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IT’S A LITTLE hip right now to pile on and say that Bitcoin is over in light of the Mt. Gox scandal, but it’s not over at all.
Let’s take a couple steps back to reestablish some of the fundamentals on how and why Bitcoin works, and cast aside clunky myths that aren’t grounded in reality.
1. Bitcoins are worthless because they aren’t backed by anything.
False! Just because there’s no vault full of gold maintaining Bitcoin’s value doesn’t mean it’s worthless. Bitcoin has value because people say it does.
It might sound like a cop-out, but consider the subjective theory of value, which argues that a thing has value when it serves someone’s purposes. As an anonymous digital currency, Bitcoin serves a purpose for many people.
2. Bitcoin is illegal.
Bitcoin is completely legal in the United States, for example. In March 2013, the US Financial Crimes Enforcement Network issues a new set of guidelines on virtual currency, determining that “a user of virtual currency is not a Money Services Businesses (MSB) under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and record keeping regulations.” Simply put — you don’t need anyone’s permission to use Bitcoin.
This post lays out various Bitcoin legalities in countries around the world.
3. Bitcoin is untraceable.
Bitcoin is completely traceable by design. These are financial transactions facilitated by open-source software running over the Internet. You should assume none of it is private.
Every single Bitcoin transaction that gets made, whether it’s to buy illegal drugs on the Silk Road or alpaca wool socks from a Massachusetts farm, is recorded at Blockchain.info. You probably should use Bitcoin the same way you use the Internet at the office — intelligently.
4. Bitcoin has never been so volatile as it has been lately.
Yes, Bitcoin’s value has seen quite some speed bumps lately. But consider June 2011, when Bitcoin rose 40-fold from $0.75 to $30. It stabilised around $5 in early 2012. This was a far more volatile time in Bitcoin’s history, but went largely unnoticed because no one was really talking about Bitcoin yet.
See higher-res image here. Image: Bitcoin Charts
5. Bitcoin is completely safe and secure.
Nope. Bitcoins can be stolen, and the recent Mt. Gox scandal should be a reminder that as long as there are humans involved, it will not be perfect.
6. There can only ever be 21 million Bitcoins in existence and that isn’t enough.
Of course it’s enough. If we should start “running out,” it’s important to realize that a Bitcoin is divisible up to eight decimal places. The value of an individual Bitcoin may rise quite high, but we can keep dealing with smaller and smaller portions of it. As little as 0.00000001 Bitcoins, to be precise.
We’ll likely end up dealing with fractionally named Bitcoin measures, like millibitcoins and nanobitcoins.
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I haven’t even got two bitcoins to rub together.
I would like to invest a little in bitcoin but I just can’t understand it. I like the idea in principle and hope it survives.
Me too, don’t like the Euro. Looking forward to doing my grocery shopping with it some day.
No legal tender law is ever needed to make men take good money; its only use is to make them take bad money.
Stephen T. Byington
Check out bitcoin talk forum. They have loads if info to help you learn.
I’ve quite a bit of experience in buying and selling bitcoins. Do you think if I set up seminars around the country as a bitcoin consultant that it would take off?
I would doubt it john.. Too much free Information out there to warrant a consultant.
Some people are too lazy to research it themselves and want to be spoon fed.
Fupping hell what muppets down voted you over that very reasonable comment?
I’d still much rather have hard cash or gold,but then that’s a personal choice I guess. Kinda understand it,just don’t trust something I can’t physically hold,see or count.
I bet you refuse to pay for downloaded music and movies – insisting on having it on CD/DVD ?
You put an opinion up on a public forum and when someone comments on that opinion, they become a smart arse, ugly,lying,rat-like,cowardly w@nker who you want to meet in person so you can beat them up. Mr.Angry 2014 goes to Stephen Duggan.Well done!
Am I the only one who hasn’t a clue about anything to do with this bitcoin thing???
loll Jermiah, you’re in the same boat as a lot of people. Incase you think you are missing out,
90% of bitcoin holders, hold less than 1.0 whole bit-coin.
If you want to get involved, head over to http://www.coinbase.com – sign up, buy a bitcoin.
This article is going over my head a bit…how can it be an anonymous currency but yet be traceable & not private?
Think of it like Einstein’s theory of the Universe – it is finite (there are an exact number of stars and galaxies in it) but unbounded (there is no such thing as flying in a starship to the “edge” as there is no edges)
Goldie: Anonymity just means that it cannot is attributed directly to a single person.
Each Bitcoin wallet has a random address e.g. 1af37d39e4b690c7, and each Bitcoin transaction has a similar random identifier. These values are publicly know and used to validate the transfer of funds from wallet A to wallet B by transaction T. However there is no record of who owns wallets A or B, nor is there any record of for what purpose transaction T occurred.
In contrast, the established system based on Credit Cards is ran secretively by private companies who validate who the owner of each card is, who the companies are who accept payments and what their financial accounts are like, and have a knowledge of what was purchased with each transaction.
Also disagree with point #3 – can’t you change the name of bitcoin transactions? Wouldn’t invest in the hot air at all
Also, part of being anonymous is that its not regulated and there’s no enforcement. If you’re bitcoins are stolen…oh well, you lose…
I think I will invest a little in it, just enough to get my feet wet, to see how it runs.
I think when lots of people start to ‘invest’ in it rather than using it as a currency that’s when a bubble starts
Most currencies are like that these days. They are not backed by like-for-like gold reserves any more.
Look at the dollar – a significant proportion of value and demand comes from the rule that oil trading must happen in dollars.
If you are a Chinese oil importer buying oil from Venezuela or Saudi Arabia, you must buy dollars with your Yuan, before paying for the oil.
Entire credit markets in the US exist based on using this temporary “wash” of currency, which exists in vast amounts.
It was why the US gets nervous when Venezuela or Iran suggest setting up oil exchanges in Euro or other currencies. It would bankrupt the US overnight.
Bitcoin is not the only currency relying on subjective value
Just got to thinking it’s something that Del Boy Trotter would have loved to invest in, I’m wondering when they do a one off special (gonna miss trigger big time btw) will he have it as part of his portfolio ? Lovely jubbley :)
The banks are against it – so that is one thing in its favour .
Also what would value of US $ be if it were not backed by guns – lots of guns – the biggest army in world in fact .
What has happened to the gold that used to back it – most appears to be gone – East to China / India etc .
The Germans looked for their 700 tons of gold back from US – but were not even allowed into vaults to view it . Why ??.
US treasury says the purity of its gold bars is higher that they thought – a good diversion . Problem is they have had to sell their own and other peoples gold to keep US afloat.
They are showing the same gold bars to all the unfortunates who think that the US guards their gold .
we never really left the gold standard – otherwise why murder politicians – eg Gadhafi and Sadam – when they threaten not to use $ .
Worse Gadhafi threatened to set up an alternative to the IMF thugs .
…and Angela Merkel is an alien shape shifting Lizard.
As valuable as 17th century Dutch tulips. Because the people say so.
Value is always subjective Colin.
Just like the cash in people’s pockets
If you say so, chumps. It’s your wealth to lose.
You just brought up the Dutch Tulips analogy because you read somebody else’s analogy on the internet. There is nothing similar about bitcoins. If you would do some research you might find this out instead of recycling some ill-informed internet blogger’s nonsense.
Your mind-reading feats are stunning, John.
how about explaining why his analogy does not work instead of just saying ‘it aint so’ after the housing bubble its not a bad thing to see cynicism about, if thats misplaced explain why.
If your robbed or loose the money in you wallet, good luck trying to trace them notes or coins. I don’t see bitcoin as an investment but I think every body should own maybe €100. Likewise gold silver I don’t see as a investment but again everyone should hold some themselves. I don’t hold much value in paper but I use it everyday as a recognised unit of exchange for goods and services and sometimes for skinning up and wiping my Enda when I go to the toilet and for now people seem to be convinced that our currency is here to last with the backing of a printer\army. Ive more faith of leaving my gold\silver with my the local farmers ass than paying my local IMF\EC led institution for looking after their own interest. It’s my rainy day fund or my pension if I am
ever allowed to retire, and if I never have to trade it before I die, inheritance tax, kiss my Kenny. 1 oz of Gold is a valuable now as it will be in 5000years time same can be said for a chicken or a candle and so to for the €\$ or Zimbabwe dollars an overpriced highly sought after worthless bit of paper. Plastic notes\cards are more valuable than paper from a recycling point of view as plastic cost more to produce I used to supply my local bin comp with 2 ton of HDLP plastic per year in exchange for their service they would have taken paper also but it had to be acknowledged by a bank for it to hold any value for him.
What you talk in’ about Willis?
Half-truths do not a myth dispel.
Bitcoin is not worthless. It is worth as much as Beanie Babies, except you can hold Beanie Babies.
Bitcoin is not illegal in the US. Yet. It is illegal in China, the largest country in world.
Bitcoin is traceable. Just call up MTGox and ask them where the traceable missing bitcoin are. They’ll tell you.
Sure they will.
I notice bitcoin is a popular topic on RT (Russia Today) network. That should tell you something.
Bitcoins are not illegal in China. Again, do some research.
Bitcoins are illegal in china therefore china is correct –
Dogs get eaten in china therefore china is correct –
I actually cant believe you used the size of a county to defend your point.. I actually cant !
But China isn`t the largest country in the world…
1 billion 360 million chinese say you’re wrong.
Currency crisis in China. Watch Bitcoin go stratospheric.
How long should we watch?
Noting the “Currency Crisis in China” story was published Feb 1….
The value argument is disingenuous. Nobody think they’re worthless, its obvious because you can just them to buy things. The issue is that perceived value is all the value they have, whereas normal currencies have the backing of the central banks that issue them and will exchange them for hard assets, they can be used to pay taxes. These are features that bitcoin lacks.
Also the argument against the 21 million limit doesn’t hold water. A limit is a limit and having an 8 decimal point resolution doesn’t change that. The issue with a fixes monetary supply is that when times go bad and people hold money, if you can’t reintroduce liquidity then economies collapse, this was part of what caused the great depression and the reason we abandoned the gold standard
The limit is why it’s desirable! It’s deflationary. Remember 30 years ago when you could buy a Mars bar for 10p? And now they cost 90c. That’s because we use inflationary fiat currencies which are inflationary because central banks keep printing more money. That will end in tears.
Nah ciaran your talking muck – For people like you there are even bitcoins which are now backed by gold .. will that suit your lifestyle ?? Hard assets . ?
The argument against the 21m holds perfect water.. its perfectly divisible so even a rudimentary child in Kindergarden could work it out.
That me thinks you have hit the nail on the head — CANT reintroduce liquidity !!!! This makes it a viable alternative.
Ciaran you appear misinformed on a number of points.
The great depression had more to do with the Real Bills Doctrine and consequent failure to enforce the gold standard. The US did not abandon the gold standard until 1973. The resulting crisis was a result of US fiscal largesse and persistent monetary expansion.
The doctrine has long been discredited since the Mississippi bubble, but now underwrites western monetary policy. Its central premise that monetary expansion can be avoided due to the unwillingness of borrowers to take on excessive debt is self-evidently fallacious.
Where did they originate from. And why. What’s to stop someone coming up with a similar coin.
They already have.
https://en.bitcoin.it/wiki/List_of_alternative_cryptocurrencies
This article should have been titled “Bitcoin 101″; anyone who’s done the least bit of investigation would have found the answers to all these myths in about 5 minutes!
I’d love to know how many bit coins the author owns.
Stay away from bitcoin or other alternatives. It is next to impossible to generate coins now for profit becuase of the cost of creating one. Buying and selling is risky business and defo not for amateurs.
Declan Byrne try now make sweeping generalisations and opinions that are not based upon facts.. Your talking muck.. absolute muck.
It is VERY possible, and im currently doing so. Im using Amazon Web Services (AWS) to mine Litecoins as we speak using a rudimentary maths -
Litecoin Sale Price -Cost of servers = Profit
Mine $20 an hour and sell for $40 .. its not that hard mate.. its really not !
Shut your filthy muck hole!
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