Posted on 01/04/2014 8:13:19 AM PST by narses
You’ve all heard about Bitcoin. No one knows who created it, although some writers have made very educated guesses about the identity of the pseudonymous creator. I have sometimes wondered whether Bitcoin is the product of some transnational criminal organization or rogue state that wants to undermine developed economies by casting their payment systems into doubt. I am less concerned with Bitcoin’s origin than with its flaws. I shall enumerate those flaws forthwith.
Bitcoin enables fraud and other criminal activities. This is absolutely the single most salient feature of Bitcoin’s anonymity. Conventional currencies are indeed subject to laundering and counterfeit. There is probably no way to eliminate those risks completely. Bitcoin magnifies those risks because it can only be exchanged anonymously. It dominates dark networks that have been known to traffic in narcotics. Law enforcement efforts to shut those networks down will terminate the ability of any financial actor to transact in Bitcoins even for legitimate reasons. When the network is down, your Bitcoins are gone. Conventional currency doesn’t work that way in real transactions. Banks and brokerages have offsite business continuity backups. Securities exchanges and central banks maintain counterparty records. These mechanisms lack Bitcoin’s anonymity but make up for that in resiliency and trustworthiness.
Digital QR codes make it vulnerable to theft. One Bloomberg TV anchor learned this the hard way. Transmuting digital Bitcoins into a paper medium means the QR code reveals their underlying location. Scanning that QR code means anyone can anonymously steal Bitcoins. That’s the bad part about anonymizing a currency. Masking ownership means no audit trail to recover a thief’s digital fingerprints.
Mining Bitcoins is a health hazard and energy sink. People run obsolete hardware just because the video cards can process random digits into raw Bitcoins. This is a kind of “mining” that’s unlike the real-world mining I’ve studied for years, because it transforms nothing into an encrypted version of nothing. Nerds who run multiple machines overnight to mine Bitcoin risk heat stroke from the machines. If you don’t believe me, do a Google search of “Bitcoin heat” and note all of the cooling problems Bitcoin miners discuss amongst themselves, with the real world watching them fry. Crypto-nerds advocate data furnaces as an economic solution to waste heat generation from Bitcoin mining. Gimme a break already. There is no way a distributed network of Bitcoin mining operations could ever be a backbone for currency transactions or an alternate energy grid. No cloud provider in its right mind will ever farm out data storage needs to distributed servers with zero physical security. Bitcoin’s so-called solutions just multiply its problems.
There is no central bank for Bitcoin. Indeed, there never will be one, because Bitcoin’s evasion of central control appeals to its users. The Federal Reserve, for all of its flaws, has enabled the US to withstand financial panics because it could manage a unified national currency. A central bank manages fractional reserve lending that allows a national economy to expand. The supply of crypto-currency is limited by algorithmic design, so an economy running on Bitcoin cannot expand to accommodate a larger population or natural resource base. A Bitcoin economy cannot grow because it cannot deploy excess capital for innovation.
Minting copycat currencies is easy. Run through the gamut of crypto-currencies like Litecoin, Dogecoin, Namecoin, Peercoin, and others to see how unserious most crypto-currency enthusiasts are about money. Dogecoin in particular is obviously a joke based on an Internet meme. Using a currency named after memes doesn’t impress me. Imagine someone in the early 20th Century printing a dollar with Mickey Mouse’s smiling visage and convincing others to take it seriously. The US economy tolerated decentralized currency minting for some of its history until the settlement of the frontier demanded a nationally integrated economy. Copycat currencies destroy the credibility of Bitcoin.
I am totally convinced that Bitcoin is at best a joke and at worst a fraud. Hi-tech startups should be be radical, disruptive, transformational, chaotic, revolutionary, and all that but those are not the characteristics of a currency. People who use currencies as a medium of exchange and store of value need them to have conservative characteristics, so that one unit today has pretty much the same value next year. Stability enables consumption and investment in reliable amounts at acceptable intervals among counterparties. Bitcoin does not accomplish these purposes.
Bitcoin is baloney. I’m waiting for some jokester to create Baloneycoin that will evaporate when minted and play some funny animation. Look up “Cosbycoin” for an early attempt at turning this idea into a joke. The parody site that features Cosbycoin is hilarious but the real joke is on anyone who takes Bitcoin seriously as an investment. I do not use Bitcoin, nor will I do business with anyone who wants to transact in Bitcoin. I may be a nerd but I’m far too intelligent to use something as stupid as Bitcoin.
Here you are, an explanation!
Biotin and Obamanation care have a lot in common. Tell me that the government is not trying to destroy the middle class and create a dearth and I will laugh in your face if you mean it.
more fiat money. just what we need. /sarc
fiat currency bump for later.....
fiat currency bump for later.....
Did Fiat buy Dodge?
As opposed to the USD which can printed in the trillions with nothing backing it.
And can be promised as future benefits in the 100's of trillions to buy votes.
Click to be Added / Removed.
Btw, from some who wrote this reply in the comments section who makes way more sense than the author, IMHO:
I’m all for arguing the pros and cons of Bitcoin but you simply must do research before writing an article.
It is quite amazing how many mistakes you make:
“Bitcoin magnifies those risks because it can only be exchanged anonymously”. This is not true. It is in fact by far and wide the most accurately trackable system. Bitcoin is simply a public ledger including every single Bitcoin transaction ever. This ledger cannot be faked thanks in no small part to the NSA’s SHA-2 encryption. US agencies have been aware of the convenience of the “blockchain” for a long time. Learn about it.
“Digital QR codes make it vulnerable to theft. One Bloomberg TV anchor learned this the hard way. Transmuting digital Bitcoins into a paper medium means the QR code reveals their underlying location. Scanning that QR code means anyone can anonymously steal Bitcoins.” Not true. The QR code is for receiving transactions only. The Bloomberg anchor revealed his private key – a long code that you should not show anyone else, just like a password. Check the story properly.
“Mining Bitcoins is a health hazard and energy sink.” You typed your article on a computer didn’t you? Then you are risking your health as much as any Bitcoin miner. You interact with computers, period. Mining does take energy, and this is not only for producing Bitcoins – the primary purpose is to power the payment network. Any digital payment network today requires power. Ask VISA for example.
“An economy running on Bitcoin cannot expand to accommodate a larger population or natural resource base. A Bitcoin economy cannot grow because it cannot deploy excess capital for innovation.” Interesting visions of the future you have there. Everyone else is looking forward to a future with Bitcoin existing alongside unified national currencies.
“Minting copycat currencies is easy. Run through the gamut of crypto-currencies like Litecoin, Dogecoin, Namecoin, Peercoin, and others to see how unserious most crypto-currency enthusiasts are about money.” So what if some people like to get involved as a hobby? They are making models and Bitcoin is the professional version with the real-world network. What’s wrong with that?
“People who use currencies as a medium of exchange and store of value need them to have conservative characteristics, so that one unit today has pretty much the same value next year.” Bitcoin is becoming more stable as time goes by. Carefully study the charts at: http://bitcoincharts.com/. Also learn about the interesting applications of Bitcoin as an intermediary, offering low fee transactions of fiat currency.
“I may be a nerd but I’m far too intelligent to use something as stupid as Bitcoin.” You are no true nerd! ;)
I have to admit some ignorance in regards to currency and the relationships to other currencies and gold.
However, all I see are criticisms of the USD because nothing is backing it. This is true, but what is backing bitcoin? We don’t even know who created it?
No thanks. Bitcoin just seems like a giant scam. That is my ignorant, unprofessional, opinion. :)
No power no money
I kinda want to really get into this, but I’m not sure this is anything more than digital tulip bulbs.
Ping
just like cash
Conventional currencies are indeed subject to laundering and counterfeit. There is probably no way to eliminate those risks completely. Bitcoin magnifies those risks because it can only be exchanged anonymously.
you can eliminate the counterfeiting by using a crypto currency... like bitcoin.
when you exchange bitcoins, you do it by confirming the validity of the coins you're receiving with the block chain. which means, you're online as you do the transaction. no one can give you fraudulent coins unless you disregard the block chain confirmation process. that would be just stupid.
It dominates dark networks that have been known to traffic in narcotics.
again, just like cash.
When the network is down, your Bitcoins are gone
your coins are in your possession all the time... unless you've uploaded them into an online wallet overseen by another organization
Conventional currency doesn’t work that way in real transactions. Banks and brokerages have offsite business continuity backups. Securities exchanges and central banks maintain counterparty records. These mechanisms lack Bitcoin’s anonymity but make up for that in resiliency and trustworthiness.
bs. if i place $100k into a safe deposit box and the bank gets robbed, i do not get my money back.
Digital QR codes make it vulnerable to theft. One Bloomberg TV anchor learned this the hard way. Transmuting digital Bitcoins into a paper medium means the QR code reveals their underlying location. Scanning that QR code means anyone can anonymously steal Bitcoins. That’s the bad part about anonymizing a currency. Masking ownership means no audit trail to recover a thief’s digital fingerprints.
leaving your cash on the table at a macdonalds will have the same result.
Mining Bitcoins is a health hazard and energy sink.
do we need to dig out the stats on making all the paper ever used printing US dollars? how about the resources spent shipping them around, securing them, and disposing of them? i'd ponder it's far more efficient to mine all these coins then continue to destroy the trees to create the fiat currencies
There is no central bank for Bitcoin. Indeed, there never will be one, because Bitcoin’s evasion of central control appeals to its users. The Federal Reserve, for all of its flaws, has enabled the US to withstand financial panics because it could manage a unified national currency. A central bank manages fractional reserve lending that allows a national economy to expand. The supply of crypto-currency is limited by algorithmic design, so an economy running on Bitcoin cannot expand to accommodate a larger population or natural resource base. A Bitcoin economy cannot grow because it cannot deploy excess capital for innovation.
bitcoins are not analogous to fiat currencies like the dollar. they are more aligned with gold. they cannot be diluted and cannot be faked. their value may increase or decrease, but they will remain intact. their purpose is to insure the parties of the transaction that they have received or given bitcoins, not some piece of paper with magic scribbles on it.
Minting copycat currencies is easy. Run through the gamut of crypto-currencies like Litecoin, Dogecoin, Namecoin, Peercoin, and others to see how unserious most crypto-currency enthusiasts are about money. Dogecoin in particular is obviously a joke based on an Internet meme. Using a currency named after memes doesn’t impress me. Imagine someone in the early 20th Century printing a dollar with Mickey Mouse’s smiling visage and convincing others to take it seriously. The US economy tolerated decentralized currency minting for some of its history until the settlement of the frontier demanded a nationally integrated economy. Copycat currencies destroy the credibility of Bitcoin.
monopoly money doesn't undermine the 'credibility' of the US dollar and other crypto currencies do not undermine the value of bitcoins.
the author is obviously ignorant of why crypto currencies exist and their true value. they are not meant as a store for wealth, but a secure transport of that wealth between parties in a transaction. once complete, it's up to the recipient whether or not they wish to remain in bitcoin or move into another currency (ie: dollars, euros, gold, real estate, etc)
I wouldn’t put all my money into it, but the small amount that my husband invested last year paid for our Christmas presents this year.
Think frightened sailors on the Nina the Pinta and the Santa Maria. Most were scared out of their minds because they “ Knew” they were going to sail off the edge of the earth and die. They could not get their head around the “fact” that the earth is round.
It is called a paradigm shift.
Now fast forward . Your at LAX with 10lb. of gold in a suitcase. What do you suppose the TSA is going to do with it?
Same airport, this time $100.000.00 cash in a suitcase, what do you suppose the TSA is going to do with it? You will never see it again.
Same senerio but you have the password to your Bitcoin wallet containing $5.000.000.00 in your memory. What do you suppose the TSA can do about it, NOTHING, NOTHING, NOTHING!!!!!
This is power and freedom heretofore never know to man. Is the light bulb starting to come on? I hope so!
The Gekko Fund. Investment philosophy: “A fool and his money are lucky enough to get together in the first place.”
I think the article was written, to scare people away from “money” the government can’t confiscate.
The number one problem with Bitcoin is that IT ISN’T REAL.
Even the US Dollar and other fiat currencies are better in
that regard as it is possible....at least for now....to gain
access and possession of a physical tangible representation of said currency in the form of a counterfeit resistant controlled representation commonly called a dollar bill.
If the interwebs get turned off for ANY reason....Bitcoin goes Bye Bye.
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