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Why Gary North Is Wrong About Bitcoin (Part 2)

bitcoin threatI guess Gary North and I have a public disagreement underway. I respect the man’s work, so I’ll try to avoid this becoming personal.

Gary’s new piece is entitled Bitcoins: The Road to Investment Hell Is Paved With Good Intentions. In it, his primary argument is that Bitcoin doesn’t pass muster as “money,” according to Austrian economic theory.

Here We Go…

I’ll start by responding to a few of Gary’s assertions, and then I’ll delve into the economic arguments. Again I’ll quote Gary in italics and respond in a plain font.

I can say this: nothing in his defense of Bitcoins [sic] as money is even remotely Austrian. It ignores the market.

Bitcoin is nothing BUT market. There are no legal tender laws enforcing its use, there is no 5000 year tradition behind it. Without the market, Bitcoin would be inert computer code.

What I am waiting for is a detailed defense of Bitcoins [sic] from an Austrian school economist or economic historian. I want to see how the Bitcoins [sic] market corresponds with the Austrian school’s thesis of the regression theorem: money as a market product that has come in response to the transition of a widely used commodity into money.

See below.

Here it is, in no uncertain terms. The Menger-Mises regression theorem was good for its day, but we live in a New World Order, a world of digits. Now we must abandon the old Menger-Mises theorem.

I did not say that Menger or Mises should be abandoned. I think that would be foolish. But we are dealing with a new type of currency, and it needs to be judged against the real world.

But, perhaps I wasn’t clear enough. One point for Gary.

He says that “Bitcoin is nothing but the operation of market forces – there is zero coercion involved.” True. But it is not money.

“Bitcoin is utterly decentralized – there is no center at all.” True, but it is not money.

“Bitcoin is utterly unplanned – it involves a million people, all doing their own thing.” True, but it is not money.

The argument here is over the definition of “money,” and it has nothing to do with how Bitcoin is used in real life. Again, more below.

[Bitcoin] is in the midst of a mania – the desire to hold digits, in order to make money in dollars. Digits are the asset. The dollar is money. It is not the other way around.

Not to be rude, but when an advocate of sound money holds up the dollar as real money, it’s time for that person to take stock of him or herself.

Is Bitcoin a mania? I don’t see it that way; but honest observers may disagree. There have been several “crashes,” and very few bitcoiners panicked. The reason, as I see it, is that they want to use the currency. It’s simply better money.

It is clearly an investment. It is in a mania stage. He can close his eyes, clap his hands, and say “Tinkerbell is not an investment,” but she is.

Tinkerbell aside, Bitcoin is not an investment in any proper sense. (It doesn’t produce, has no income, expenses, etc.) If people treat it as one, as some must be doing, that’s their problem.

Mr. Rosenberg calls himself a cryptohippie. He runs a cryptography service called Cryptohippie (www.cryptohippie.com). My assessment: its name targets a narrow audience: hippies who are interested in crytography and privacy. This is not the average Joe.

Our customers do value privacy, but they come from all across the spectrum, including many investors and even a surprising number of grandmothers.

This is Austrian school monetary theory. Accept no substitutes!

I like the Austrian School too well to treat it as an idol.

The crucial economic issue is the imputation of value by investors and owners of Bitcoins [sic]. What motivates them? A fast buck! A lot of fast bucks! Bucks are money. Bitcoins [sic] aren’t.

The people I see in Bitcoin (and I suspect that I see more of them than Gary does) are in it for the long term. They USE Bitcoin. When they find that their bitcoins buy more goods than before, they spend some of their Bitcoin on those things but continue to accept it as payment from others. They USE it.

And none of this proves anything about Satoshi’s intent.

Bitcoins [sic] did not go from a price of $50 for 10,000 in 2009 to the price of an ounce of gold in late November 2013 based on what the mysterious Mr. Nakamoto thought he was doing.

Precisely! The market did that. No coercion was involved. Tradition wasn’t involved. People had to WANT Bitcoin, and they had to overcome plenty of intimidation along the way.

Economic Analysis

Gary writes:

To the cryptographers who want to be Austrian school economists, I say this: begin with Menger and Mises on the origin of money. Do not begin with Mr. Nakamoto.

That is a very good point. Let’s look at that for a moment.

  • The Menger-Mises Regression Theorem is first and foremost an observation of how money came into being historically, without coercion.
  • It should also be noted that there’s a big difference between what people treat as money and what should be money from an Austrian perspective. Confusing those two is to go from an is to an ought.
  • There are two components to valuing something as money. One is through its perceived usefulness as a commodity; the other is the perceived usefulness as a medium of exchange.
  • It could be argued that Bitcoin lacks any perceived usefulness as a commodity (which might be misguided) while at the same time increasing in perceived usefulness as a medium of exchange, which increases the price. This is true of other “monies” as well – the USD, EUR, and specifically for the Chinese currency, where we can see a spread and price increase because of it is increasing usefulness.
  • It isn’t suitable to fall back on the regression theorem. It would be of value in a coercionless world, but that is not where we live. We live in a world where currencies are used as money and are backed by coercion.
  • The real game changer is that Bitcoin is useful as a medium of exchange without coercive protection.
  • As some people come only for the price increases, two price components are created: perceived usefulness as a monetary instrument, and speculating for price increases.
  • Speculation may be a misguided approach, but as Austrians, we assume that the market will find a price that satisfies the market.
  • Speculative price increases create problems for Bitcoin’s use as a monetary instrument, but these problems are symmetric, very much like they are in deflationary periods of currencies. When the Swiss franc rises due to EUR or USD issues, it does not become less ‘money.’
  • Price adaption for products sold for bitcoins is the reaction. Prices in Bitcoin fall more dramatically than the price of Bitcoin increases, because the speculative view of Bitcoin holders can also be found in Bitcoin seekers.
  • At some point, we will have a price overstep and a correction. That’s exactly what we see everywhere else. The difference is that the Bitcoin market is still small, and that uncertainties (regulation, etc.) are still looming.
  • From a “properties of money” perspective, Bitcoin qualifies in more ways than the dollar. And it is more useful than gold in the current environment, at least in the West.

One more question: Did the dollar stop being money when the gold window was closed and it escaped the Austrian regression theorem?

I’ll close by repeating my primary point in this discussion:

What’s important about Bitcoin is NOT the price but that it bypasses coercion.

Bitcoin is Freedom Money.

Paul Rosenberg
FreemansPerspective.com

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  • JdL

    Not to be rude, but when an advocate of sound money holds up the dollar as real money, it’s time for that person to take stock of him or herself.

    Exactly. I think you’re effectively thrashing Mr. North in this debate. I do (apparently as always) have a quibble:

    It could be argued that Bitcoin lacks any perceived usefulness as a commodity (which might be misguided)…

    I must be misunderstanding the meaning of “usefulness as a commodity”, then. You’ve already said that Bitcoin should not be considered an investment. How then is it a commodity? I can’t eat a bitcoin, and it’s not useful in industry (as gold is). As far as I can see, the ONLY use of Bitcoin is as a medium of exchange. Which is plenty, I think.

    • Andrea van de Kleut

      I’d like to <with due respect,, put in my 2 cent's . Bitcoin is not an investments as most people think of an investment. It does not earn dividends, it does not earn capital gains on a steady clip, it does not get you a tax deduction for a loss in any tax year . However it is very useful , but it is not a commodity in the sense that it is "touchable" (not in the sense of Krypto currency" anyway .I realize that they "make" an actual coin/token. but the true BTC was always meant as a Krytpocurrency"( digits on a chainblock). it is new , and i believe no one knows how to approach this , since none of us have even been this close to looking at this as a " new value/currency.Now we have this new uncontrolled value which we can use as payment for anothers value/thing, once he agrees , we have a Market. and there is a beginning of this new market , but it is not subject to regulation, since no one is boss or major "profit taker" or bamboozeler that can say what will happen to it, It may very well collapse (much like other "curencies/value tokens did and still do today.But that is to be expected. I like the fact that this is ( still) OF the people, FOR the people, and has no middleman to pay, to take your "value anywhere you want to take it , no matter where in the world.THAT in itself is a grand thing. one could argue about what is wright and what is wrong , but those are personal convitions handed down through the family or other "tteachers" from the past , THIS IS NOT THE PAST!! I see it for what it is ," freedom " from other that want to tell me what to do with my own money/ currency / value tokens.
      thanks for listening to an old woman, who frankly doesn't give a damn what any one " financial guru" wants to hold me to. this is exactly the opposit of them . And I like it.

    • Paul Rosenberg

      Bitcoin (the currency part) can convey not just title, but information. It is also useful as an escrow, for complex contracts. I haven’t written about these uses yet, but they are built in, and I see them as providing additional utility.

  • Gordon Johnson

    I think both you and Gary are wrong.

    That people freely traded it before it was accepted in exchange for goods and services largely satisfies regression theorem, in my opinion. This falsifies Gary’s argument, the rest consisting of assertions on bitcoin marketability that are easily dispelled, such as not being exchanged for goods and services as they are here: https://www.spendbitcoins.com/places

    Gary’s objection stems from regression theorem, which is a way to validate Aristotles’ fourth quality of money “Instrinsic value”. Basically, if people wanted it for itself before it was used as currency, says regression theorem, then it is money.

    But lots of people bought and/or mined bitcoins before they were accepted. And clearly a growing number of businesses accept them now as currency.

    I object on durability terms. Electronics are not very durable. Computer algorithms are not very durable whether they are math-based or not.

    Every computer cipher used math-based encryption components. All but the most current batch have been cracked. It is an arms race between encrypters and decrypters.

    The durability of bitcoin rests not only on the durability of the physical electronics on which they reside – not great – but ultimately on the algoritms that Satoshi and others wrote that make bitcoin authenticatable and limited in quantity.

    Those will eventually be broken when it becomes profitable enough to do so.

    I see no reason to expect that bitcoin will be the very first bit of unhackable code in the history of mankind. And lacking that assurance leaves bitcoin vulnerable to ‘bitcoin 2.0′ or some other digital variant.

    Steel is more durable than electronics, but is not durable enough to be money because over time it will rust away and store no value. There is no compelling reason to expect otherwise for bitcoin.

    Your gold, on the other hand, will still be gold 10,000 years after you are gone.

    • JdL

      Electronics are not very durable.

      No single electronic device can be relied upon, but Bitcoin wallets can be backed up as many times as the owner desires, so with a little care, the chance of loss of one’s wallet becomes vanishingly small.

      I see no reason to expect that bitcoin will be the very first bit of unhackable code in the history of mankind.

      While I would never claim that any mathematical algorithm is “unhackable”, there are many examples of algorithms that have not so far been practical to hack. Someone may figure out how to factor the product of two huge primes in less time than the life of the universe, for example, which would defeat the algorithm used by PGP, but I’d bet on that not happening any time soon, even with increasingly fast computers.

      Your gold, on the other hand, will still be gold 10,000 years after you are gone.

      Very true. Gold has several wonderful qualities, including extreme unwillingness to oxidize, a high melting point, scarcity, beauty, and even usefulness in industry. But you almost seem to be saying that one must choose between Bitcoin and gold. Why not appreciate both?

      • Gordon Johnson

        JdL,

        I do not say that Bitcoin is not ‘good’ we are talking about whether it is money. Notably money is different than currency, though it can also serve as currency.

        Currency is like a rental car ticket, it can be filled by any car matching its specifications – so long as the car is a real one not a virtual one. You can trade them. Maybe I want an SUV and you want two economy models. Everything is fine so long as the cars represented by the tickets are real.

        The money is the car.

        Now, I can drive the car and we can trade that way, or we can just switch tickets. The tickets are lighter, easier to carry, more PORTABLE.

        And the currency – the tickets – are just as good as the money right until you receive a forgery – a ticket with no car. Then the difference is obvious. You can’t have a car with no car. That is why the car is the store of value in this example.

        The durability of electronics is very questionable. Using your terms I would note that all the same protections you noted for a bitcoin wallet are available to your personal data at work – in which you’ve invested your labor.

        Answer honestly now – have you ever lost your work? All you had stored in one particular ‘wallet’, job, file, computer, account?

        I have done IT for decades. Everything I do is mirrored and duplicated multiple times. And I still lose data. Some of it is due to physics (bit rot), some is due to probability (RAID-5 write hole or other disruptions during transfer), and some is due to human error. Regardless, while all of the above losses are ‘theoretically’ possible to avoid, in reality they are inevitable.

        This is the difference between mathematics and reality. Mathematics are valid in so much as they describe reality. The reverse is not true.

        In short I’m not buying durability by virtue of reproducibility.

        On the mathematical algorithm issue you raised I would say that not all algorithms, not even in bitcoin, are mathematical. Claiming that bitcoin is mathematically unforge-able is the same as saying that its encryption is unnecessary.

        We all know the encryption is there for a reason.

        Lastly, I do appreciate both! But that does not make them serve the same functions!

    • http://www.salescopywriter.net/ Alan

      A lot of people talk of “hacking” or “breaking” bitcoins security, but what for?

      You could crack the algo (virtually impossible but let’s pretend), then what? You still cannot create fake coins, as existing coins need to be transferred to and from wallets, you can’t just stuff fake coins into that system. The best you could do is to block some genuine transactions, ie you could disrupt other people’s business but you wouldn’t get rich from doing that.

      Nor could you stop the whole system, not without an equal or greater network of powerful computers dedicated to the task.

      It’s vastly easier to hack someone’s PC and steal their passwords, then steal from their bank account, than to attack the security system itself. Note that this option also applies to conventional bank accounts and also that the banking industry uses the same kind of cryptography. That means you can substitute the word “bitcoin” with the words “modern day banking”, ie:

      “I see no reason to expect that modern day banking security systems will be the very first bit of unhackable code in the history of mankind”

      If you’re truly worried about that then you best close down your bank account/s, ASAP! Someone could steal all your money! Eek!

      Really?

      • Gordon Johnson

        In nearly 30 years of IT work, I’ve never heard the knowledgeable use the word “Can’t”. The word “unfeasible” is more accurate…but what is feasible changes over time.

        With bitcoin, like fiat currencies, you surrender something of real physical value – your labor, or the physical product thereof – in return for something virtual.

        Bitcoin’s main advantages over fiat currencies lie in its difficulty to forge, whether by a central authority or decentralized personnel.

        Bitcoin’s main advantage over traditional metal currency is in its portability.

        Your only security that the value you placed there is still unique lies in the cryptology that enforces the use of the bitcoin algorithm and prevents side-stepping that algorithm.

        You have presented that the algorithm and the cryptology enforcing it are beyond hacking. If so it will be the very first algorithm in the history of the human race that is unhackable.

        The belief that bitcoin is unhackable is naive. Hackability is a constant in all human constructions that lies on the premise: What one man can build another can compromise.

        Bitcoin is still very new. The algorithms that secure it are not new by standards if IT timescales – but by all others they are new.

        Bitcoin is software. It features protocols enforcing uniqueness, and accounting of transfer in algorithms. Ciphers are used for authentication, encryption, etc, in order to force bitcoin users not to bypass some or all restrictions inherent in the algorithmic process.

        The encryption is formidable.

        But currencies must be a LONG TERM STORE OF VALUE. 10 or even 20 years is NOT LONG TERM. CENTURIES IS LONG TERM.

        I know and have used many ‘formidable’ encryption standards over the years. All of them seemed unbreakable in any realistic sense at the time. All of them had features that led to estimates of the time required to crack them being measured in decades or centuries.

        All of them have since been hacked. These algorithms too will eventually be hacked – and it need not be by means of brute force, which would require a quantum computer.

        The encryption is a NECESSARY feature. There is a reason it is there. Without it the transfer protocols would be exposed, which are the most likely attack point.

        With a compromised transmission mechanism an number of transfers could be intercepted and forged to one or many other ‘wallets’.

        I don’t expect it to happen soon. But it will happen.

        Furthermore, as a store of value, you are one CME or EMP away from total loss of currency accounting. This is one advantage of metals, which can be disbursed, but are almost impossible to physically destroy, are fairly easily authenticated, thus making them a good store of value.

        Again, while bitcoin is a BETTER store of value than fiat currencies – and by virtue of use qualifies as a CURRENCY, it doesn’t really store value – ergo I can’t expect it to be possible for my great-grandchildren to be accessing my stored labor from a bitcoin wallet 100 years from now.

        Without the store of value function neither fiat currencies nor bitcoin can be considered to be MONEY (the thing that secures the value of your currencies and thereby forms the basis for accounting over generations (for companies) and even centuries.

        On the other hand, I can take an ounce of gold that was mined in 600 BC and get a reasonable facsimile of its original value out of it today…and that is with massive rehypothecation dividing its value.

        Bitcoin is good. I would like to use it. It is certainly better than dollars, euros, or pounds. But I suspect that eventually bitcoin miners and brokers are going to want Gold or Silver in exchange. At that point MONEY – the store of value – will be performing its function while CURRENCY will be used as script to trade with – performing its function.

        I can’t say whether or not someone will eventually develop a crypto currency secured by Gold or Silver. It doesn’t really matter.since the transferability is a function of encryptable accounting.

      • Gordon Johnson

        By the way…

        With respect to that last statement about ‘shutting down’ bank accounts.

        Yes, they can steal my money. They do steal my money. Yours too. Cypriot bank account holders too. And English ones. And Russian ones. This is all in the news right now, and especially since 2008.

        Isn’t that why bitcoin was created?

        And for what it is worth, if you are wise you will observe the conditions in the banking system and not expect them to store value. Obviously, by virtue of ‘Legal Tender’ laws we have to maintain some accounts just to live…

        In other words there is a difference between a checking account and a savings account. And no, I don’t expect them to store my value fairly.

        Seeing events around the world, looking at central bank and government policies and actions I fully expect your ‘EEEK’ moment to happen to a lot of people, somewhere, in the next 365 days.

        But… that’s a no-brainer. It has been happening every year to people ‘over there’.

        I don’t understand why people cannot realize that it can also happen ‘over-here’.

  • Diogenes

    As much as I respect Rosenberg, and often disagree with North and his writing tone, I think North is actually correct in this instance, that BitCoin is pretty much a Ponzi scheme. BitCoin is a reaction against a dominating fiat money system, and would not make sense to use on it’s own in a none fiat world that wasn’t motivating desperate attempts to escape the fiat money system. This is because 1. there is no commodity use of bitcoin outside of acting as a medium of exchange, and 2. it’s easily possible to make a possibly endless number of competitor systems to BitCoin based on the same principles but with slightly different math algorithms. Those 2 facts directly undermine BitCoin as a sound money, and even as a temporarily expedient form of exchange. BitCoin is the first crypto currency system of it’s type, and could and will collapse as soon as an alternative system is created, thus showing the none rarity and group agreement dependence of this type of currency exchange system. BitCoin is a Ponzi scheme because it depends on it’s users not recognizing those 2 facts, and that growing none libertarian public interest in it strongly appears to be driven by an expectation of future growth.

    We use the dollar as a necessary exchange expediency because we are forced to, and because the public has been brainwashed to believe it’s good money, not because it actually has sound money characteristics, which of course it does not. Sound money advocates should be just that, or else we will be discredited when those who follow our advice lose their wealth.

    Money is the most marketable commodity. There is no such product as ‘money’ that is not the most marketable commodity. ‘Money’ is a synonym for ‘the most marketable commodity’, or at least was that, until 100 years of fiat dollars confused the issue. What that means is that genuine sound money is Never purposely created by any one, it simply defaults to whatever the current most marketable commodity is. There have been endless attempts throughout history to make this or that coin or other item ‘money’, and each and every one has eventually failed. And every single time those who counted their sound money as the weight of their gold and silver retained their wealth.

    This time will be no different.

    That’s because gold and silver have inherent characteristics which always end up making them the most marketable commodities, more so than any other commodity or product ever discovered or created in history.

    What does make for good money? Again, Aristotle gives us the answer. It’s something that has five characteristics: it’s durable and divisible, consistent and convenient, and has value in itself. http://www.caseyresearch.com/editorial/3270?ppref=DLC058ED0310B

    Gold is all of those things, and has been universally desired as adornment material by humans throughout history including today. BitCoin is temporarily convenient, and none of the other 4. Thus due to Gresham’s law, it’s highly likely to be driven out of circulation at some soon to happen point.

    • http://www.salescopywriter.net/ Alan

      To simply throw out there “I think it’s a ponzi scheme” despite TWO articles on this site explaining why it isn’t is the height of ignorance.

      You say it would make no sense to use it if it were not for the oppressive nature of fiat currencies? Of course it would and does! It’s an international currency, it’s an international payment system and with it anyone, without needing a bank account, can send money to anyone else on Earth, in a matter of seconds, with ZERO chance of chargebacks or card fraud. If you cannot see the value in that then you’re not really looking.

      Then you throw up the altcoin argument, that somehow bitcoin is no good because another cryptocurrency could emerge? Well there have already been others, from litecoin to the silly dodgecoin, That don’t distract from bitcoin’s position as the #1 cryptocurrency. By your reasoning the dollar ceased to be money because the euro appeared.

      Then you reveal your real argument – that you’re a gold bug clinging to the idea of most exchangeable commodity. OK, go right ahead and exchange $900 of gold for a bitcoin?

      Yeah that’s right, you can’t, because you can’t exchange gold online, can you? At best you can hope for some paper or digital certificate, using some trusted 3rd party such as a bank.. Can you see where that’s going? Bitcoin was developed to help get AWAY from that ridiculous situation, a situation already long-proven to create fraud and inflation through ‘fractional reserve’ banking.

      Generally on Disqus I try to be reasonably polite – but not to those that are unreasonable. Your post was so incredibly dense and ignorant it made my nose twitch.

  • Hannon

    I don’t like bitcoin for a few reasons:

    1) it is completely dependent on DARPA’s network. Don’t think a Linux distro will keep you safe, satan’s spy tech is built right into the hardware, and while they may not be able to read it’s encryption, they can activate a spider any time they want and delete all the wallets at the same time. While they may not get everyone of them, but they could disrupt it enough to make it worthless. It’s also possible, they may add filters that block it, once we’re forced onto internet 2.

    2) the block chain associated with it, is now 9 plus gigs and growing. If bitcoin ever grows past the recent speculators and its die hard believers, the block chain will go into the terabits and beyond. You’ll need a bed room stacked floor to ceiling with hard drives for your bitcoin wallet. This built in flaw, or strength, depending on how you look at it, is already starting the “talk” of some type of centralization, which in my mind, defeats the purpose of it.

    3) You can’t walk around and transact away from your PC, unless of course you carry a smart phone, and everything associated with that. The cost of these fancy phones and their monthly bill, is never calculated into the transaction cost by the pro-bitcoin crowd, but they are there.

    4) It’s a 100% percent traceable, non-commodity backed, digital currency. Outside of being debt based, it’s kinda what the bad guys want.

    5) If bitcoin were to displace just a small fraction of dollar or euro transactions, your dsl or cable modem, wouldn’t have the bandwidth to keep up with the block chain, even if you had the storage capacity.

    6) It’s only a matter of time before the unhackable encryption, get hacked. Who knows what kind of quantum computing tech, the power structure can throw at crunching the numbers.

    I do like bitcoin for a few reasons:

    1) It is, as of now, decentralized and out of the hands of psychopathic control freaks.

    2) It truly is market/user driven. People like it based on what it is, not some law shoving it down their throats, or they are using it to out right protest the stinking banksters.

    3) It’s not a usury based currency, that creates an impossible black hole of debt.

    4) It’s very convenient, provided your vendor accepts it.

    5) It doesn’t care about imaginary lines on a map

    6) Even if it fails, it shows the people of the world, that decentralized people created currency is possible, and it will provide a learning experience for the next experiment in decentralized currency in our digital age. We can build something better next time.

    7) If bitcoin is widely adopted and successful, not only will it be a knife in the side of the bad guys, but it will drive market based expansion of data storage and internet bandwidth, instead of some corporate monopolies, doling it out to us at the rate they decide they want to spy on us at.

    All in all, I can’t poo poo bitcoin, but I won’t put too many eggs in the basket either. I hope it’s successful, and it’s not a Trojan horse designed to destroy the idea later on down the road. I consider it arrogant, or unwise to think it’s promoters or detractors understand where this is going. I still think of it as an experiment, a grand and noble one at that, it’s as much of an asymmetric political movement as a currency. If I were to give advise, I’d say put some money into it and use it, but not more than you can afford to lose, use it as a medium of exchange and go from there. If somebody wants my investment advise, the love of others, knowledge and skill sets are the only thing the bad guys can’t steel from you, as long as your still on this plain.

    • http://www.salescopywriter.net/ Alan

      You make some good points and you make them fairly, so I’ll try to respond in kind…

      1. It relies on the internet. Yes, this is true. So do I, as I work online, along with many people (salescopywriter.net) Huge chunks of the modern world rely on the internet, just as many people’s careers rely on television. I don’t think the internet is going anywhere soon. Regarding the idea of spiders that could delete wallets, wallets can be backed up, including paper wallets with zero net connection. You’re right that people should be aware of such risks, including common hard drive failure etc. Backing up is always a good idea.

      2. The blockchain is huge – True, though most people don’t need it. There are opensource and secure wallets that function fine without downloading the whole chain or anything like it. It does suggest that in the future we’ll have to pay a fee to finance those that do work with blocks. That’s fine, we pay bank fees anyway and bitcoin’s would still be as low or lower.

      3. You need a phone or tablet to do mobile banking. Yes. You need to carry your wallet to spend money. Yes. Your objection seems to be that you need a phone or similar to spend locally? Firstly bitcoin is an international currency rather than for local use (why not just use the local currency?) but really it’s a non issue, as so many people already do have phones. In fact in developing countries the internet and computing is rarely on a PC or laptop, mobile phones are the net connection of choice. Heck, in Africa there are places where they use mobile phone credit as a form of digital currency…. Think about that!

      4. It’s traceable. Yes, just like everything else you do with electronic banking. No, it’s not as anon’ as physical cash. To me that just means that one shouldn’t believe the hype that it’s entirely private. However it IS more private than using a credit card, because you don’t have to give the vendor your name, just your money. As a classic example, your wife won’t ever see a charge for your midget porn site on your credit card statement.

      5. The internet couldn’t handle the bandwidth – didn’t that say that about photographs? Then video? We don’t need millions of people downloading the entire blockchain, just a few hundred decentralized businesspeople charging a fee or mining coins.

      6. It will be hacked – on that basis you should stop using your credit cards or any other form of bank that uses online banking, because they use the same kind of security. In fairness to bitcoin though, hacking it wouldn’t acheive much. You still cannot create fake coins, all you could do is try to disrupt the system but you wouldn’t profit from that.

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