarily work, but that’s another story).
Deflation will still happen because however often you divide or re-denominate BTC, a single unit will have an increasing real value over time, which means that there is an incentive to hoard, and the cost of being indebted is pushed ever upwards.
Couldn’t say it better myself.
You would need a pretty terrible reading comprehension to get that out of it, but that is your right and you can do so as you wish. The government being untrustworthy does not make Bitcoin or cryptocurrencies good anymore than heart disease being bad makes cancer a good thing.
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If you’re looking for more information, there is a free video training series on bitcoin available at bitcoin.cbtnuggets.com.
Oh, I disagree. Well, I agree with the notion of Bitcoin currently being volatile, but from what I’ve noticed, it seems that it’s volatile with relation to other currencies. In other words, the volatility seems to be centered around how many USD someone is willing to part with in order to acquire a Bitcoin.
Er…one could argue that they’re very similar. In one corner, you have money that has the backing of the issuing government, and in the other corner you have something that is theoretically secure that requires computational time to create. In both cases, neither one has value unless someone is willing to accept them as a form of payment. Right now, they seem to be viable, even though Bitcoin has some fairly substantial structural flaws.
The only thing I think is bizarre about Bitcoin is the whole “mining” process, which makes it seem like eGold 2.0 imho. I’m not sure how one would go about regulating coinage to mimic scarcity without it tbh. My guess is that if, say, the U.S. started issuing dollars in the form of cryptocurrency, the serial number would be some cryptographically secure system that would nevertheless allow for something resembling the current system.
Bitcoin is an interesting development, to be sure; I’d be shocked if various governments weren’t watching this with extreme interest, and an eye toward adopting something similar.
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My guess is that if they did something like this, it’d just be something that you’d exchange your current money for, and could only spend at Walmart. They could follow Amazon’s lead and treat their own coin much like Amazon’s Appstore coins, where a coin is worth a penny, but you get discounts for buying and using their e-tokens.
Also for what it’s worth, I find the idea of Bitcoin to be fascinating. It’s a really neat idea and a great example of geek culture hitting mainstream. It’s just a terrible implementation and is ruined by the weight of economy.
This is a really terrible article. How to get started in bitcoin with no real discussion of the advantages and disadvantages or any sense of the underlying issues. If you’d been living in a cave for the past two years, stumbled out six months ago and heard so much about bitcoin that you figured it must be something good and wanted to get in right away without having to think too much, then this is the guide for you. Otherwise you’d be better off at Wikipedia.
Well, of course he doesn’t want you to consider the advantages and disadvantages, the author works for a bitcoin company and has a vested interest in getting your money (your real money, that is) into the Internet Tulips market.
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You are right, my bad! The divisibility property does not solve the inherent tendency for a fixed cap currency like bitcoin to deflate but it does make the re-denomination process much simpler.
Also deflation is not inherently bad, it’s just inflation in reverse. So rather than an ever upward trajectory of rising prices, wages and a constant imperative to spend and take on debt, you have the opposite. From a psychological standpoint having your wages reduced every year is a difficult one to swallow, but this would be inline with a fall in the nominal value of goods and services.
Like I said before I don’t think bitcoin or any digital currency will usurp the central banking model, but at least we now have a choice. Why can they not co-exist? I personally hold only a very small amount of bitcoin for experimental purposes, I’m fascinated by the technology but at the same time acknowledge that it will not solve the world’s problems. But giving people a choice is never a bad thing.
No, deflationary currency is bad because it discourages its own use as currency. Why spend money and help the economy if you can just sit on it and watch it grow? It also means anybody who gets in early has an insurmountable advantage. It exacerbates inequality.
Bitcoin has shown itself to be useful for only two things: speculation and money laundering. For the speculation side there is really nothing that makes it terribly different from Beanie Babies, Baseball Cards, etc… The money laundering aspect is somewhat more unique and has helped fuel services like the Silk Road, although the completely open nature of the block chain means you need to take special steps to make your money anonymous, and many people don’t realize that.
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It’s an interesting solution to the problem of double-spending that avoids having only one point of failure. It is not (and was probably never intended to be) a replacement for actual money.
It doesn’t help that the people touting Bitcoin tend to be scammers, venture capitalists, money launderers, or libertarians (possibly all four at the same time).
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You need to tell that to a lot of people in the Bitcoin community. Just do a Ctrl-F for the word “fiat” to find them.
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So “Saving” is a bad thing now that should be discouraged?
In the aggregate, yes. While it is good to have some personal savings, they represent a drag on the economy as a whole. This is why the wealth inequality is such a drag on the economy and why our economy has been growing flatter over the years. When you concentrate the money at the top, most of that money end up being saved instead of being spent and adding to GDP. The worst part is you have people fighting for this using terms like “Job Creator” when in fact it is demand that creates jobs, and the amount of demand created per dollar decreases as you go up the income curve.
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But evidently the current system is a long way of promoting any sort of wealth equality, that’s why the wealth gap between rich and poor has been expanding at an ever accelerating rate since the 1970s. The act of printing money to plug the balance sheets of “Too Big to Fail” banks and passing that debt on to unborn future generations does not make for a fair and cohesive society.
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