Wednesday, April 10, 2013

Bitcoin- a fun ride

Bitcoin.  Seems like lots of people are talking about it recently.  Some extolling its virtues, and others screaming "Scam!".

I finally started accepting Bitcoin a while back- at a good time, it would appear.

Now, I am still not convinced that Bitcoin is as wonderful as some seem to think.  I may be wrong, and that would delight me.

My suspicions center on a couple of things:

Bitcoins are not based on anything tangible.  You can't hold a Bitcoin and turn it over in your hands.  This may not bother people accustomed to digital FRNs in their bank account, but it does bother me a little.  Anything digital can vanish without a trace- without you even doing anything negligent to lose it.  Maybe the digital world will keep getting more robust so that this will become a complete non-issue.  Other than government records, I would like to see information become impossible to accidentally lose.

The second part of my suspicion is less justifiable- I don't completely understand them.  Yeah, I have read volumes of stuff and watched numerous videos, but my ignorance must go deeper than mere information can fix.  Perhaps it's because I am more of a "stone knives and bearskins" sort of person, and not a computer geek.

Still, I don't like keeping all my eggs- or money- in one basket.  So I will keep dabbling in, and accepting, Bitcoin to see where this ends up.  It's good entertainment anyway.



  1. I'm really glad somebody brought this up Keith. Not being an economist or highly educated in financial theory I have wondered what advantage BC offers other than some additional privacy and autonomy (for now). The "bit" that you "own" is just a line entry on a spread sheet program in some server somewhere right? It isn't backed by redeemable gold/silver or something that would give it intrinsic value? Just askin' I don't know myself.

  2. Thomas Knapp points out that Bitcoin isn't anonymous. Not without some serious work, anyway.

    The Bitcoin you own isn't exactly on "some server somewhere"; it's in everyone's "Bitcoin wallet". The record is distributed everywhere Bitcoin is. However, if you lose your "wallet", your Bitcoin is lost forever.

    It is backed by nothing but the computer work/time that goes in to "mining" Bitcoin. In that way it is similar to those local currencies based on "hours" of work. It's just that your computer is doing the work and you are paying for the electricity your computer spends as it works. Yes, I prefer something more tangible, but that's why I see Bitcoin as a piece of the puzzle, not as The Answer.

  3. I don't accept bitcoins. Why would I? I can't use them to pay my light bill nor my mortgage. If I want to use them in the real world I have to convert them to the currency recognized by my "servant". And I have to pay a fee for the privilege of conversion. Someone is making money off bitcoins, but it ain't me.

  4. Actually, more and more places in the real world are accepting Bitcoin, like

    There are places online where you can find places that take Bitcoin directly, without converting them to any government fiat money of any sort first.

  5. "Bitcoins are not based on anything tangible"

    Your instincts are correct. Money is the most widely accepted ":commodity" in trade. A mere unit of account is not a commodity but only a money substitute, and thus not money. I tend to trust what has evolved in human society via the direction of the "invisible hand" of nature. Anything that is instead the intentional construct of men elicits my suspicion, not my trust.

  6. Here's Daily Bell's conclusion on Bitcoin:

    "...While the success of Bitcoin is not assured, the currency has made enormous strides since 2009 and with an expanding user base may eventually become a world-class money..."

    Here's what looks to me to be a realistic view from Hugo Salinas Price:

    "...The Bitcoin is an example of the tremendous hold that the idea of the omnipotence of technology to solve human problems has upon humanity. However, technology cannot create matter; it cannot create commodity-money, as it cannot create petroleum. Technology may give various forms to matter, but it cannot create matter or substance, and money must be the substance that is most accepted in commerce. All the Ph.D.s and Nobels in Economics are playing games to keep the world entertained. The less their pronouncements make sense, the wiser they think we will consider them..."

    The article is worth a read. You can view it here.

    I'm a "poor" man -- just had significant reduction in resources due to a family crisis. Although I admire the promoters of "Bitcoin" as a slap to enforced and counterfeit "currency" and as a token entrée into a free market means of exchange, I would not invest more than I would be able and willing to donate to what I might see as a true cause for liberty.