Bitcoin is just about the biggest scam ever perpetrated. An imaginary currency, not backed by any government or tangible collateral, totally unregulated and totally susceptible to manipulation and theft. It's the new Ponzi scheme for millenials.
Saying it is a scam is an opinion not a fact. US Dollars are no longer backed by gold(no countries currency is) so technically speaking they are not based on tangible collateral.
One other thing you should research is fractional reserve banking. This is the reason our government insures bank deposits. The vast majority of the bitcoin community recommend people keep control of their own bitcoin, companies like Mt. Gox knowingly operated on a fractional reserve system, and knowingly had full control over peoples bitcoins, this was known and would be the equivelant of the community telling people not to let a private company store their cash in a system without transparency. The bitcoin protocol itself goes against central management so Mt. Gox operating as a fractional reserve bank was not within the core values of bitcoin.(Mt. Gox was part fractional reserve type bank part exchange, one of many exchanges)
As far as regulation manipulation and theft, in this regards it would be very similar to cash. Very difficult for governments to regulate the exchange of paper between two individuals, same with bitcoin. Same for theft and manipulation, if someone steals your physical wallet, they can take the money out and do with it as the please, same with your digital wallet. Bitcoin wallets can be created with math and never touch a computer, this is called cold storage, you can keep this in your back pocket surrounded by leather and it would be identical to your wallet. Please clarify what you mean by it being susceptible to manipulation and theft, I'd love to know your thoughts.
I will also address further comments, give me time. I am trying to include refrences were appropriate, and if anyone has questions or would like clarification please let me know.
EDIT: Additionally, in regards to it being a ponzi scheme... The first early adopters would frequently (and the community at large still does) give away large amounts of bitcoin. They'd trade 10,000 bitcoins for a $10 pizza. In the very beginning no exchanges existed as this was a new technology being played with by geeks like myself. It started purely as a proof of concept. The begining and well into its infancy the only way to acquire bitcoins were to "mine" them for free(minus your electricity usage). You can still mine them without giving anything to the early adopters. People buying them do so because they choose not to mine them and acquire them for free. This was developed by geeks, not financial masterminds who wanted to scam people, it should be evident by the way they are freely created and transferred.
I purchased around $100 dollars in bitcoins a few years ago, I've made several thousand off of it but only currently have around $2000 worth of bitcoin now.
That was a great time to buy bitcoin because it was before all of the hype. Do you ever do technical analysis on bitcoins or are you more fundamental? I know a few guys who are really into bitcoins and they are always looking at chart patterns with this stuff.
I don't do much analysis on it now, too busy with other stuff, but at one point in time I ran a very large bitcoin blog and information site. I exposed several scams, I was an anonymous member of the community but a very large member of the community. I am very familiar with the technical aspects of it as well.
I purchased around $100 dollars in bitcoins a few years ago, I've made several thousand off of it but only currently have around $2000 worth of bitcoin now
I totally believe your statement. Many initial investors in Ponzi schemes make a lot of money at the beginning as well. And, if they're lucky, they get out before the whole thing crashes. Matter of fact, right here in MA a huge Ponzi scheme involving a company called TelexFREE defrauded working Brazilians out of millions of dollars. But some of the first who got into it and got out of it fast enough made a pile of cash. Even some of Madoff's clients profited when they were able to cash in their accounts before that house of cards collapsed.
Now, the difference between Madoff and traditional Ponzi schemes and Bitcoin is that if you're ripped off by a Ponzi scheme there's a tiny little chance that the courts might be able to compensate you if they can "find the stolen money" or liquidate the cars, homes and yachets bought by the scammers on punters' investments. Lose your Bitcoin stash and who do you sue? The Internet?
Anyway, there's plenty of "fact-based," "unemotional" commentary out there showing the dangers and fraud associated a form of currency whose "minters" are accountable to no one. Here are just a small sampling, ranging from pro-free-market sites like FoxBusiness to techevangelists like Wired.
Government backed isnt all that comforting but as raisindot said this isnt backed by ****
Curious on what the government is backing? What protections do you receive? Are you just referring to the insured value of your money in the bank? This is purely for clarification on what you mean.
Yes, I have. Extensively. The potential for fraud, theft and artificial manipulation--aided by the power and speed of the Internet--makes Madoff look like three-card monte by comparison. But, hey, if people want to spend real money to lose imaginary money, all the power to them.
In the lack of facts I guess bashing your opposing view helps make your point? Please clarify the potential for fraud that exists that does not with cash? Also, the definition of fiat currency: Fiat money has been defined variously as:
any money declared by a government to be legal tender.
state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
intrinsically valueless money used as money because of government decree
While gold- or silver-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of gold or silver, fiat money's value is unrelated to the value of any physical quantity. Even a coin containing valuable metal may be considered fiat currency if its face value is defined by law as different from its market value as metal.
Here is a link to an Investor Alert concerning bitcoin that was posted on the FINRA (Financial Industry Regulatory Authority) web site. This alert raises a number of cautions about the potential and actual abuses of "digital currency" and cites its sources.
I would be curious to hear a point-by-point response from the perspective of bitcoin advocates, particularly to these bullet points from the article:
Bitcoin Risks
*Digital currency such as Bitcoin is not legal tender. No law requires companies or individuals to accept bitcoins as a form of payment. Instead, Bitcoin use is limited to businesses and individuals that are willing to accept bitcoins. If no one accepts bitcoins, bitcoins will become worthless.
*Platforms that buy and sell bitcoins can be hacked, and some have failed. In addition, like the platforms themselves, digital wallets can be hacked. As a result, consumers canand havelost money.
*Bitcoin transactions can be subject to fraud and theft. For example, a fraudster could pose as a Bitcoin exchange, Bitcoin intermediary or trader in an effort to lure you to send money, which is then stolen.
*Unlike US banks and credit unions that provide certain guarantees of safety to depositors, there are no such safeguards provided to digital wallets.
*Bitcoin payments are irreversible. Once you complete a transaction, it cannot be reversed. Purchases can be refunded, but that depends solely on the willingness of the establishment to do so.
*In part because of the anonymity Bitcoin offers, it has been used in illegal activity, including drug dealing, money laundering and other forms of illegal commerce. Abuses could impact consumers and speculators; for instance, law enforcement agencies could shut down or restrict the use of platforms and exchanges, limiting or shutting off the ability to use or trade bitcoins.
"When I have found intense pain relieved, a weary brain soothed, and calm, refreshing sleep obtained by a cigar, I have felt grateful to God, and have blessed His name." - Charles Haddon Spurgeon
Doing a little research, I wouldn't go so far as to call it fraud or a scheme yet. It seems to be a flawed and risky experiment in crypto-currency. I'm excited as to the possibilities that this might bring in the future, but as of right now, I'd stick with the dollar or investing in gold and cigars.
I purchased around $100 dollars in bitcoins a few years ago, I've made several thousand off of it but only currently have around $2000 worth of bitcoin now
I totally believe your statement. Many initial investors in Ponzi schemes make a lot of money at the beginning as well. And, if they're lucky, they get out before the whole thing crashes. Matter of fact, right here in MA a huge Ponzi scheme involving a company called TelexFREE defrauded working Brazilians out of millions of dollars. But some of the first who got into it and got out of it fast enough made a pile of cash. Even some of Madoff's clients profited when they were able to cash in their accounts before that house of cards collapsed.
Now, the difference between Madoff and traditional Ponzi schemes and Bitcoin is that if you're ripped off by a Ponzi scheme there's a tiny little chance that the courts might be able to compensate you if they can "find the stolen money" or liquidate the cars, homes and yachets bought by the scammers on punters' investments. Lose your Bitcoin stash and who do you sue? The Internet?
Anyway, there's plenty of "fact-based," "unemotional" commentary out there showing the dangers and fraud associated a form of currency whose "minters" are accountable to no one. Here are just a small sampling, ranging from pro-free-market sites like FoxBusiness to techevangelists like Wired.
http://www.nbcnews.com/tech/innovation/dont-be-sucker-bitcoin-scams-sec-warns-n100371 This article outlines the dangers of bitcoin because like cash transactions are hard to trace and can not be reveresed, all of these concerns are valid with Cash or wire transfers as well, and are primarly an issue of educating people not to be gullable. Things like "Avoid deals that sound too good to be true" are not bitcoin specific, this should be common sense. Should people avoid email because of nigarian 409 scams? Should people avoid Wire Transfers? These scams have nothing to do with bitcoin.
After reading the first few links I stopped, please let me know if the rest have anything to do with bitcoin itself or dangers that are present only for bitcoin.
It seems that everything you linked has to do with common sense. I could reference thousands of links and news articles with the exact same circumstances but swap out "bitcoin" for "cash" or "wire transfer" or "gold" or any other thing of value.
What makes bitcoin more susceptible to these scams?
Here is a link to an Investor Alert concerning bitcoin that was posted on the FINRA (Financial Industry Regulatory Authority) web site. This alert raises a number of cautions about the potential and actual abuses of "digital currency" and cites its sources.
I would be curious to hear a point-by-point response from the perspective of bitcoin advocates, particularly to these bullet points from the article:
Great response Doug!! This is how debates of topics should be, clear and concise and actually looking at both sides!
Give me a few hours as I'm at work and its a hectic day, but I'll comment on each point.
Here is a link to an Investor Alert concerning bitcoin that was posted on the FINRA (Financial Industry Regulatory Authority) web site. This alert raises a number of cautions about the potential and actual abuses of "digital currency" and cites its sources.
I would be curious to hear a point-by-point response from the perspective of bitcoin advocates, particularly to these bullet points from the article:
Bitcoin Risks
*Digital currency such as Bitcoin is not legal tender. No law requires companies or individuals to accept bitcoins as a form of payment. Instead, Bitcoin use is limited to businesses and individuals that are willing to accept bitcoins. If no one accepts bitcoins, bitcoins will become worthless.
Absolutely correct on this, its only as useful as the people you are using it with. I think this is true for anything with value though. Gold and Diamonds are only valuable if people want them, the same with currencies as we've seen with currencies around the world that have crashed. I have old peso's at home and dinars that are worthless now, I use the old peso's as poker chips.
*Platforms that buy and sell bitcoins can be hacked, and some have failed. In addition, like the platforms themselves, digital wallets can be hacked. As a result, consumers canand havelost money.
This is one of the huge problems with bitcoin(and technology in general). Bitcoin is used by a lot of IT security professionals because it is based off of cryptography. At its core it is very secure and currently unhackable as a protocol and encryption. Peoples implementations of it are not unhackable though. Digital bitcoin wallets themselves are not hackable, but the computers you store your encryption keys on are hackable, if you steal the encryption key you have access to the wallet. This is similar to an impenetrable safe to store your money in, the keys to that safe are the vulnerability in the system. IT Security is inconvenient so many times people do not implement it well, but these are fundamental problems with computers and user education, not with the bitcoin protocol. Users have also lost money from losing their encryption keys, in fact a developer of bitcoin lost a wallet key containing 7000 bitcoin, completely unrecoverable.Here is a link to several scams, thefts and losses. Most if not all of these have to deal with user error and/or trust in a 3rd party, these types of things happen in the world of cash all the time.
*Bitcoin transactions can be subject to fraud and theft. For example, a fraudster could pose as a Bitcoin exchange, Bitcoin intermediary or trader in an effort to lure you to send money, which is then stolen.
This is not unique to bitcoin in any way. These scams have been going on for thousands of years.
*Unlike US banks and credit unions that provide certain guarantees of safety to depositors, there are no such safeguards provided to digital wallets.
In a sense the risks are the same as cash. Your digital wallet is the same as the wallet in your back pocket, you lose it and its gone, someone steals it and you never get it back. Bitcoin is not a bank, it doesn't pretend to be. As a side note, the reason behind the insured value of your deposits is because of something called Fractional Reserve Banking and the fear that people had when this started.
*Bitcoin payments are irreversible. Once you complete a transaction, it cannot be reversed. Purchases can be refunded, but that depends solely on the willingness of the establishment to do so.
This is one of my favorite parts of bitcoin. It reverses the trust model.
I've previously owned retail businesses and I've encountered fraud from consumers reversing transactions or bouncing checks fraudulently. Many times it is not worth pursuing these and you write it off as a loss and business expense. This prevents an honest merchant falling victim to fraud. This puts the responsibility of the consumer to know who he is conducting a transaction with and to trust the person he is conducting the transaction with.
Most of the Pro-Bitcoin literature preaches this and urges people to know who they conduct business with and not to transfer funds unless they trust the person. Consumers should be educated on who they conduct business or transfers with in my opinion. I am an educated consumer who typically will research a company I buy things from regardless of if they are online or not, or using bitcoin or not. I know better than to buy speakers with cash from a guy in a van on the side of the street, this common sense should translate to the rest of the world as well.
*In part because of the anonymity Bitcoin offers, it has been used in illegal activity, including drug dealing, money laundering and other forms of illegal commerce. Abuses could impact consumers and speculators; for instance, law enforcement agencies could shut down or restrict the use of platforms and exchanges, limiting or shutting off the ability to use or trade bitcoins.
This is definitely real, the shutdown of silk road caused major fluctuations in the market, the legal trouble in China impacted the market even further. I assume similar things happened in Cuba during the embargo as well.
No one is forcing people to use bitcoin, like anything else people should educate themselves before jumping into it, know the risks associated with it. Bitcoin is not without risks, it could at any moment completely crash and be worthless. If you are looking for a conservative investment you should not be considering bitcoin. Bitcoin is NOT an investment, it is a crypto currency. Can you make money off of it, yes, but you can also lose money with it, however the same can be said with stocks, gold, the US Dollar.
It's purpose is not to invest money, it's purpose is to fix problems that people find with traditional methods. Problems like charge backs to merchants, overly high transaction fee's, transferring large amounts of money over large distances. And some of its greatest benefits, security, control, and transparency. Decentralized networks are an incredible thing, and bitcoin leverages this to a payment processing platform.
Let me know if you have any other questions on it, would like further clarification or references for things mentioned, or if I possibly misinterpreted anything you asked.
I honestly think a lot of the confusion comes from a lack of understanding of the technology involved and the way bitcoin works. The media unfortunately has put out a lot of incorrect information and confused everyone.
EDIT: and if you'd like any bitcoin, or would like help on setting it up for yourself or tips and information on how to securely set it up(from beginners to advanced air-gapped systems).
Here is a link to an Investor Alert concerning bitcoin that was posted on the FINRA (Financial Industry Regulatory Authority) web site. This alert raises a number of cautions about the potential and actual abuses of "digital currency" and cites its sources.
I would be curious to hear a point-by-point response from the perspective of bitcoin advocates, particularly to these bullet points from the article:
Great response Doug!! This is how debates of topics should be, clear and concise and actually looking at both sides!
Give me a few hours as I'm at work and its a hectic day, but I'll comment on each point.
Chrisfold, I would be very happy to read links from legitimate news sites you post that counter all of the various warnings about about the risks of Bitcoin fraud from the SEC, FINRA and other sources. I'd be particularly interested in articles written by objective sources (i.e. those not in the Bitcoin business) that prove that Bitcoin transactions are safe, that the value of Bitcoin is backed by something other an algorithm, that regulations are in place to protect investors in the case of fraud, that Bitcoin transactions are transparent and custodied the same way wire and ACH transactions are, that if any problem occurs with a Bitcoin trade the investor has a place they can contact for resolution of the problem, and that there are legal systems in place allowing Bitcoin owners to sue those who commit fraud against them.
The ball, sir, is in your court. Let's keep the debate going!
Here is a link to an Investor Alert concerning bitcoin that was posted on the FINRA (Financial Industry Regulatory Authority) web site. This alert raises a number of cautions about the potential and actual abuses of "digital currency" and cites its sources.
I would be curious to hear a point-by-point response from the perspective of bitcoin advocates, particularly to these bullet points from the article:
Great response Doug!! This is how debates of topics should be, clear and concise and actually looking at both sides!
Give me a few hours as I'm at work and its a hectic day, but I'll comment on each point.
Chrisfold, I would be very happy to read links from legitimate news sites you post that counter all of the various warnings about about the risks of Bitcoin fraud from the SEC, FINRA and other sources. I'd be particularly interested in articles written by objective sources (i.e. those not in the Bitcoin business) that prove that Bitcoin transactions are safe, that the value of Bitcoin is backed by something other an algorithm, that regulations are in place to protect investors in the case of fraud, that Bitcoin transactions are transparent and custodied the same way wire and ACH transactions are, that if any problem occurs with a Bitcoin trade the investor has a place they can contact for resolution of the problem, and that there are legal systems in place allowing Bitcoin owners to sue those who commit fraud against them.
The ball, sir, is in your court. Let's keep the debate going!
Great questions. I'll answer briefly before I have to get back to work, and then I'll let you clarify from my answer what references you'd like.
Bitcoin has the same fraud potential as cash. Scams and fraud predate bitcoin, they have just been adopted to game bitcoin users because they found bitcoin users to be very generous much like this forum. We could fall victim to scam on this forum just as easily as cash or bitcoin, that does not mean there is a fundamental flaw in the forum, cash or bitcoin. EDIT: AND they've seen that like cash a transaction can not be forcibly reversed.(which in many's opinions is a benefit)
The value of bitcoin is not backed by anything. But neither is the value of Fiat Currency like the US Dollar.
Bitcoin is not an investment, it is a Crypto Currency. One of its many benefits are that it is not regulated or governed and can not be, it is a true decentralized network. If you are wanting to make an investment out of bitcoin you are free to use it that way, but that is not its intended purpose. In fact people investing and holding onto money is counter productive to the bitcoin network and the way it works.
Your reference of bitcoin trading is referenced as an investment format like stock trading. This is not its intended use. People do similar things with trading currencies, any time you have 2 things that fluctuate in price you will see people trading them to make money off of it. Just like cash, anyone is free to do whatever they'd like with bitcoins, third party companies can come in and accept bitcoin for whatever purposes they'd like and there is no central agency to interfere, this is a benefit and something that bitcoin adopters prefer.
Cash does not have any system in place to allow you to sue those committing fraud, the court system does. Mt Gox is currently in bankruptcy court, and have several lawsuits filed against them in both the US and Japan, these are facilitated by the court systems and judicial system not by currency the same as Cash doesn't have a system in place to sue.
A lot of people find comfort and benefit from a system that is decentralized and has nothing to control it with the exception of the majority of adoption. Some of the benefits of this would be that no government, organization or person can seize or freeze your assets. Just like the color red, some people like this and some people don't. It's not for everyone just like some people never carry cash.
Bitcoin has something called a blockchain, if you run the bitcoin client on your computer it downloads the entire blockchain which is a history of every single bitcoin transaction ever, from when they were mined to where they are currently. This is called true transparency. If you'd like I can link you to websites that you can view the blockchain, or I can help you to download it yourself and I can explain how to search through it by sending you a small amount of bitcoin and you can trace it back to when it was originally made.
Raisindot: What makes you feel that Bitcoin is more susceptible to fraud, scam or theft anymore than Cash is? What makes you feel that Bitcoin is a ponzi scheme. I'd like to address these comments you made.
Thanks for the earlier replies to the FINRA alert, Chris. Did you get a chance to read the article I linked to earlier by Gary North? Here's the Link in case you missed it.
I would be curious to see how you would interact with his arguments. He has another article on bitcoin that You Can View Here.
"When I have found intense pain relieved, a weary brain soothed, and calm, refreshing sleep obtained by a cigar, I have felt grateful to God, and have blessed His name." - Charles Haddon Spurgeon
Thanks for the earlier replies to the FINRA alert, Chris. Did you get a chance to read the article I linked to earlier by Gary North? Here's the Link in case you missed it.
I would be curious to see how you would interact with his arguments. He has another article on bitcoin that You Can View Here.
I'll start with the second article you linked as it has the earliest date.
I'm not familiar with Gary North but just by reading the first paragraph dealing with bitcoin it is obvious he is speaking on a subject he is not familiar with. A lot of people jumped on the bitcoin bandwagon when it became a popular term and they wanted to form opinions on it without a clear understanding or knowledge of how it works. Lets start with the second paragraph referencing bitcoin from that article:
You have to have digital currency in order to buy Bitcoins. This digital currency leaves a record. Every purchase you make with the digital currency leaves a record. You are then told that you can make purchases with Bitcoins. These will not leave a record. As long as you never have to reenter the monetary economy of the government's fiat money systems, there is no further trace of your purchases with respect to digital entries.
Absolutely wrong. While you can purchase bitcoin with other digital currencies or even with fiat currencies this is in no way needed. The most famous bitcoin transaction in history, and one of the most valuable now, would be the transaction of 10,000 bitcoins for a pizza. You can trade bitcoin for anything. Doug, I'll send you bitcoin for your participation in this thread, you did not need any currency to acquire it. You can get free bitcoins all over the internet. You can mine for them and get them that way. Where he is correct is that every transaction is recorded, it is recorded in the blockchain and its a form of checks and balances. People say it is anonymous currency which it is not, every single transaction ever made is viewable to the entire public, its transparent and accountable. He has no comprehension of the system and how it works.
I'll be honest, I normally stop reading at that point because I know the entire article is written by someone without an understanding of the topic he is speaking on, but I'll read through both articles.
You have to have digital currency in order to buy Bitcoins. This digital currency leaves a record. Every purchase you make with the digital currency leaves a record. You are then told that you can make purchases with Bitcoins. These will not leave a record. As long as you never have to reenter the monetary economy of the government's fiat money systems, there is no further trace of your purchases with respect to digital entries.
But this creates a problem for the person selling you something. If the item that he sells you is manufactured, then he has to rely on the division of labor. He has to re-enter the world of fiat money currencies, meaning government run and central bank run fiat money currencies. He must convert his Bitcoins to real money. That is because he must buy real goods.
Bitcoins are virtual money. Problem: virtual money buys very few real goods. For virtual money to buy anything, the virtual money must be converted back into real money, which is digital money, which is money that is an entry in a bank account. At this point, all of the supposed privacy of Bitcoins disappears. Now the government can trace whatever happens.
Gary now thinks that Bitcoin claims to be anonymous, this shows that all of his knowledge has come from misinformed media coverage of bitcoin and not from his own research. A little bit of research would have led him to the bitcoin website which has tried to correct this misinformation since the begining. One of the benefits of bitcoin is transparency, the fact that EVERY single transaction is logged and public record, its the core of how bitcoin works.
The problem for the defender Bitcoins is this: we need a comprehensive system of prices. For Bitcoins to work, they must be autonomous from the fiat money pricing system of the various government currencies. In order to make a pencil, there has to be a comprehensive, universal, widely recognized Bitcoins network. It is not possible to run Bitcoins as a separate currency system unless it applies to every product, every transaction, every service that is presently priced in terms of government monetary systems. Why is this? Because the division of labor must be integrated by a single currency system.
OK, I lied.... I said I was going to read the whole thing but it's painful to read. A lot of repeating and most of what I read is based off the same misinformation. I'd love if you could give a cliff notes version and bullet point what the main issues are that you see here?
I'll add in my thoughts and personal opinions on some things I briefly skimmed over though. When I first started using bitcoin it wasn't very useful at all, I could only trade it with other geeks and it was just something fun and a new technology to learn about, a great proof of concept from a whitepaper written on crypto currencies. Using it to buy real world goods, forget it, you could trade it with geeks and sometimes get things... Fast forward a few years... not much that I can't buy with it now. People even get paid with it.
Now lets look at the history of currencies. Generally speaking they are pretty slow to be adopted, and they fluctuate in value quite a bit until they are widely accepted. It's simple supply and demand, its the way all things of value work. Or dollar fluctuates in price, our goods fluctuate in price, gold fluctuates in price. If you are dealing with something from within the ecosystem then everything can be bought with a certain currency, but try buying that chainsaw here in america with a franc or euro, nope you'll have to convert it to something used locally. As currency grows in popularity its acceptance gains as well, and we see that happening with bitcoin. Long ago people would trade seashells and stones. What happens with any currency not on the gold standard(all of them) when they are first started?
Who knows if bitcoin will make it or not? I'm guessing it probably won't, but I am guessing that it will lead to something that will become widely used based off of the same decentralized type of network. Bitcoin is and always has been a proof of concept, surprisingly enough it actually works and works well.
So the other article brings up some good points. People holding on to bitcoins and not spending them. This is something that the developers of bitcoin, and true adopters of bitcoin are against. I purchase items frequently from amazon and other places online with bitcoin. Whenever I go to purchase an item and I see the availability to purchase it in bitcoin I do so. I do this not only because its the purpose of bitcoin but also because I see the benefits in it. The merchant gets paid with a MUCH lower transaction cost. Most people take for granted the fee's merchants pay from bitcoin, merchants individually pay thousands/millions every year in credit card fee's. Credit card companies make so much off of this that they give rewards, miles, money to people using their cards. Everyone thinks this is great but it causes the price of goods to raise, someone has to pay for those miles, and the merchant will pass that cost onto the consumer. When I buy things with bitcoins I'll typically get a discount as well, bonus.
So I'd like to say that Gary actually got something quite right, the fact that people holding on and treating it like an investment versus a currency is bad for bitcoin, but as more and more people use it and find the benefits of it, as more businesses accept it, the percentage of hoarders and percentage of legitimate users will turn as it already has started to. Gary thinks the developers of bitcoin made it to not be used, quite wrong, its meant to be used and has all of the features to make it work better when used.
Government backed isnt all that comforting but as raisindot said this isnt backed by ****
Curious on what the government is backing? What protections do you receive? Are you just referring to the insured value of your money in the bank? This is purely for clarification on what you mean.
the us government back their fiat dollars "with full faith and credit" they will always be accepted because the govt says they support the dollar. Take it for what it is. Who backs bitcoin? Is it widely accepted as currency? And what if it isnt tomorrow?
I understand fiat currencies, fractional reserves and all that. As a currency bitcoin is just strange... but there have been stranger. Certain pacific island cultures used giant stone circles. They never changed hands in transactions. It was just understood whoever owned the largest one was rich lol! I think monetary policy and the money and banking system is super interesting.
gold was used because of its intrinsic value, but you cant have monetary policy with gold. So we have fiat dollars. But what is intrinsically valuable about an imaginary bitcoin? Thats part of its basis of value right? And its a "limited"supply so it has no inflation. But I think part of the fear is its imaginary nature. It doesnt physically exist. That makes it seem susceptible to fraud. How much easier is it to counterfeit if you dont even have to fool anyone with a fake? Just my ideas and opinion. I will read up on it. As I said currencies are one of the most interesting things in macro econ to me.
Here is a fascinating discussion between Peter Schiff (bitcoin skeptic) and Eric Voorhees (bitcoin proponent). Schiff acknowledges the admirable goals of the bitcoin community, but believes the system has a fundamental flaw. So far, I find Schiff's misgivings about bitcoin more compelling. Anyway, whatever position you take, I think you'll find this exchange quite interesting.
"When I have found intense pain relieved, a weary brain soothed, and calm, refreshing sleep obtained by a cigar, I have felt grateful to God, and have blessed His name." - Charles Haddon Spurgeon
Government backed isnt all that comforting but as raisindot said this isnt backed by ****
Curious on what the government is backing? What protections do you receive? Are you just referring to the insured value of your money in the bank? This is purely for clarification on what you mean.
the us government back their fiat dollars "with full faith and credit" they will always be accepted because the govt says they support the dollar. Take it for what it is. Who backs bitcoin? Is it widely accepted as currency? And what if it isnt tomorrow?
I understand fiat currencies, fractional reserves and all that. As a currency bitcoin is just strange... but there have been stranger. Certain pacific island cultures used giant stone circles. They never changed hands in transactions. It was just understood whoever owned the largest one was rich lol! I think monetary policy and the money and banking system is super interesting.
gold was used because of its intrinsic value, but you cant have monetary policy with gold. So we have fiat dollars. But what is intrinsically valuable about an imaginary bitcoin? Thats part of its basis of value right? And its a "limited"supply so it has no inflation. But I think part of the fear is its imaginary nature. It doesnt physically exist. That makes it seem susceptible to fraud. How much easier is it to counterfeit if you dont even have to fool anyone with a fake? Just my ideas and opinion. I will read up on it. As I said currencies are one of the most interesting things in macro econ to me.
I'd recommend reading https://bitcoin.org/en/how-it-works to get a really brief quick primer on how it works. Technically speaking it would take one of two things to happen in order for someone to "counterfeit" bitcoin. Someone would either have to take control of 51% or more of the computing power of the network (bitcoin is the largest computing network that has ever been, and if anyone could get that much computing power it would be MUCH more profitable for them to just generate the bitcoins legitimately) or they would have to crack modern cryptography (and if that happens every modern financial institution on earth is susceptible, not to mention everything else that relies on passwords or encryption). Bitcoin is also unique in that its completely decentralized but updates can be issued out, and as long as 51% of the people agree on the update and apply it then it will update the entire system, allowing it to change when needed for more advanced encryption.
Like I said though, bitcoin isn't for everyone, and I agree it probably will not be the cryptocurrency that stays around forever, however I believe that eventually there will be a decentralized crypto currency that gets acceptance with the vast majority of the world. I also disagree strongly with people who think it is a ponzi scheme or people who think it is any more susceptible to scams, theft or manipulation. The people who say these things often like to tell everyone they have researched bitcoin heavily, but very often they have just formed their opinions from what others have said versus researching on their own and coming to their own conclusions. People that are however curious and wanting to learn I find much more open to coming to an informed decision whether they like the currency or not they are at least informed.
I guess for me the government backs the dollar, but the dollar is what gives the government its power, if the dollar was to ever fail and crash I don't see what the government would do to "back it", they've lost all their power as well.
People always fear what they don't know.... I'm rambling now though... it's late and I have been working like crazy, goodnight all and I am open to discussion on any of it through PM or this thread, and even people who think its a scam if they'd like to familiarize themselves with it I'll give them some bitcoin. Night!
Here is a fascinating discussion between Peter Schiff (bitcoin skeptic) and Eric Voorhees (bitcoin proponent). Schiff acknowledges the admirable goals of the bitcoin community, but believes the system has a fundamental flaw. So far, I find Schiff's misgivings about bitcoin more compelling. Anyway, whatever position you take, I think you'll find this exchange quite interesting.
You are absolutely right that the govt and fed have a symbiotic relationship. Especially now. Gov needs dollars, fed wants to rev up economy, so they buy bonds on open market. Banks get dollars and govt gets free debt. Woo boo.
I guess for me the government backs the dollar, but the dollar is what gives the government its power, if the dollar was to ever fail and crash I don't see what the government would do to "back it", they've lost all their power as well.
This is a key issue for me in this whole discussion. It seems to me that a currency - a medium of exchange that is universally accepted as a basis of trade in goods and services - in order to be stable and sustainable - must be "backed" by some physical commodity that is also universally accepted as valuable by the public. This is what dollars used to be before the corruption of the gold standard. Paper dollars had value because they were certificates that could be exchanged for something of value, namely gold.
Today's paper dollars have no true value because they are "backed" by nothing but the government's promise that they will be replaced by more worthless paper, but none of the paper represents any solid commodity. Paper dollars have "power," in that they are accepted as payment for goods and services, but their assumed value is an illusion carried over from the time in which they actually represented a hard commodity (gold) and were simply a certificate of ownership of that commodity.
In that sense, bitcoins are similar to fiat currency to the extent that people will mutually agree to accept them as a medium of exchange for goods and services. But, like fiat currency, they are not "backed" by any tangible, material commodity and thus they have no actual value.
This is why I like Peter Schiff's suggestion that if bitcoin - or some other form of cryptocurrency - is to become a primary and stable medium of exchange, it would have to be linked to a physical commodity such as gold, so that the exchange of the digital currency is a true token of the exchange of something of actual value for the product or service that is desired by the consumer. Without that link to something tangible, it seems to me that it sets up a monetary system that can simply evaporate into thin air.
"When I have found intense pain relieved, a weary brain soothed, and calm, refreshing sleep obtained by a cigar, I have felt grateful to God, and have blessed His name." - Charles Haddon Spurgeon
Raisindot: What makes you feel that Bitcoin is more susceptible to fraud, scam or theft anymore than Cash is? What makes you feel that Bitcoin is a ponzi scheme. I'd like to address these comments you made.
Chrislolds, I'm STILL waiting for you to cite independent sources that counter all of the many independent sources I've cited warning that Bitcoin offers no protection for buyers or sellers, is an opaque market unaccountable to anyone, and widely susceptible to fraud that can bankrupt owners, offering no insurance or legal recourse.
But since you've asked, I'll answer your question.
Bitcoin is NOT like cash. Every dollar I have, whether it was minted in 1910 or 2014, is backed by the full faith and credit of the United states for the value on its face. I can bring such currency to nearly any bank in the world and they will exchange it for the equivalent value of that currency. And even if a currency itself no longer exists because its country no longer exists, at least it may have some scrap metal value. None of this can be said for Bitcoin. If the computers go down, Bitcoin is worthless.
Bitcoin is NOT like gold. Yes, the price of gold can rise or fall--something that can happen with any commodity--there is ALWAYS a physical source of the stuff backing up the price. Even if you don't store the gold yourself--i.e., instead, you purchase it indirectly by buying shares of bullion held in a store facility--you can be reasonably assured (if you've done the proper due diligence) that the gold actually exists. Most gold storage facilities are custodied by banks, which serve as Trustees to protect the interest of owners. The gold is insured against theft, and strict security measures are in place governing the transfer and storage of the stuff. Bitcoin has not protections for investors whatsoever. Also, gigantic swings in gold are unlikely to happen (unless the Apocalypse occurs) because most countries have reserves of gold that they can either add to or release to stabilize prices.
Bitcoin is NOT like diamonds. Yes, quality diamond prices are artificially high because the supply of such diamonds is strictly liimited by the diamond cartels. In truth, if the billions of diamonds held in storage were released the price would be as low as cubic zirconia. If you decide to invest in diamonds, well, that's a risk you take. You're not insured for anything. But, at least you have the rocks in your possession that you might be able to sell on Ebay or Craigslist at a discount. And you always have prices in your local Kay Jeweler's to check it against. You have nothing similar for Bitcoin.
Bitcoin is NOT like collecting baseball cards, comic books or Beanie Babies. Collectibles markets are very volatile, but you can always get a market price for your Derek Jeter rookie card or your "rare" Beanie Baby by looking at prices paid on Ebay. Yet, unlike baseball cards, Ebay offers no protections for Bitcoin sellers (or buyers either), since there is no standardized mechanism in place to "prove" that these digital media were delivered or not.
Bitcoin IS like Nigerian banking schemes, Ponzi schemes, Craigslist scams and other assorted scams, in that these transactions are not governed by U.S. or foreign regulations, there is no protection for buyers or sellers against fraud, there is no central, regulated authority that determines prices in a transparent and accountable way. To me, there is no difference between sending cash to a Nigerian banking scammer and buying Bitcoin in terms of protection for my investment.
Again, I'm very open to reading independent sources you can site that can vouch that trading in Bitcoin is as safe as dealing in cash.
Bitcoin is NOT like cash. Every dollar I have, whether it was minted in 1910 or 2014, is backed by the full faith and credit of the United states for the value on its face. I can bring such currency to nearly any bank in the world and they will exchange it for the equivalent value of that currency. And even if a currency itself no longer exists because its country no longer exists, at least it may have some scrap metal value. None of this can be said for Bitcoin. If the computers go down, Bitcoin is worthless.
This is another important point. Even after the demise of the gold standard, which turned paper dollars from receipts of ownership into I.O.U.s, the dollar retained its power and value as currency because it is recognized and supported by the government of the United States. That "backing" obviously meant more when there was actual gold behind the paper dollars to insure their value. Post gold-standard paper dollars have been devalued because the tangible commodity they used to represent is no longer connected with them, but the federal government still "guarantees" their worth as a promissory note. Should the government run short of the resources to honor that promise, they have the power to raise revenue via taxation.
The absence of an enforcement mechanism - an institution with sufficient material resources to back the currency and meaningful authority to insure that those resources are adequate to support the currency - any private alternative currency is nothing but a more-or-less elaborate barter system. Granted, there have been cultures throughout history that have based their economies on a barter system, but real currency has proven to be far more stable and efficient.
For something to be regarded and accepted as "real currency," it has to be representative of something with universally accepted material value and supported and enforced by an institution (not necessarily the government) with sufficient authority to maintain its lawful and orderly use.
"When I have found intense pain relieved, a weary brain soothed, and calm, refreshing sleep obtained by a cigar, I have felt grateful to God, and have blessed His name." - Charles Haddon Spurgeon
Bitcoin is just about the biggest scam ever perpetrated. An imaginary currency, not backed by any government or tangible collateral, totally unregulated and totally susceptible to manipulation and theft. It's the new Ponzi scheme for millenials.
amen
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One other thing you should research is fractional reserve banking. This is the reason our government insures bank deposits. The vast majority of the bitcoin community recommend people keep control of their own bitcoin, companies like Mt. Gox knowingly operated on a fractional reserve system, and knowingly had full control over peoples bitcoins, this was known and would be the equivelant of the community telling people not to let a private company store their cash in a system without transparency. The bitcoin protocol itself goes against central management so Mt. Gox operating as a fractional reserve bank was not within the core values of bitcoin.(Mt. Gox was part fractional reserve type bank part exchange, one of many exchanges)
As far as regulation manipulation and theft, in this regards it would be very similar to cash. Very difficult for governments to regulate the exchange of paper between two individuals, same with bitcoin. Same for theft and manipulation, if someone steals your physical wallet, they can take the money out and do with it as the please, same with your digital wallet. Bitcoin wallets can be created with math and never touch a computer, this is called cold storage, you can keep this in your back pocket surrounded by leather and it would be identical to your wallet. Please clarify what you mean by it being susceptible to manipulation and theft, I'd love to know your thoughts.
I will also address further comments, give me time. I am trying to include refrences were appropriate, and if anyone has questions or would like clarification please let me know.
EDIT: Additionally, in regards to it being a ponzi scheme... The first early adopters would frequently (and the community at large still does) give away large amounts of bitcoin. They'd trade 10,000 bitcoins for a $10 pizza. In the very beginning no exchanges existed as this was a new technology being played with by geeks like myself. It started purely as a proof of concept. The begining and well into its infancy the only way to acquire bitcoins were to "mine" them for free(minus your electricity usage). You can still mine them without giving anything to the early adopters. People buying them do so because they choose not to mine them and acquire them for free. This was developed by geeks, not financial masterminds who wanted to scam people, it should be evident by the way they are freely created and transferred.
Now, the difference between Madoff and traditional Ponzi schemes and Bitcoin is that if you're ripped off by a Ponzi scheme there's a tiny little chance that the courts might be able to compensate you if they can "find the stolen money" or liquidate the cars, homes and yachets bought by the scammers on punters' investments. Lose your Bitcoin stash and who do you sue? The Internet?
Anyway, there's plenty of "fact-based," "unemotional" commentary out there showing the dangers and fraud associated a form of currency whose "minters" are accountable to no one. Here are just a small sampling, ranging from pro-free-market sites like FoxBusiness to techevangelists like Wired.
http://www.nbcnews.com/tech/innovation/dont-be-sucker-bitcoin-scams-sec-warns-n100371
http://time.com/4287/bitcoin-scam-costs-wisconsin-man-150000/
http://www.theguardian.com/money/2014/mar/01/paypal-bitcoin-scam-ebay
http://www.forbes.com/sites/andygreenberg/2014/03/09/hackers-hit-mt-gox-exchanges-ceo-claim-to-publish-evidence-of-fraud/
http://www.foxbusiness.com/industries/2014/05/07/sec-says-bitcoin-has-heightened-risk-fraud/
http://www.slate.com/articles/news_and_politics/view_from_chicago/2013/04/bitcoin_is_a_ponzi_scheme_the_internet_currency_will_collapse.html
http://www.wired.com/2013/05/lets-cut-through-the-bitcoin-hype/
http://www.bloomberg.com/video/bitcoin-a-ponzi-scheme-fraud-marathon-s-richards-xkVBN0BCTYOh5O13JTt2Ug.html
In the lack of facts I guess bashing your opposing view helps make your point? Please clarify the potential for fraud that exists that does not with cash? Also, the definition of fiat currency:
Fiat money has been defined variously as:
any money declared by a government to be legal tender.
state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
intrinsically valueless money used as money because of government decree
While gold- or silver-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of gold or silver, fiat money's value is unrelated to the value of any physical quantity. Even a coin containing valuable metal may be considered fiat currency if its face value is defined by law as different from its market value as metal.
Real money to imaginary money, I guess your definition of real money is Fiat Money.
There are many benefits to using bitcoin temporarly for purposes such as transferring money very quickly and inexpensivly over large distances.
I would be curious to hear a point-by-point response from the perspective of bitcoin advocates, particularly to these bullet points from the article:
Bitcoin Risks
*Digital currency such as Bitcoin is not legal tender. No law requires companies or individuals to accept bitcoins as a form of payment. Instead, Bitcoin use is limited to businesses and individuals that are willing to accept bitcoins. If no one accepts bitcoins, bitcoins will become worthless.
*Platforms that buy and sell bitcoins can be hacked, and some have failed. In addition, like the platforms themselves, digital wallets can be hacked. As a result, consumers canand havelost money.
*Bitcoin transactions can be subject to fraud and theft. For example, a fraudster could pose as a Bitcoin exchange, Bitcoin intermediary or trader in an effort to lure you to send money, which is then stolen.
*Unlike US banks and credit unions that provide certain guarantees of safety to depositors, there are no such safeguards provided to digital wallets.
*Bitcoin payments are irreversible. Once you complete a transaction, it cannot be reversed. Purchases can be refunded, but that depends solely on the willingness of the establishment to do so.
*In part because of the anonymity Bitcoin offers, it has been used in illegal activity, including drug dealing, money laundering and other forms of illegal commerce. Abuses could impact consumers and speculators; for instance, law enforcement agencies could shut down or restrict the use of platforms and exchanges, limiting or shutting off the ability to use or trade bitcoins.
It seems that everything you linked has to do with common sense. I could reference thousands of links and news articles with the exact same circumstances but swap out "bitcoin" for "cash" or "wire transfer" or "gold" or any other thing of value.
What makes bitcoin more susceptible to these scams?
Give me a few hours as I'm at work and its a hectic day, but I'll comment on each point.
I've previously owned retail businesses and I've encountered fraud from consumers reversing transactions or bouncing checks fraudulently. Many times it is not worth pursuing these and you write it off as a loss and business expense. This prevents an honest merchant falling victim to fraud. This puts the responsibility of the consumer to know who he is conducting a transaction with and to trust the person he is conducting the transaction with.
Most of the Pro-Bitcoin literature preaches this and urges people to know who they conduct business with and not to transfer funds unless they trust the person. Consumers should be educated on who they conduct business or transfers with in my opinion. I am an educated consumer who typically will research a company I buy things from regardless of if they are online or not, or using bitcoin or not. I know better than to buy speakers with cash from a guy in a van on the side of the street, this common sense should translate to the rest of the world as well. This is definitely real, the shutdown of silk road caused major fluctuations in the market, the legal trouble in China impacted the market even further. I assume similar things happened in Cuba during the embargo as well.
No one is forcing people to use bitcoin, like anything else people should educate themselves before jumping into it, know the risks associated with it. Bitcoin is not without risks, it could at any moment completely crash and be worthless. If you are looking for a conservative investment you should not be considering bitcoin. Bitcoin is NOT an investment, it is a crypto currency. Can you make money off of it, yes, but you can also lose money with it, however the same can be said with stocks, gold, the US Dollar.
It's purpose is not to invest money, it's purpose is to fix problems that people find with traditional methods. Problems like charge backs to merchants, overly high transaction fee's, transferring large amounts of money over large distances. And some of its greatest benefits, security, control, and transparency. Decentralized networks are an incredible thing, and bitcoin leverages this to a payment processing platform.
I honestly think a lot of the confusion comes from a lack of understanding of the technology involved and the way bitcoin works. The media unfortunately has put out a lot of incorrect information and confused everyone.
EDIT: and if you'd like any bitcoin, or would like help on setting it up for yourself or tips and information on how to securely set it up(from beginners to advanced air-gapped systems).
Chrisfold, I would be very happy to read links from legitimate news sites you post that counter all of the various warnings about about the risks of Bitcoin fraud from the SEC, FINRA and other sources. I'd be particularly interested in articles written by objective sources (i.e. those not in the Bitcoin business) that prove that Bitcoin transactions are safe, that the value of Bitcoin is backed by something other an algorithm, that regulations are in place to protect investors in the case of fraud, that Bitcoin transactions are transparent and custodied the same way wire and ACH transactions are, that if any problem occurs with a Bitcoin trade the investor has a place they can contact for resolution of the problem, and that there are legal systems in place allowing Bitcoin owners to sue those who commit fraud against them.
The ball, sir, is in your court. Let's keep the debate going!
Bitcoin has the same fraud potential as cash. Scams and fraud predate bitcoin, they have just been adopted to game bitcoin users because they found bitcoin users to be very generous much like this forum. We could fall victim to scam on this forum just as easily as cash or bitcoin, that does not mean there is a fundamental flaw in the forum, cash or bitcoin.
EDIT: AND they've seen that like cash a transaction can not be forcibly reversed.(which in many's opinions is a benefit)
The value of bitcoin is not backed by anything. But neither is the value of Fiat Currency like the US Dollar.
Bitcoin is not an investment, it is a Crypto Currency. One of its many benefits are that it is not regulated or governed and can not be, it is a true decentralized network. If you are wanting to make an investment out of bitcoin you are free to use it that way, but that is not its intended purpose. In fact people investing and holding onto money is counter productive to the bitcoin network and the way it works.
Your reference of bitcoin trading is referenced as an investment format like stock trading. This is not its intended use. People do similar things with trading currencies, any time you have 2 things that fluctuate in price you will see people trading them to make money off of it. Just like cash, anyone is free to do whatever they'd like with bitcoins, third party companies can come in and accept bitcoin for whatever purposes they'd like and there is no central agency to interfere, this is a benefit and something that bitcoin adopters prefer.
Cash does not have any system in place to allow you to sue those committing fraud, the court system does. Mt Gox is currently in bankruptcy court, and have several lawsuits filed against them in both the US and Japan, these are facilitated by the court systems and judicial system not by currency the same as Cash doesn't have a system in place to sue.
A lot of people find comfort and benefit from a system that is decentralized and has nothing to control it with the exception of the majority of adoption. Some of the benefits of this would be that no government, organization or person can seize or freeze your assets. Just like the color red, some people like this and some people don't. It's not for everyone just like some people never carry cash.
Bitcoin has something called a blockchain, if you run the bitcoin client on your computer it downloads the entire blockchain which is a history of every single bitcoin transaction ever, from when they were mined to where they are currently. This is called true transparency. If you'd like I can link you to websites that you can view the blockchain, or I can help you to download it yourself and I can explain how to search through it by sending you a small amount of bitcoin and you can trace it back to when it was originally made.
I would be curious to see how you would interact with his arguments. He has another article on bitcoin that You Can View Here.
I'm not familiar with Gary North but just by reading the first paragraph dealing with bitcoin it is obvious he is speaking on a subject he is not familiar with. A lot of people jumped on the bitcoin bandwagon when it became a popular term and they wanted to form opinions on it without a clear understanding or knowledge of how it works. Lets start with the second paragraph referencing bitcoin from that article:
Absolutely wrong. While you can purchase bitcoin with other digital currencies or even with fiat currencies this is in no way needed. The most famous bitcoin transaction in history, and one of the most valuable now, would be the transaction of 10,000 bitcoins for a pizza. You can trade bitcoin for anything. Doug, I'll send you bitcoin for your participation in this thread, you did not need any currency to acquire it. You can get free bitcoins all over the internet. You can mine for them and get them that way. Where he is correct is that every transaction is recorded, it is recorded in the blockchain and its a form of checks and balances. People say it is anonymous currency which it is not, every single transaction ever made is viewable to the entire public, its transparent and accountable. He has no comprehension of the system and how it works.
I'll be honest, I normally stop reading at that point because I know the entire article is written by someone without an understanding of the topic he is speaking on, but I'll read through both articles.
Gary now thinks that Bitcoin claims to be anonymous, this shows that all of his knowledge has come from misinformed media coverage of bitcoin and not from his own research. A little bit of research would have led him to the bitcoin website which has tried to correct this misinformation since the begining. One of the benefits of bitcoin is transparency, the fact that EVERY single transaction is logged and public record, its the core of how bitcoin works.
OK, I lied.... I said I was going to read the whole thing but it's painful to read. A lot of repeating and most of what I read is based off the same misinformation. I'd love if you could give a cliff notes version and bullet point what the main issues are that you see here?
I'll add in my thoughts and personal opinions on some things I briefly skimmed over though. When I first started using bitcoin it wasn't very useful at all, I could only trade it with other geeks and it was just something fun and a new technology to learn about, a great proof of concept from a whitepaper written on crypto currencies. Using it to buy real world goods, forget it, you could trade it with geeks and sometimes get things... Fast forward a few years... not much that I can't buy with it now. People even get paid with it.
Now lets look at the history of currencies. Generally speaking they are pretty slow to be adopted, and they fluctuate in value quite a bit until they are widely accepted. It's simple supply and demand, its the way all things of value work. Or dollar fluctuates in price, our goods fluctuate in price, gold fluctuates in price. If you are dealing with something from within the ecosystem then everything can be bought with a certain currency, but try buying that chainsaw here in america with a franc or euro, nope you'll have to convert it to something used locally. As currency grows in popularity its acceptance gains as well, and we see that happening with bitcoin. Long ago people would trade seashells and stones. What happens with any currency not on the gold standard(all of them) when they are first started?
Who knows if bitcoin will make it or not? I'm guessing it probably won't, but I am guessing that it will lead to something that will become widely used based off of the same decentralized type of network. Bitcoin is and always has been a proof of concept, surprisingly enough it actually works and works well.
So the other article brings up some good points. People holding on to bitcoins and not spending them. This is something that the developers of bitcoin, and true adopters of bitcoin are against. I purchase items frequently from amazon and other places online with bitcoin. Whenever I go to purchase an item and I see the availability to purchase it in bitcoin I do so. I do this not only because its the purpose of bitcoin but also because I see the benefits in it. The merchant gets paid with a MUCH lower transaction cost. Most people take for granted the fee's merchants pay from bitcoin, merchants individually pay thousands/millions every year in credit card fee's. Credit card companies make so much off of this that they give rewards, miles, money to people using their cards. Everyone thinks this is great but it causes the price of goods to raise, someone has to pay for those miles, and the merchant will pass that cost onto the consumer. When I buy things with bitcoins I'll typically get a discount as well, bonus.
So I'd like to say that Gary actually got something quite right, the fact that people holding on and treating it like an investment versus a currency is bad for bitcoin, but as more and more people use it and find the benefits of it, as more businesses accept it, the percentage of hoarders and percentage of legitimate users will turn as it already has started to. Gary thinks the developers of bitcoin made it to not be used, quite wrong, its meant to be used and has all of the features to make it work better when used.
I understand fiat currencies, fractional reserves and all that. As a currency bitcoin is just strange... but there have been stranger. Certain pacific island cultures used giant stone circles. They never changed hands in transactions. It was just understood whoever owned the largest one was rich lol! I think monetary policy and the money and banking system is super interesting.
gold was used because of its intrinsic value, but you cant have monetary policy with gold. So we have fiat dollars. But what is intrinsically valuable about an imaginary bitcoin? Thats part of its basis of value right? And its a "limited"supply so it has no inflation. But I think part of the fear is its imaginary nature. It doesnt physically exist. That makes it seem susceptible to fraud. How much easier is it to counterfeit if you dont even have to fool anyone with a fake? Just my ideas and opinion. I will read up on it. As I said currencies are one of the most interesting things in macro econ to me.
Like I said though, bitcoin isn't for everyone, and I agree it probably will not be the cryptocurrency that stays around forever, however I believe that eventually there will be a decentralized crypto currency that gets acceptance with the vast majority of the world. I also disagree strongly with people who think it is a ponzi scheme or people who think it is any more susceptible to scams, theft or manipulation. The people who say these things often like to tell everyone they have researched bitcoin heavily, but very often they have just formed their opinions from what others have said versus researching on their own and coming to their own conclusions. People that are however curious and wanting to learn I find much more open to coming to an informed decision whether they like the currency or not they are at least informed.
I guess for me the government backs the dollar, but the dollar is what gives the government its power, if the dollar was to ever fail and crash I don't see what the government would do to "back it", they've lost all their power as well.
People always fear what they don't know.... I'm rambling now though... it's late and I have been working like crazy, goodnight all and I am open to discussion on any of it through PM or this thread, and even people who think its a scam if they'd like to familiarize themselves with it I'll give them some bitcoin. Night!
Today's paper dollars have no true value because they are "backed" by nothing but the government's promise that they will be replaced by more worthless paper, but none of the paper represents any solid commodity. Paper dollars have "power," in that they are accepted as payment for goods and services, but their assumed value is an illusion carried over from the time in which they actually represented a hard commodity (gold) and were simply a certificate of ownership of that commodity.
In that sense, bitcoins are similar to fiat currency to the extent that people will mutually agree to accept them as a medium of exchange for goods and services. But, like fiat currency, they are not "backed" by any tangible, material commodity and thus they have no actual value.
This is why I like Peter Schiff's suggestion that if bitcoin - or some other form of cryptocurrency - is to become a primary and stable medium of exchange, it would have to be linked to a physical commodity such as gold, so that the exchange of the digital currency is a true token of the exchange of something of actual value for the product or service that is desired by the consumer. Without that link to something tangible, it seems to me that it sets up a monetary system that can simply evaporate into thin air.
Chrislolds, I'm STILL waiting for you to cite independent sources that counter all of the many independent sources I've cited warning that Bitcoin offers no protection for buyers or sellers, is an opaque market unaccountable to anyone, and widely susceptible to fraud that can bankrupt owners, offering no insurance or legal recourse.
But since you've asked, I'll answer your question.
Bitcoin is NOT like cash. Every dollar I have, whether it was minted in 1910 or 2014, is backed by the full faith and credit of the United states for the value on its face. I can bring such currency to nearly any bank in the world and they will exchange it for the equivalent value of that currency. And even if a currency itself no longer exists because its country no longer exists, at least it may have some scrap metal value. None of this can be said for Bitcoin. If the computers go down, Bitcoin is worthless.
Bitcoin is NOT like gold. Yes, the price of gold can rise or fall--something that can happen with any commodity--there is ALWAYS a physical source of the stuff backing up the price. Even if you don't store the gold yourself--i.e., instead, you purchase it indirectly by buying shares of bullion held in a store facility--you can be reasonably assured (if you've done the proper due diligence) that the gold actually exists. Most gold storage facilities are custodied by banks, which serve as Trustees to protect the interest of owners. The gold is insured against theft, and strict security measures are in place governing the transfer and storage of the stuff. Bitcoin has not protections for investors whatsoever. Also, gigantic swings in gold are unlikely to happen (unless the Apocalypse occurs) because most countries have reserves of gold that they can either add to or release to stabilize prices.
Bitcoin is NOT like diamonds. Yes, quality diamond prices are artificially high because the supply of such diamonds is strictly liimited by the diamond cartels. In truth, if the billions of diamonds held in storage were released the price would be as low as cubic zirconia. If you decide to invest in diamonds, well, that's a risk you take. You're not insured for anything. But, at least you have the rocks in your possession that you might be able to sell on Ebay or Craigslist at a discount. And you always have prices in your local Kay Jeweler's to check it against. You have nothing similar for Bitcoin.
Bitcoin is NOT like collecting baseball cards, comic books or Beanie Babies. Collectibles markets are very volatile, but you can always get a market price for your Derek Jeter rookie card or your "rare" Beanie Baby by looking at prices paid on Ebay. Yet, unlike baseball cards, Ebay offers no protections for Bitcoin sellers (or buyers either), since there is no standardized mechanism in place to "prove" that these digital media were delivered or not.
Bitcoin IS like Nigerian banking schemes, Ponzi schemes, Craigslist scams and other assorted scams, in that these transactions are not governed by U.S. or foreign regulations, there is no protection for buyers or sellers against fraud, there is no central, regulated authority that determines prices in a transparent and accountable way. To me, there is no difference between sending cash to a Nigerian banking scammer and buying Bitcoin in terms of protection for my investment.
Again, I'm very open to reading independent sources you can site that can vouch that trading in Bitcoin is as safe as dealing in cash.
The absence of an enforcement mechanism - an institution with sufficient material resources to back the currency and meaningful authority to insure that those resources are adequate to support the currency - any private alternative currency is nothing but a more-or-less elaborate barter system. Granted, there have been cultures throughout history that have based their economies on a barter system, but real currency has proven to be far more stable and efficient.
For something to be regarded and accepted as "real currency," it has to be representative of something with universally accepted material value and supported and enforced by an institution (not necessarily the government) with sufficient authority to maintain its lawful and orderly use.