73 Comments

Summary:

It may be technically fascinating, but — nine months into writing about the hyper-volatile crypto-currency — I’ve completely lost track of why we need or want Bitcoin.

Bitcoin
photo: Guardian/Guy Grandjean, James Ball

Last April I wrote that we should care about Bitcoin because it represented a new conception of currency, one untethered by traditional restrictions like state monetary policy. Nine months later, I must confess I’m scratching my head as to the point of it all.

I’m not saying that Bitcoin is necessarily a bad thing, though the last couple of weeks have produced a flurry of articles to that effect, generally from people a lot better-versed in economics than I am (do read Alex Payne, Charlie Stross, Brad DeLong and Paul Krugman).

What I am saying is that I’ve realized I can’t actually see the point of Bitcoin, as in “why should anyone use it?” Last April, I wasn’t dealing with the “why” aspect enough. The arguments in favor of Bitcoin’s use – in real life, not speculative cashing in and out — are way too easy to shoot down. So let’s go hunting:

  • Bitcoin is elegant: This is true – it’s smart how the mining process and the “blockchain” ledger system are interdependent, and its deflationary aspect is fascinating – but it’s not an argument for using the stuff. I’ll stick by my original thesis that it makes Bitcoin worth watching, though.
  • Bitcoin’s use is anonymous: In theory, perhaps, but not in reality. The blockchain is public and can be mapped, and regulated exchanges demand ID verification as an anti-money-laundering measure, which is good, because money-laundering and tax-dodging are bad.
  • Bitcoin can be used for cheap international transfers: Undercutting those money-for-nothing banks is admirable, and probably the best potential argument for Bitcoin. Except there’s already a new breed of international transfer services such as CurrencyFair and TransferWise that manage to drastically undercut the banks without requiring a new, hyper-volatile, unpredictable currency as the medium of exchange.
  • Bitcoin can be used for micropayments: Like Chris Dixon, I would really love micropayments to become a thing, mainly because online content and the open web desperately need a new business model. However, I’m not very clear on why a new virtual currency would make this happen where previous efforts have failed. If anything, the success of in-app purchases points towards a future of platform-specific tokens such as Amazon Coins, rather than decentralized, pay-anywhere crypto-currencies.
  • Bitcoin provides a financial system outside of state control: This is where ideology enters the picture. Personally, I’m not convinced that fiat currency is a tool of mass oppression. Sure, central banks mess up, but at the end of the day they effectively underwrite the money they issue. That may be a shaky business, but it mostly works. Also, if consumers are to use Bitcoin with the same confidence as they use regular money, it needs to be regulated to a degree for their protection, and who’s the regulator? The state. Sorry, no escape.

As for why not to use Bitcoin, just ask the vast majority of those who currently hold it. Because that’s what they’re doing: holding or trading it, not spending it. Why? Because it’s very unpredictable, so big retailers won’t price their wares in it, so it’s hard to spend. And even if it was easier to spend, would you spend it today in the expectation that it will be worth less tomorrow, or rather use fiat currency because your bitcoins might double in value over the next week? Buying stuff on a day-to-day basis really shouldn’t require a gambling mindset.

So in summary, I get that Bitcoin is a potential “disruptor”, but I honestly don’t know what advantages it’s supposed to bring — particularly considering the major downsides around volatility and security. I’m not even sure why virtual currencies in general are useful.

Last April I used the analogy of Napster to explain why Bitcoin could have an important legacy even if it fails, but in retrospect that wasn’t the best point of comparison. The early file-sharing engines were addressing a clear and valid need – sure, people wanted stuff for free, but they also wanted to bypass manipulative and exploitative region- and time-based restrictions, and to access works not available in-store.

Today, file-sharing appears to be in decline because those earlier problems are solved by the predictable, legitimized likes of Spotify and Netflix that probably wouldn’t exist without the pressure exerted on the content industry by their riskier forebears.

I simply don’t see what situation needs Bitcoin/Litecoin/Dogecoin/whatever like digital content needed Napster. If you can enlighten me, please do.

  1. It’s a scam, to separate people from their money – just like railroad stocks in the Panic of 1893…remember that?

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    1. No. I don’t remember that, but thanks for refreshing my memory. That was a crazy time…that railroad stock problem.

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      1. I hope there are more people on this blog who realize how incredibly funny your comment was (is?).

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  2. Think of someone in Uganda who develops and app they want to sell for 25 cents. Given the fees and restrictions I don’t see how that person could operate such a business without something like Bitcoin. They are not going to have access to the services you mention or the fees would cost more than the item they are selling.

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    1. What Milly said, that’s the point.

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    2. True, the services I cited are quite recent and don’t cover all countries yet. But which fees are you talking about specifically? Obviously developers get paid out on a monthly basis, not each time their app gets downloaded…

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      1. Ian Betteridge Friday, January 3, 2014

        Much of Africa is already way more advanced in terms of cashless payments than the West, without silly systems like Bitcoin. A quarter of Kenya’s entire economy, for example, flows through M-Pesa.

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        1. iheartubuntu.com Tuesday, February 11, 2014

          Bitcoin has already been adapted to MPesa so people in developing nations will pay ZERO fees instead of small fees and theres no need for a bank anymore. Just connect your bitcoin wallet address to mPesa via SMS. Now isnt that awesome. One of the points of bitcoin is to get away from central banks. MPesa is still attached to the banking system, but not anymore thanks to bitcoin.

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          1. rageofreason Monday, March 31, 2014

            They pay zero (more generally, near zero, in the bitcoin system as a whole) transaction fees before mining new bitcoin in the primary incentive right now for miners. When that is no longer lucrative (90% of bitcoin will have been mined in another 7 years) transaction fees will rise and I suspect the level will be set by competition with other payment methods. i.e. they’ll be much higher than now. That’s a good thing; the competition will bring fees down. On the minus side bitcoin volatility makes holding the stuff a really bad idea – esp for poor people.

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      2. Bitcoin Psychic Monday, January 6, 2014

        The country is irrelevant, the point is that apple/mastercard/BofA/whoever takes a chunk of the value of your sale (Apple won’t let you sell an app for less than .99), with Bitcoin all the proceeds can theoretically all go to yourself. With bitcoin you could be selling your blog by the article for 10 cents a piece but that isnot profitable with paypal and visas processing fees.

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  3. One big reason to use bitcoin instead of other payment systems is because you can. You dont have to sign any papers, you dont have to ask for any permissions. Just do it! ™

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  4. It doesn’t have a “point”, a central driving force, it’s a network of advantages large and small. It’s more like a nascent ecosystem with an energy source and a proto-cell raring to soon compete with and eventually absorb inflationary currencies.

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    1. I appreciate that there’s no central driving force, but why specifically should someone use it?

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      1. Farshad Abdollah-nia Thursday, January 2, 2014

        Why Rep. Steve Stockman is using it? He says digital currency is about “freedom,” as in choosing “what you do with your money” and keeping “your money without people influencing it by printing money or through regulation.”

        Okay, Stockman is a politician. He is lying. He is using it because it’s popular. Why is it popular? He gets it: because it’s “free”, and “decentralized”.

        It doesn’t end here. There is a huge part of the story that is often not understood, hence negelected. Why is it gaining more and more value despite being more and more produced? It’s NOT simply because there is going to a limited number of Bitcoins so people speculate that it will become rare and expensive in the future. If this were the case, David Meyer’s arguments would hold. There are many rare, hard-to-obtain things in the world, and they are worthless. Why should Bitcoin be any different if it doesn’t serve particularly bad need. Even worse, there are many other alternative “coins” that can serve exactly the same purpose. There are cheap exchange companies as you mentioned. Why Bitcoin?

        The answer is because there is already a growing “investment” in Bitcoin, simply for PROFIT. Mining Bitcoin is costly, and it gets more and more costly to create Bitcoins as more and more powerful miners join the network, and as the production rate is designed to decrease over time. Only those miners who can afford the largest and most efficient machines (ASIC’s) survive. This means there is more and more competition, more and more investment from rich people as well as ordinary people who share ASIC’s that engage in mining. Now, if a single Bitcoin costs, say, $700 to create, it wont be sold for any less than that value. That means the miners, who are the major owners of Bitcoin, wont sell it for cheap. This communinty of primarily rich owners endorses and trades it at a price above $700. Why would other people choose to accept this high price? Well, they can, of course, choose not to buy it, or speculate that althoug it’s a cool technology, it’s currently in its bubble stage so let’s wait for it to stabilize. The price, however, wont be affected. It may even go higher than the production cost as some ordinary people buy it at $700 to sell it at a higher price, for profit. This shows that Bitcoin has already attained the status of diamond or gold. You do not absolutely need to own or use any gold or diamonds in your life. So what’s the “point” of them? Why are they expensive? You don’t like them, don’t buy them. The gold/diamond owners and buyers don’t care if other people don’t like or cannot afford the comodity. The price remains high.

        Bitcoin however has the advantage over gold/diamond/etc of being free, open source, secure and possible to buy, hold, and transfer quickly, cheaply, in any amount, to anyone in the world who is willing to accept it. This has made it easily accessible and popular for the public. This great liquidity, on the other had, has made it extremely volatile in its infancy stage. But remember, it’s still the birth/production stage of Bitcoin. Soon as it becomes more publically accepetd by merchants and people, the volatility will fade away, still at a price higher than you may particularly enjoy thinking about.

        P.S. Lookup the current ASIC sell/share price and use an online mining calculator to get an up-to-date estimate of the current minnig cost for a Bitcoin.

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        1. Jonathan Mills Friday, January 3, 2014

          When you say “There are many rare, hard-to-obtain things in the world, and they are worthless” can you give an example?

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          1. Farshad Abdollah-nia Friday, January 3, 2014

            Sure.

            I have a strand of my long-deceased grandma’s hair. It carries her unique DNA and it’s totally rare as no other hair on earth has its unique properties. It’s hard to obtain as there is only a small sample available. How much would you pay for it?

            Or, consider a random scribble by my 2-year-old. I have the only original copy in the world. Totally as rare and unique as an original Picasso drawing. Who cares?

            I am sure you can think of many more examples.

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  5. Believe it or not, you aren’t the only person in the world. The area you live isn’t the only place in the world. As hard as it must be to grasp, you aren’t nearly as important as you think you are. When you can’t find a use for something, that doesn’t mean that it doesn’t have one. This exists, come to peace with it.

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    1. Thanks for the reminder. So run me through the use case that you’re thinking of.

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  6. You have to be kidding. In 20 years, when your dollars will buy a tiny fraction of what they will today and Bitcoin has lost none of it’s buying power, you may get the point of Bitcoin.

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    1. Bit coin worth $1k in dec 2013, now worth $636, just two months later. Care to comment again?

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      1. Each mega spike in Bitcoin was preceded by such a correction. Mike, do you care to make YOUR comment again??

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  7. I’m more agnostic overall. Libertarian political fantasies aside, crypto-currency does have a point, to whatever extent that it promises:
    1) Convenient, cheap transactions – and not just internationally. Some merchants are accepting Bitcoin in face-to-face transactions in the hope of avoiding the usurious fees charged by Visa and MasterCard.
    2) Anonymity. That may mostly matter to people who are looking to avoid taxes or buy illegal things, but there are a whole lot of people in the world interested in doing those things.
    3) Potential for world-wide acceptance. Even if Bitcoin or Dogecoin or whatever are “sexy” for stupid reasons, that sexiness still matters a lot if it means more people accept and use it then the more conventional alternatives.

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    1. I would agree with Brian’s list (Particularly points 1 & 3, I cannot speak to the actual level of anonymity Bitcoin provides, I just don’t understand cryptography well).

      First, I would expect that if Bitcoin is allowed to mature, the currency would stabilize. That is a big if, there are plenty of things that still stand in its way (regulation, a massive investor dumping their holdings and causing a huge scare, or people just get bored with the idea) but it is a least POSSIBLE.

      To expand on Brian’s third point: I could imagine people outside the U.S., who live in a country facing hyperinflation, trading Bitcoins instead of the local currency. This would allow them to peg prices to a reliable currency and avoid the types of situations which are, ironically, happening with Bitcoin today.

      I looked into TransferWired and while they absolutely do cheapen the cost of international transfers, they certainly don’t eliminate it. .5% is a lot less than 3.5%, but on a large transfer, .5% is a lot more than free (correct me if I am wrong about Bitcoin being free).

      I am also not sure about your argument regarding Micropayments. I personally HATE buying points at a retailer and using them to pay for platform specific goods. I always wind up with extras. On top of that, I don’t see many outside institutions rallying to sell goods and services using Amazon points or anything. I don’t think most companies or individuals would want to tie up their business/finances with a single private institution, I think that is why the decentralized nature of Bitcoin is a bit exciting.

      I certainly agree with your comparison to Napster though. Their is a pretty good chance Bitcoin won’t last, but it could be a stepping stone on the path to a international financial system that is not quite as expensive/regulated to do business in.

      I appreciate the post!

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      1. Bitcoin transactions aren’t free – they are very cheap for large transactions, and proportionally more expensive for lower-value transactions.

        Regarding my micropayments argument, I wasn’t saying people would generally start using Amazon Coins – I was saying that transactions are increasingly happening through proprietary channels, such as Amazon or Apple or Google Play, so channel-specific tokens kind of make sense. I don’t personally like that scenario, since I abhor walled gardens, but that’s how I see things going right now.

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    2. 1. A payment method is something that the consumer demands, not what’s best for the merchant. I’d always use a credit card to buy as it doesn’t cost me anything and it gives me protection, cash back, and many other benefits. Just because Bitcoin is cheaper for merchant to accept, it doesn’t mean it’s what consumers will use. Also, even if somebody steals my credit card, I’ve lost nothing except some time to report it. Right now, merchants accept Bitcoin to get free publicity as the media picks up anything Bitcoin-related, but what are the real commerce numbers? We only got numbers from BitPay, but BitPay themselves said that many use them to purchase large amounts of bitcoin ($1M is one of the case I read about), i.e. it’s not real commerce.
      2. Bitcoin is pseudo-anonymous. For NSA, it’s not anonymous at all.
      3. In an utopian world where you can buy food and pay your rent with it, but not anytime soon. With huge fluctuations, people will have to buffer in 20-30% to be on the safe side and this is not practical. There were examples of merchants who charge 3 times the fiat rate in Bitcoin in India.

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      1. 1 A payment method like fiat currency is imposed upon mankind by a few. Since many e-commerce merchants are operating at 1 or 2 percent profit margins, they can hugely benefit from cryptocurrency and do without draconian transaction fees. Once these benefits are passed on to the consumers, by giving a discount if payed in Bitcoin. Some businesses accepting BTC already offer customers this discount. It is so shortsighted that you think that the costs of our banking systems are not included in consumer prices. Now you pay everyday for those dickheads that dispute charges on their credit-cards!

        2. Can you tell me 1 thing that is not anonymous for the NSA?

        3. Their are already many solutions to trade and accept Bitcoin without any risk of fluctuations, think Bitpay?

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        1. 1. No e-commerce merchant is working with single-digit margins! There affiliate programs, credit card processing fees, reward programs, returns and exchanges fund, etc. Stop listening to Overstock’s false advertising that they work with 1-2% margin! They simply don’t! Merchant fees are not draconian – they only are such for micropayments, but both Amazon and PayPal offer different rates for micropayments, so, let’s cut the uninformed Bitcoin-fan propaganda! As a merchant, you may get charged 2-3%, but then I get 1-2% cash back, so, the bank makes very little, indeed. Included or not, pricing will continue to have those calculated in the price as the vast majority of people will still be using their credit cards!
          2. NSA can correlate tons of information and reveal the identity – phone location, browser history, IP, and many others. That’s why the US didn’t shut it down – they can trace Bitcoin transactions pretty well. I bet money they are already building a DB of wallet ID identifying information!
          3. I know what’s out there, but this isn’t truly accepting Bitcoin! You accept fiat and some company does a service for you to convert Bitcoin into fiat. It’s like saying: “Overstock accepts EUR!” as people with European credit cards can still purchase on the site as the conversion is done by the bank automatically.

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          1. “so, let’s cut the uninformed Bitcoin-fan propaganda! As a merchant, you may get charged 2-3%, but then I get 1-2% cash back, so, the bank makes very little, indeed.”

            Wrong, Vitaly! When you get 1-2% back from your bank on a credit card purchase, it’s simply NOT coming out of the 2-3% transaction fee paid by the merchant. It’s coming out of the 10-20% interest the bank earns from their credit card users. All you have to do is realize that there is no such thing as 2-3% back on debit card transactions! So yes, merchants ARE being charged more than is necessary (i.e. 2-3%). And yes, those charges ARE passed along to the consumer in the form of higher prices. And yes, Bitcoin WILL introduce transaction cost savings, some or all of which will be passed along to consumers. Of course, we shouldn’t fool ourselves into thinking the transactions costs will go to zero. There IS value offered by Visa/MC and their merchant processors. But because they have a near monopoly, they charge more than the value they offer. So that will change. And because their system has more fraud in it than it should (which accounts for some of the 2-3%), that will change too. You’ll be thanking Bitcoin for that!

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            1. Oops, I meant Nikolay. Sorry!

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            2. You’re wrong. I get 1.5% from PayPal Debit Card on anything I buy with it – I get the cashback monthly. So far I’ve made tens of thousands of dollars of cash back. The only revenue they get from me is my merchant fees, which are pretty much twice my cashback. If I pay my credit card at the end of the month, they don’t make anything from me, in fact, I get a free 20-some-day credit. I’m sure there are merchants that reward the banks more if they bring business in – like Discover does with their 5% cashback, but that’s a different story! I’m sure there are more elaborate schemes to provide cashback, but my point is – you get extra benefits with credit cards. Also, all Bitcoin fans tend to ignore the mining fees, which currently are equal to 3%, i.e. higher than credit cards. It’s just an elaborate psychological scheme that will become obvious once there are no more Bitcoin to be mined! There’s no free lunch! The miners who keep the system alive need to get paid. And they are not less greedy than the banks by all accounts!

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      2. Nikolay Kolev if you had bought some bitcoins the first time I saw your name on a bitcoin article talking about why you don’t like bitcoins, you would have/could have made some money by now.

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        1. I buy and sell Bitcoin – that’s the only credible use as there are enough hyped up people to buy high and sell low.

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          1. so u say the bit coins is going to drop or keep going higher

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          2. Bam! Right there, Nikolay. Even though I don’t think this the reason you bash bitcoin on every article that exists (interested readers can easily google his name and bitcoin to verify), but that one statement is proof alone that you COULD be spreading all this FUD just to buy cheap bitcoins so you can sell into the next rally!

            I doubt that is the motivation for your persistent opinions, but if I had to choose between that motivation and “I’m just interested in spreading my opinion about something that I think is just a pipe dream” I can tell you right now which motivation makes more sense ;-)

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      3. “There were examples of merchants who charge 3 times the fiat rate in Bitcoin in India.”

        Citation please.

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  8. The concept of the blockchain is a rather important creation in fact. Being able to have a distributed, peer to peer, unforgeable proof of existence ledger is revolutionary. I think we will look back years from now and laugh at these arguments over whether or not the concept of bitcoin and blockchain is valuable. I remember having similar arguments with my parents about the Internet. “Why would you want some place where there is no centralized control of content??” “How can you trust content if it doesn’t come from the News orgs or other professional companies?” It’s still very early days for bitcoin and I don’t understand the passionate hatred for bitcoin that comes from some individuals because it doesn’t have “intrinsic value”. Lots of people thought of the Internet as a timesink and waste of time for nerds. Only history will tell.

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    1. I wouldn’t say blockchain is revolutionary. It’s a solution of a problem, but revolutionary it is not. In fact, it’s not even an elegant solution – it requires miners, it requires synching with the blockchain – you can’t embed this into a small device. For example, NameCoin can never replace DNS as DNS is fast, the client is light-weight and simple. Compare this with NameCoin-based DNS. You need gigabytes of storage and constant synching with the blockchain.

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      1. You could say that as well about HTTP, it is just a solution to a problem. It requires computers, cable connections, isp’s – you can’t embed that into a pencil or yellow pages nor does it fit into your mailbox.

        What inventions do you consider as revolutionary?

        I think we can call something revolutionary if it imposes a treat to the established way of doing things. So if the blockchain isn’t a revolutionary invention we should redefine the term ‘revolutionary’. Within a couple of decades we might realize in masses that revolutionary is still an understatement, it is the turn of the century, it will change mankind as much as the industrial revolution! I wish we had invented this before the wheel.

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        1. HTTP is a protocol and there are single chip computers as webservers, so, yes, you can embed a web server into a pencil; the Internet is something different – even Bitcoin relies on it. Decentralization isn’t required for most stuff, only for niches. And just because you can implement a lot of things with the blockchain, doesn’t mean it’s the sanest thing to do! For example, it can’t be real-time.

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          1. A Decentralized internet is already in the works based on the bitcoin PROTOCOL. You think Netflix wouldn’t hop on that in two seconds with the internet gatekeepers trying to bleed their profits dry? How about Decentralized Traffic lights? Do you have any idea how much more efficient traffic would be if all cars and traffic lights in a given area shared GPS information? The possibilities are endless.

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  9. Whoa, I didn’t realize companies like CurrencyFair and TransferWise even existed. Might as well just scrap Bitcoin then. NOT.

    I think the problem the author is having is that he doesn’t really understand what Bitcoin is. Bitcoin is not a company. It’s not a service. It’s not even a currency, at least not first and foremost. What Bitcoin is, primarily, is a protocol. And it enables an “internet of money” so to speak, lowering the barrier to entry for companies (or anyone) wanting to create all manner of payment applications, many of which were never before possible…and some that haven’t even been dreamt up yet. This is the power of Bitcoin. And that doesn’t even begin to address Bitcoin as a distributed super-computer, the largest in the world, which not only secures the Bitcoin payment system, but will enable applications far beyond just payments.

    And let me tell Mr Meyer another thing he’s missing. By coupling the protocol with a “currency”, it allows for anyone to have a stake in the long-term success of Bitcoin. This has multiple effects. For one, it injects capital into the Bitcoin ecosystem, which is being used to develop companies, products and services around the Bitcoin protocol.

    As the offerings develop, more individuals use it and more merchants sign on, Bitcoin becomes more and more useful, increasingly under-pinning the Bitcoin “currency” as an investment and as a store of value. The more people who invest, the more stakeholders there are who want it to succeed and will, therefore, be increasingly likely to use it and tell people about it. The more it gets used (i.e. the more useful it becomes), the more it becomes a store of value, the more capital gets injected into the ecosystem, the more people want to use it, and so on, and so on. It’s a cycle.

    Pretty amazing if you ask me. Of course, not everyone gets it. For those that don’t (like our author), you really should just get out of the way before you get steamrolled. Cheers!

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    1. You are right.

      I love the befuddled, almost panic-stricken nature of the detractors who don’t see the innate beauty and functional value in what has been devised with bitcoin.

      Whether bitcoin itself survives, or whether it serves to be a proof-of-concept for what will follow is yet to be seen, but one thing is an absolute certainty: the future has arrived and fungible digital commodities are here to stay. They’re just too much fun!

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    2. Jonathan Mills Friday, January 3, 2014

      How do you inject capital into a currency with a finite cap? Surely because more currency can’t be issued over and above the already predetermined amounts to be mined (still a finite amount) all demand will do is inflate the currency against its fiat peers as we saw recently and raise the barriers to entry? And how would Bitcoin then retain it’s value if someone else set up another monetary system on the same principles because Bitcoins were to expensive – wouldn’t that be the same as printing more money?

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      1. John DeRegnaucourt Sunday, January 5, 2014

        Comments like yours, come from not understanding that Bitcoin is highly divisible. Someone could create the “OneCoon” for example, and only one exists. And this OneCoin could be divisible to say 16 decimal places. No one would ever own a whole ‘OneCoin’ but simple a fractional part of it.

        Because only OneCoin exists, over time as more money enters the OneCoin currency, the value of the smaller and smaller decimal places increases over time (deflationary – and good). Think of FLAT screen TVs – they are one of the most deflationary product examples in the world. I know if I take $1500 and buy a TV today, what I will get. I also know that if I hold onto that $1500 and wait one year, the TV I get will be larger and have more features. Yet people still buy FLAT screen TVs, even though it is a deflationary product.

        The Central Banks have everyone thinking that inflationary economy is good. That keeps everyone ‘on the treadmill’ working their asses off. In a deflationary monetary system, your money gets more valuable over time. You would be able to retire sooner.

        One other point the author misses is that currently Central Banksters have EXCLUSIVE rights to mine USD (Euros, Yen, etc.) As the print $80 Billion USD per month, does anyone raise your paycheck (or bank account balance accordingly as your fiat currency pie-slice has just decreased)? No. At least Bitcoin allows the ‘world’ to mine.

        Nearly all governments are massively debt ridden and are using Quantitative Easing (printing massive amounts of their own currency) to cover up their debts (they are shrinking the amount owed by the amount of new money they print). With a deflationary currency, governments would be forced to FINALLY balance their budgets.

        Bitcoin is the future. It fixes to many financial problems in our economy, and will allow people to retire sooner and not work until their graves.

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  10. Why use bit coins ? very handy if you want to buy drugs. Bypassing credit card and bank fees has to be a bonus too. Becoming part of a worldwide revolution in value exchange has its advantages also.

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    1. Chris Bordeman Thursday, January 2, 2014

      Bypassing fees is not hard with most banks, and you can actually buy things with their money other than drugs and other bitcoins. And without vast swings in value from day to day.

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      1. Yeah, but try sending money internationally without:

        - Incurring a somewhat substantial fee
        and/or
        - Waiting days for it to clear

        I used bitcoin last month to send some money to my friend in Germany. It cost me £0.02, transferred instantly and cleared in about 30 minutes, after which he immediately exchanged it for euros and banked it. It’s great.

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        1. using BTC to send money today is PAINFUL. It takes forever to even buy BTC and then by the time you get some the price has moved. The exchanges like Coinbase for us sods in the USA charge 1% just to go from USD to BTC… I get it’s a proof of concept and one day it will be good but right now its just a science experiment. Not something that can be used on mass consumer scale…

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          1. here’s a detailed account of how difficult it is to practically use bitcoin today for an international transfer… effectively totally useless. Read below: http://techcrunch.com/2014/01/01/why-i-lost-faith-in-bitcoin-as-a-money-transfer-protocol/

            perhaps it’ll get better over time ala Clayton Christensen’s Innovator’s Dilemma theorty… but right now Bitcoin is like the “homebrew computer club” version of Wozniak’s first PC… we have quite a few iterations to get to an Apple I, Apple II, Lisa, Mac and eventually an iPhone

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            1. I use Bitcoin to exchange Euros into Malaysian Ringgit. As I have Bitcoin, it’s usually a matter of hours to do this, transferring some of my Bitcoin to LocalBitcoins.com, finding a seller and executing the trade. This allows me to avoid banking fees (7 Euro + 1%-2% worse exchange rate), and it doesn’t take 4 working days to clear.

              I’ve looked at the alternatives mentioned. Currencyfair and Transferwise only offers a small numbers of currencies to exchange, and MYR isn’t one of them. Also, Transferwise says it takes 2-4 days to transfer money. These services may grow into interesting alternatives. But meanwhile Bitcoin already works.

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            2. Here’s the detail about losing faith:

              “Then, when I finally got my bitcoins, I transfered them to Bitstamp in a couple of hours (no fee) — it was flawless and a great example of the beauty of Bitcoin. Finally, I transfered my bitcoins to my French account ($1.24 fee to convert into EUR with a very good conversion rate). I had to wait a few days before getting my money because of the traditional banking system.”

              In case you missed it: “it was flawless and a great example of the beauty of Bitcoin”

              And it was compromised by a lazy link-bait headline and poor performance by the bloated, incumbent oligopolists.

              “I had to wait a few days before getting my money because of the traditional banking system.”

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