A while ago I asked you about Bitcoin. Some of the answers were helpful.
Tonight I read about Bitcoin for a while and watched some videos, focusing on how to “mine” it and then how to use it.
Intriguing possibilities!
Cryptocurrency, 3D printing, … what next?
Are any of you mining and using Bitcoin?
The combox is open… not in an anarchic way, but… just go ahead.
About Bitcoin...2013
- Huh? What in tarnation's Bitcoin? (57%, 566 Votes)
- I know what it is but I am not involved... yet (21%, 212 Votes)
- I will never get into this (20%, 203 Votes)
- I have done some mining and I use/trade/spend a little (1%, 7 Votes)
- I have some but I am not really into it (1%, 6 Votes)
- I am really into mining and I use/trade/spend a lot (0%, 4 Votes)
- I'm into other cryptocurrencies (0%, 2 Votes)
Total Voters: 1,000
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If you want an alternative currency, never a bad idea as part of diversified investment portfolio or simply as disaster insurance, buy gold or silver. It’s real. You can hold it in your hand and it has 6000 years of acceptance as money behind it. And you can’t create more of it electronically or with a printing press.
Bitcoin? Get back to me in a thousand years and we can talk about it.
So how do you mine it? Or do you need to dip a pan into a data stream?
I voted “I know what it is but I am not involved… yet”. Bloomberg did a story on it a month or two ago, and I began to do some research after that. I need to do more…
I will only trust physical Gold & Silver.
I voted “What in tarnation…” mostly because.. well, I know too little about it. I followed the link, so I see it’s intended to be some new form of currency, but that’s all I really know.
Something in particular about it bothers me:
Off the top of my head, I can’t think of any significant nation-state–present or past–which ever used anything besides gold, silver, or both as a common means of exchange. ..Pardon me, sometimes copper, bronze, or nickel have been involved too, but often to a lesser degree.
Every nation that has ever created coin..has established a particular value for the coin. Usually they come in denominations, depending on the size and particular metallic content of the coin(s).
Point is: I have yet to see any indication of how value will be set to bitcoin.
There’re various exchanges for dollars, euro, lyra, yen, and a few dozen others already.
I think before bitcoin would be useful..there’d need to be a routine means of exchanging it for something else.
That or else we’ll all need to agree to use bitcoin instead of dollars or whatever.
I don’t see that happening anytime soon.
I voted for “I know what it is but I am not involved…yet”. Shepard Smith just did a segment on the bitcoin yesterday on his 3pm show. His guest was saying that the current price of a bitcoin is $113.00 per 1 bitcoin. His guest also said that the value fluctuates, but that basically the feds are getting ready to crack down on bitcoins and start regulating them because some people are using it to launder money. The guest’s prediction was that once that happens, it will drive the cost of bitcoins back down. So, if bitcoins work in any way that is similar to the stock market, I guess we might infer that it is better to buy them low and sell them high, because one is not required to use them only to purchase goods. The bitcoin system also allows one to cash them in. The unknown factor at present is, once the feds crack down on bitcoins, will they a.) be content to simply regulate them, or b.) shut the whole bitcoin system down completely?
For some reason, I couldn’t pull the video up on Fox News’ website, but I found it on Yahoo. This is the exact report I’m describing above. It just aired yesterday afternoon.
http://finance.yahoo.com/video/bitcoin-investigation-end-virtual-currency-202416525.html
After I saw the video I linked to above (which I saw when it originally aired yesterday) I decided that just the threat of Federal involvement makes the bitcoin too volatile and risky to get involved with now, even though it is still legal to do for the time being. However, if the bitcoin goes through the Federal review and regulation process and comes out the other side as a legal, stable business model, then I would give some serious consideration to jumping in.
For now though, how would the government or anyone else discern the difference between a regular citizen investing their own honest dollars into a virtual currency versus a criminal using bitcoins to illegally launder dirty money? I prefer not to be mistaken for a criminal when I’m not one. Therefore, I’m staying safely on the sidelines for the foreseeable future.
Jeannie-C’s other half here – retired 35 year IT guy.. some thoughts..
– you need rather specialized ASIC based hardware to effectively mine. An ordinary PC will get you nowhere fast. Entry level setup, about $800 with a waiting list of a month or two.
– in some cases the cost of electricity required will exceed the value of the mined coins.
– heat generation and noise are things you need to consider, as you will need to keep the miner running 24 /7
– only a few places to “trade coins” into cash (and there are some security concerns ) Exploits exist that can steal from your “digital wallet”. Plus you have to trust whoever is running the show and hope you get your cash.
– This will be either criminalized or regulated to death eventually. Governments hate what they cannot control. This is already beginning to happen in some countries.
– in a real TEOTWAKI ,no electricity, no computers, no Bitcoins.
– The value and ease of mining fluctuates with demand.
My opinion – more trouble than its worth – TAANSTAFL applies in spades. Better off acquiring physical value (Krugerrands, loose diamonds, etc) if you want high value- easily portable $$$ for when it goes bad. (or as investments)
From 14 May 2013
Feds seize money from Dwolla account belonging to top Bitcoin exchange Mt. Gox
Forgive the typo.. its TANSTAFL, of course..
Jeannie_C,
Actually, it is TANSTAAFL, the “AA” is “as a.” I read the book* many decades ago, and that is also how every site on the Web remembers it as well.
Pax et bonum,
Keith Töpfer
____________________
* The Moon is a Harsh Mistress, by Ray Bradbury
At present I only have sufficient understanding of precious metals to enable me comfortably to use them as “insurance” against inflation, but I do have a new and as yet unread eBook, Bitcoin and Digital Currencies, by James Cox, which is on my reading list. Once I have a sufficient understanding I will decide whether, and to what extent, to acquire some quantity of Bitcoin.
Keith Töpfer
Keith! Right novel, wrong author. ;) It was Robert A. Heinlein.
Absolutely correct, William, Heinlein it was. Must have been a (very brief) “senior moment.” Either that or one of the problems with having a near-eidetic memory—failure to verify the fact before publishing, thereby allowing memory lapses to introduce error. Thank you for the corrective.
Keith Töpfer
I have plenty of those moments myself, Keith. ;) But am similarly cursed–or was, in my younger days–with near eidetic recall. These days, not so much, at least not for short-term items. Such as why did I come upstairs?
For the record, “insurance” against inflation is non-existent. Inflation is nothing else than prices going up (and if it’s a serious issue, go up quickly), and while the most common cause of that is the increase of the money supply, it can equally be caused by a massive change of conditions of supply and demand. Case in point: ask yourself how much you’ll be willing to pay for a gallon of fresh drinking water after a category 5 hurricane paid you a visit, and no FEMA official in sight.
Bitcoin tries to circumvent the increase of the money supply issue (but would be inadequate at that should the procedure be hacked somehow, or technological innovation would enable much faster mining) but can do nothing about the latter. It also is quite vulnerable to the absence of electricity, electronic theft and loss of credibility.
Precious metals are not much of a solution either. As most goldbugs tend to ignore, any serious usage of physical gold (or silver) as currency would skyrocket the value of that metal enomously (back-of-the-eveloppe: by a factor somewhere between 5 and 100 or more), which would make a lot of mining that is now unprofitable, profitable again. Basically, you’d be giving the keys to the world to Vladimir Putin and Jacob Zuma (not to mention making every Indian bride a rich woman). The idea that precious metals are not subject to an increase in their supply is plainly untrue. It may be harder to increase, but the people who’ll benefit from it will not let such an opportunity pass.
In fact, going over the various other ways to safeguard one’s wealth, we end up with the conclusion that none of them are truely safe. The vulnerabilities differ from type to type, and through diversification one could negate the worst outcomes somewhat, but generally at a cost, as only an investment in the real economy (directly or indirectly) can expect a positive real rate of return in the long run.
There is no perfectly investment which has a rate of return significantly higher than inflation. That’s axiomatic. High return = high risk.
A problem for BitCoin is that it is an underground economy, and all governments (perhaps especially the American one) hate underground economies. They live to tax, and they cannot tax what they cannot track. Hence, if BitCoin comes into widespread use, it will be attacked by government(s). Why do you suppose that counterfeiting of currency is so fiercely brought to an end? And believe me, it is almost nonexistent. According to Wikipedia, less than $3 per $10,000 counterfeit currency exists in our economy. About $0.84 per person. And in 2011, 3,028 arrests were made in connection with counterfeiting.
Anyway, all that is simply to underscore that the government(s) will not ignore any underground currency.
Make that “no perfectly safe investment”. Sorry.
To put a spanner in the works, more and more banks, especially ones in Europe, are accepting shariah law for banking with Muslims. It happened here in Ireland last February as part of an huge influx of Saudi investments/cash in all the Irish banks. Shariah law means that Muslims can borrow money without paying interest-yes, true. The businesses which surround me in Dublin run by Muslims; if they borrow, do not pay interest if they bank with those institutions using shariah law. One of the goals of global rule of Islam is the destruction of riba, or interest. Riba is condemned in Islam.
Now, most Muslims trade in gold, silver, oil and commodities, as that is part of the directive of shariah compliant regarding trading and money. Bitcoin is essentially a lottery, which is only worth as much as the people involved think it is as it is not resting on real goods, in much the same way as paper money, as it is based on mathematics, not real stuff, like gold. For Bitcoin to remain valuable, despite the fact that it is outside the constructs of the banking systems of the world, all the people involved have to agree to that worth through their investments in Bitcoin. Now, in shariah law as in our common sense, there has to be a value to a commodity. There has to be a fixed protection. This does not exist in Bitcoin, as it is just inflationary or deflationary as non-fixed currencies. This is one reason why Muslims have avoided Bitcoin, and in this, conservative, old fashioned Americans who know that property, gold, commodities are the locus of wealth would agree with them.
Pay attention to this upcoming global meeting in Dubai. http://zeenews.india.com/business/news/international/dubai-to-organise-first-global-islamic-economy-summit_81935.html
The Muslims want to change the entire global financial network. And, Bitcoin would not, at this point, be part of that exchange. Scary stuff is abroad and with the complete fall of the Euro, which is inevitable, what do you think will replace it or the dollar which would collapse immediately afterwards? Not Bitcoin.
I agree with Jeannie C’s “other half” and wmeyer’s comments.
“This will be either criminalized or regulated to death eventually. Governments hate what they cannot control. This is already beginning to happen in some countries.”
As to the “hard value” of precious metals. Let us not forget that in the past, the American government has made it illegal for a citizen to own gold. In taking such an action, they can set a deadline, and in a grace period, offer literally any exchange they wish for people who wish to cash in their holdings.
You cannot depend on anything being beyond possibility under a tyrant, nor under a tyrannical government.
wmeyer, the law for the government of America to take gold away is still on the books. My mother, who is 85, remembers as a little girl, government officials in St. Louis, going door to door and demanding gold coins from the citizens. It can happen again.