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One of my customers sent me a slip of paper for Christmas. Bitcoins. Well, not a whole Bitcoin; I was given ฿0.05. From the time I spent looking into it to the time I luckily cashed it in for a gift card, this is my experience with the thing. And for those of you that don't want to read on, here's the TL;DR version... did anyone ever give you old Turkish Lira as a present and just left it up to you to figure it out? It's like that, but with iPhone apps!

...being a millionaire has its privileges. Jackpot! 777 all the way! Oh...

My foray into the world of cryptocurrency, below the fold.

I opened the card, and there it was. Printed out around the time the Chinese had largely said "nope" and the Bitcoin value just dropped 25%, but by the time I paid any attention to it and thought "I'd better see how I cash this in for real money that doesn't involve buying tat from or gambling it online" it had risen back up again to near $40 ($800 for ฿1).

This is called a "wallet", and is useless at holding anything my wallet holds.

Those weren't my first thoughts: I only found out about the lack of places to exchange this for what I wanted after a lot of searching and reading. My first thought, right out of the gate, was "people are taking this for payment. I'll just buy something on with it."

Right out of the gate, there was my first problem. When you're given a gift card for a store or a website or for apps and music on the iTunes store, you know it's not as good as cash but you're getting satisfaction within seconds. Put that code into the webste, or even just aim your camera at the code and boom!

It's all about 7H3 B3NJAM1N5.

There's no set-up like that for Bitcoin. There are hoops to jump through, so that's when I started looking around for places to spend what I had. Which means I did what 99% of people would probably do. I googled "exchange bitcoin money". The Bitcoin wiki has a page on currency exchange tells you about how you convert hard cash into Bitcoins, but the bit about going the other way around is noticeably vaguer. It tells you it has an exchange rate, but not how to do that exchange. It then dismisses the criticism that it's an unstable bubble currency it tells you it got up to $1216.73 and was down to $77 in the same year.

Other sites follow the same pattern. Lots of info on how to buy in right now, scant info on how to cash out if you need to in a hurry. It reminded me a lot of timeshare sales techniques... when people are pushing you to buy, buy, buy to that extent it's not good.

I downloaded the Blockchain app and transferred the Private Key on there. This meant I had the amount on my phone, I could check its exchange rate. Someone suggested a few places that allow you to buy gift cards so I looked around and randomly chose Gyft, downloaded their app too.

And now I see their ads everywhere I go!

Now: I could have gone for a better exchange rate. Blockchain uses Bitstamp as their exchange rate but Mt.Gox has a higher rate. It's like handling a foreign currency: the bank gives you a better rate, but you have to wait for the bank to open. How does this analogy work here? Why didn't I go through Mt.Gox? Well, this is why, from their verification page (which you only see after logging in)...

Notes: Due to the rising popularity of Bitcoin, we now have a high volume of verification requests and are experiencing delays. Verification can currently take 10 business days on a case by case basis, so please keep this in mind before contacting support.


Required documentation :

- A CURRENT and VALID Photo ID issued by a government entity (i.e. National Identity card, Drivers license, Passport, etc.).

- Proof of residence issued within the last six months (no exceptions): Utility bill, tax return, insurance payment, etc. We are sorry but NO BANK STATEMENTS will be accepted. to be a part of the system that isn't part of the system, I need to be a part of the system and give them all this documentation?!?

Screw that. Gyft as the store through BlockChain as the exchanger. Gyft had what I wanted anyway; an Amazon gift card. To get a $40 Amazon gift card, I had to wait for the value of ฿1 to rise to $800. For quite a while, it was hovering around the $780-$790 mark.

I could've paid a few cents, bought the fractions I needed, but it was the principle of the thing now.

Just a bit more, and the $40 would be less than the five Bitcents (not sure if that's the term, but it'll do). Then, I saw it. The exchange rate the Gyft site and app used just hit above the $800 mark. Go time!!!...


Like any currency exchange, someone somewhere takes a cut eventually. In this case, Gyft takes a tiny amount because daddy needs to buy new shoes somehow. So I needed the rate to rise so that the $40 gift card equated to ฿0.0495 (and there was a ฿0.0005 handling fee from Gyft on top, around 40 cents) Reciprocal fractions, quick bit of divison... and I needed one Bitcoin to be worth $808.080808...

They actually have a tune called 808080808. It's got a good beat you can dance to.

I could've ended this at any time. Used a credit card, bought the few thousandths of a Bitcoin I needed, but I figured I'd wait it out. I'd not paid for it, anything was a bonus, it would just be more of a bonus if I didn't have to pay my own money to unlock my gift. So I checked four or five times a day, and I can understand how people can become obsessed with day trading. Then, it happened. I checked, one Bitcoin had risen to around $820. Oh happy day! I got the address to transfer the Bitcoins for the Amazon card and did it right then and there. The transaction was verified, the alphanumeric string that held the total worth of the money went from one alphanumeric wallet to another, hello new phone case!

...because, let's face it, money's only worth anything if you can use it to get what you want or need.

That was at the beginning of the month, and eleven days is a long time in cryptocurrency land. I was lucky to get it low and 'sell' it higher when I did. I was lucky that waiting for it to push above the 80808's worked for me. Not prescient, not gifted in my foresight, just fucking lucky. In the days since I swapped this cryptocurrency for something I can actually use to buy what I want, this is what the value of Bitcoin has done...

To paraphrase one of the Rockerfellers, the market has shit the bed.

This beautiful crown of libertarian wealth is prone to outside interference which can fuck it up, big time.

Andreas Antonopolous is chief security officer at, a popular Bitcoin wallet service, and he tells CoinDesk that numerous Bitcoin exchanges are experiencing a "massive and concerted" denial of service attack right now.
To stop a total collapse, the big players have suspended activities that involve people abandoning ship. There's a run on the banks and people are flooding the savings and loan.

"But don't you see? Your money is tied up in John's mom's basement, and his money is tied up in Chad's mom's basement..."

JPMorgan has come out with a scathing attack - "bitcoin looks like an innovation worth limiting exposure to;" CoinDesk reports that major exchanges are under a "massive and concerted attack" by a bot system - creating a "fog of confusion" over the system; and perhaps most critically, BitStamp has followed Mt.Gox and halted withdrawals "due to inconsistent results from their bitcoin wallet" - due to the DDoS attacks...
Someone that won a Nobel Prize in knowing money (Paul Krugman) noted:
I have had and am continuing to have a dialogue with smart technologists who are very high on BitCoin - but when I try to get them to explain to me why BitCoin is a reliable store of value, they always seem to come back with explanations about how it's a terrific medium of exchange. Even if I buy this (which I don't, entirely), it doesn't solve my problem. And I haven't been able to get my correspondents to recognize that these are different questions.
The aim of Bitcoin is to replace fiat currency, a currency that (if you listen to our bootstrappy friends) is only worth anything because enough people say it is ...with a currency whose whole worth exists for the same reason. It's a sales pitch by its adherents, driven by a Emperor's New Clothes fear that someone at the back will say "hey, this isn't built on any foundations" and it all comes crashing down. They're invested, both emotionally and financially.

But what happens when the banks get attacked? What happens when you want a hand on a lifeboat so bad?

My current Bitcoin balance is six ten-thousandths of a Bitcoin. When I thought of making this diary entry it was just a fraction under 47 cents... now my phone app says it's 38.4 cents, but I'm also receiving a lot of Javascript and HTML looking error messages too. I couldn't care one way or another if that loose change disappeared tomorrow. Having to jump through more hoops than handling foreign currency has to use the Bitcoins I was given, avoiding one exchange that required the kind of info about me that sounded like an identity-theft scam, just to transfer it into a form as inflexible as a gift card that can be used with just one company with the hope its volatility doesn't render it worthless? And doing it just before today happened? It put me off Bitcoin for life.

EDIT, MORNING AFTER EDITION - I showed the graph from Bitstamp in the diary, as that was the exchange I went with. It's like keeping an eye on the Bureau De Change I intended to use...

...without checking the fluctuating rate at that bank. Meanwhile, this is what happened at that Bitcoin bank, the Magic the Gathering Online eXchange...

Imagine being paid for a job near the end of January, but instead of giving you $1,000 the company gave you ฿1 and instructions on opening an account with Mt.Gox. Your thousand dollars is now worth just over $525, it's in a format you can't spend immediately in any store in your city, and the place that holds your cash says you can't have it.

This is what Krugman talked about when he was asking about "a reliable store of value" needs to be in a form where it's able to be saved and retrieved at a later time, when demanded, and be predictably useful when retrieved. Mt.Gox has had multiple occasions in a single year where people couldn't get their money out of the exchange. There's no saying that you could definitely get access to your money at X o'clock on the X of February, there's no guarantee that X amount of Bitcoins would be enough to buy you a Blu-ray player or not enough to buy you a Blu-ray disk. It's a store of value, but it's far from a reliable one.

Originally posted to ShawnGBR on Tue Feb 11, 2014 at 07:02 PM PST.

Also republished by Community Spotlight.

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Comment Preferences

  •  Tip Jar (169+ / 0-)
    Recommended by:
    Mannie, old wobbly, here4tehbeer, Liberal Protestant, Mother Shipper, jlms qkw, Ice Blue, Matt Z, Wee Mama, wu ming, ontheleftcoast, Norm in Chicago, prfb, also mom of 5, fcvaguy, DavidMS, devis1, Susan from 29, chuco35, Jorge Harris, subtropolis, MarkC, Thinking Fella, HiKa, Cassandra Waites, Omir the Storyteller, mslat27, delver, middleagedhousewife, tegrat, Wheever, magnetics, ichibon, Liberal Thinking, Kathy S, wader, kevinpdx, bob152, dull knife, elfling, kitchen sink think tank, LeftHandedMan, TwoSolitudes, denise b, owlbear1, Egalitare, grollen, Tortmaster, rbird, ManfromMiddletown, thenekkidtruth, TFinSF, Murphoney, Larsstephens, deminva, rat racer, Joy of Fishes, The Lone Apple, tobendaro, Rich in PA, airportman, milkbone, Curt Matlock, rapala, temptxan, tomephil, cskendrick, flowerfarmer, millwood, BobBlueMass, BYw, Enzo Valenzetti, Tommy T, NYFM, sangemon, eagleray, Yasuragi, leeleedee, Bmeis, tommymet, citizenx, Temmoku, Blu Gal in DE, zerelda, hubcap, NM Ray, caul, blue aardvark, shanikka, darthstar, Kevskos, Crider, srelar, RLF, ricklewsive, Catte Nappe, wilderness voice, realalaskan, cassandracarolina, sostos, marathon, Texknight, TheLizardKing, bleeding blue, JVolvo, Shakludanto, 313to212, RandomNonviolence, commonmass, Isaacsdad, Assaf, ER Doc, mrmango, Nowhere Man, Dem Beans, dradams, appledown, nookular, CitizenOfEarth, Tool, Shockwave, samanthab, Odysseus, dsb, LordRobin, sethtriggs, NoMoJoe, cpresley, sidnora, Witgren, ltsply2, rmonroe, just another vet, greycat, BlueOak, foresterbob, JLan, jared the bassplayer, Laughing Vergil, Chinton, petulans, pixxer, Aaa T Tudeattack, Involuntary Exile, implicate order, rsmpdx, Betty Pinson, AdamR510, filby, duhban, Hey338Too, AaronInSanDiego, rpjs, OrdinaryIowan, Wednesday Bizzare, peptabysmal, cyberpuggy, grover, mbayrob, daeros, bluedust, Amor Y Risa, david78209, Dauphin, Rosaura, koosah, Tinfoil Hat, wilywascal, Phoenix Woman

    The nation can be made to produce a far higher standard of living for the masses of the people if only government is intelligent and energetic... (FDR, '37)

    by ShawnGBR on Tue Feb 11, 2014 at 07:02:41 PM PST

  •  I just want to say how lucky I am again. (42+ / 0-)

    I was so close to going with mt.Gox. If I had, my application may still be pending. My gift may still have been stuck in limbo, behind the closed doors of an institution under cyber attack.

    One thing I forgot to mention in my diary: in the conversations I had in the "how do I spend this?" phase, someone mentioned there's a café in Vancouver that deals in Bitcoin.

    I'm in Pennsylvania. It's 11pm now, but Kayak tells me in can leave around 6am and change in Newark and Pearson (where?) to be there a little over 13 hours after I leave. For $1,600 and change. To use the nearest ATM, assuming it's not down because of the DDoS.

    The nation can be made to produce a far higher standard of living for the masses of the people if only government is intelligent and energetic... (FDR, '37)

    by ShawnGBR on Tue Feb 11, 2014 at 08:02:22 PM PST

  •  Besides the convertability issues (32+ / 0-)

    and the volatility in price, there is the fundamental point that the total world store of Bitcoins is designed to be a fixed amount. It is like being on the gold standard, only you are mining out all the gold.

    Modern currencies are mostly managed, with varying degrees of success, to maintain a small positive rate of inflation. Furthermore the money supply is expanded or contracted as economic conditions require. There are people who think government intervention in the money supply is a bad thing, but Bitcoin, with no government backing or intervention, has a number of downsides, including substantial volatility. And there is a political risk to it, since it is subject to future regulation or even prohibition by governments.

    •  I agree with you. (1+ / 0-)
      Recommended by:

      But while I agree with you, the Bitcoin folks will point to this as a positive aspect of the currency: it's not 'vulnerable' to inflation as a result of government printing or hitting a mother lode.

      •  In theory, it's vulnerable to deflation (2+ / 0-)
        Recommended by:
        sethtriggs, duhban

        Once all the Bitcoins are mined out, the value of a Bitcoin should increase over time if new people keep trying to use them. Which means that people would be less likely to spend them as a currency and even more likely to convert them to a more usable currency like dollars.

        I don't pretend to understand everything about currency, but I realize that fiat money, while not backed by a specific tangible asset, is backed by faith in the issuing body. At least with buying, say, physical gold I'd have something that has intrinsic value whatever the seigniorage. With Bitcoin I don't even have anything that I can hold on to physically and also nothing backed by a sovereign issuer.

        •  Yep. (2+ / 0-)
          Recommended by:
          iburl, erichiro

          Again, your first paragraph is a good thing for Bitcoin advocates. Many of them are just trying to make, well, money. Not to evangelize a currency. The big players evangelize just to get people interested. Then, just as you said, Bitcoins have a limited supply, as more people use them the value of a Bitcoin goes up. And voila, early investors exchange Bitcoins for cash. Good 'ole supply and demand. Which is sometimes more relevant to money than other goods...

          I do want to point out that gold doesn't really have all that much intrinsic value. Yes, it's useful for electronics and a few sundry applications. But most of gold's value is based on the same thing Bitcoin is based on: a sufficiently large mass of people thinking it's reliable money. There's really not much difference between a Bitcoin zealot and a Glenn Beck-listening gold investor. Both are building up the bubble that the real investors are planning to make money on. In fact, gold is dropping now for exactly that reason: it, like Bitcoin, is a bubble currency based on the whimsical beliefs of the masses in its value.

          Yes, you can't hold onto Bitcoin. But you can be quite sure it's not going to just disappear: the massive computing power used to make Bitcoin is not just meant to regulate the supply - it also applies so many levels of encryption to the base Bitcoin ownership & transfer system that Bitcoin is about as likely to be stolen as gold. Someone can find where you stashed your gold/figure out the combination to your safe. Or figure out the password to your Bitcoin e-wallet. Neither actions have much to do with the currency itself.

          As to being backed by a sovereign issuer... well in that respect Bitcoin is indeed very different from dollars. But it's exactly the same as gold. There aren't any significant political entities that recognize the gold standard anymore.

          Frankly, gold is an excellent way to conceptualize Bitcoin. They have a relatively limited supply, aren't backed by a sovereign issuer, and are both vulnerable to theft (figuring out the combination to your safe or password to your e-wallet) but not counterfeiting.

          They're also both an easy way to move currency without being subject to the usual international controls... though Bitcoin comes out ahead of gold on this one.

  •  meh -- you just don't get it (48+ / 0-)

    I kid. This diary contained more useful information on Bitcoin that i've yet seen. Not that i've gone out of my way to hunt down the specifics. Maybe there is a kernel of wisdom in the idea, but it seems a lot like tulip bulbs from where i'm sitting.

    Thanks for the amusing and enlightening story.

    All things in the sky are pure to those who have no telescopes. – Charles Fort

    by subtropolis on Tue Feb 11, 2014 at 09:04:35 PM PST

  •  Yeah...Bitcoins. (27+ / 0-)

    So, you don't trust the Full Faith & Credit of The United States of America & our flimsy Dollar--but you do trust a "currency" made up by a hacker from Hong Kong. Okaaaaay...whatever.

    Great diary. Fun to read & an action-packed first-person account of how I haven't fucked up yet. The fella likey. This fella also likey the Dollar.

    The better I know people, the more I like my dog.

    by Thinking Fella on Tue Feb 11, 2014 at 09:11:03 PM PST

  •  Bitcoin is flawed. But don't throw out the baby (5+ / 0-)

    with the bathwater. The open-source technology that powers bitcoin can also be used to create any kind of currency that people wish to create: local currencies, people-powered currencies, libertarian currencies (i.e. bitcoin), or nearly any kind of alternative type of monetary ststem that people can dream of.

    The corrupt monetary system that runs the U.S. dollar -- in which free money is handed out by the Federal Reserve to investment banks to go into the Wall Street casino and make even more money for already-rich bankers -- is hardly something to be happy about, and desperately needs reform. Perhaps the digital currency movement could be part of the solution. Maybe not bitcoin itself, but the technology that makes alternative currencies possible.

    The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

    by Eric Stetson on Tue Feb 11, 2014 at 09:24:14 PM PST

  •  The Something Awful forums (26+ / 0-)

    have pretty well documented the stupidity that is Buttcoin and their community of libertarian idiots for three years now. is a great resource for the latest stupidity.  Also, the thing that never gets old is to remember that Mt.Gox stands for Magic the Gathering Online: Exchange, it's original purpose was trading e-Magic cards -- captains of industry, ahoy!

    •  Great minds think alike! (7+ / 0-)

      The hungry judges soon the sentence sign, And wretches hang, that jurymen may dine.

      by magnetics on Tue Feb 11, 2014 at 10:15:58 PM PST

      [ Parent ]

    •  Much becomes clear. (3+ / 0-)
      Recommended by:
      caul, realalaskan, wilderness voice

      There's a big argument about the merits of Bitcoin on a game forum I participate in - a few backers of the game are rather enthusiastic Bitcoin evangelists, and gaming PC hardware is apparently not too different from crypto-mining hardware - and all of a sudden a contingent of self-proclaimed Goons piled into the argument on the anti-Bitcoin side.

      I'd been a critic of Bitcoin in the argument - citing its volatility as an issue for a business with bills and salaries to pay - but sometimes you've just got to get out of the blast radius before the argument really gets going...

    •  You are KIDDING me. (1+ / 0-)
      Recommended by:

      This all started as part of a CARD GAME??????

      This isn't freedom. This is fear - Captain America

      by Ellid on Wed Feb 12, 2014 at 08:56:40 AM PST

      [ Parent ]

      •  Bitcoin did not. Mt. Gox did. (2+ / 0-)
        Recommended by:
        NE2, sethtriggs

        Magic: The Gathering, being still probably the most popular collectible card game played, also has an online component where you can pay real money for virtual cards. These are locked to your account but can be traded with other players for other virtual cards. The only way I know to get value out of the online game, besides selling instead of trading, is to complete a set of a basic edition or expansion pack, at which point the manufacturer is willing to "convert" your virtual cards to a physical set and send it to you, then deleting your online cards. You can then sell the physical cards.

      •  Yes, but it was card game for nerds, so (1+ / 0-)
        Recommended by:

        therefore it must be very intelligent. I think that's the operating assumption- that it's run by people in the know who are smarter than the rest of us, so what could go wrong?

        •  Oh God. "Fans are slans" (1+ / 0-)
          Recommended by:

          It's one of the least attractive characteristics of Homo Nerdus Americanus:  the tendency to think that brains trump everything else, including common sense and actual expertise, and thus the rest of the world should put nerds in charge.


          This isn't freedom. This is fear - Captain America

          by Ellid on Wed Feb 12, 2014 at 11:37:59 AM PST

          [ Parent ]

    •  Sent an email to Buttcoin. (2+ / 0-)
      Recommended by:
      magnetics, Hey338Too

      Let's see if they republish / link to my experiences!

      The nation can be made to produce a far higher standard of living for the masses of the people if only government is intelligent and energetic... (FDR, '37)

      by ShawnGBR on Wed Feb 12, 2014 at 09:34:52 AM PST

      [ Parent ]

  •  The frustrating thing for me about Bitcoin (26+ / 0-)

    is that I read a lot of pro-Bitcoin commentary that seems to rely on the same thinking that Movement Conservatives and some wingnut libertarians who are just too embarrassed to admit they are basically talk radio Movement Conservatives fall victim to.

    If people I hate/mistrust don't like it, it must be good/this only further confirms to me that this is something I want. I don't know if Bitcoin is good or bad. I don't pretend I do. I just can't help but notice that there is something disturbingly familiar about my gentle attempts to get more details and more clarifications from those who are enthusiastic. Did you ever have a conversation with a really rightwing person, in the Tea Party mold, where you started to see a kind of religious faith in Mike Huckabee or Glenn Beck that made everything 'good enough for me'.  

    That's a great way to end up being royally fucked and left holding the bag. Confident that everybody else is about to get hit in the face with a shovel until you walk confidently into traffic or off a cliff.  

    All I have to do to find myself the bad guy is raise wary questions and express cautious doubt.

    That, and a combination of "I want this to be awesome so badly that I don't want to hear warnings to be wary".

    How is it that person x is freaked out about the stability and value of the US dollar, but not freaked out about the stability and value of virtual money?  

    What makes me wary about Bitcoin is that I reach a point in having a conversation about it where the most staunchest advocates for it where they are suddenly are unable to elaborate further beyond boosterism, and I find myself in some variation of "if Paul Krugman hates it, I'm all for it" land.  

    I wonder if Paul Krugman has had a conversation where the person he is speaking to just says "I like it because I heard you hate it." Huh. Do tell. Here's an Arcade Fire video from YouTube while I sneak away.  

    It's just a little too familiar. Like the "arguments" in favor of voting for Ted Cruz or Rand Paul. Look who they piss off! Who cares if they destroy the middle class because I hate Barney Frank and anybody who hates that guy is okay by me. Ugh.

    Every conversation I have ever had with a Tea Party person hits a point where not being 100% on board makes you the enemy.

    I remember the first time I realized that "liberal" just meant "bad" or "I hate it" to Movement Conservatives. It didn't actually matter if the thing under discussion was actually a liberal notion or idea at all.

    And suddenly I get why Glenn Beck was able to get so many folks to buy gold from companies that were scaring the living shit out of them about how paper money was really worthless and we should go back to the gold standard before people wake up one day and money is worthless.

    There is a Monty Python routine-worthy air to a die hard Beckistanian explaining what the gold standard is in their heads and why it is better than the status quo.

    I just hope the technology that evolves from the development has lasting value beyond it.

    “Once is happenstance. Twice is coincidence. Three times is enemy action.” — Auric Goldfinger

    by LeftHandedMan on Tue Feb 11, 2014 at 11:51:43 PM PST

    •  Seems to boil down to groupthink (10+ / 0-)

      doesn't it?

      Several years ago I was traveling and up early in the hotel room, getting my morning news from this beautiful orange satan.

      A diarist (a very popular diarist, I might add, and considered an expert on the subject) was enumerating the reasons why Bank of America was going to go belly up literally any moment.  

      I allowed myself to get so concerned I didn't know whether to pay my mortgage early or not pay it at all.  The facts were so factual, the reasoning so reasonable.  And BOA is such a passel of asshats that it seemed like karmic justice.

      And then a funny thing happened.  Nothing.  Oddly enough.

      This same very popular diarist churns out new diaries regularly in which he warns presciently of things that haven't quite happened yet.  And people thank him for the warnings.

      This diary rocked, by the way.  Very informative and funny!

      Christie is toast.

      by deminva on Wed Feb 12, 2014 at 03:40:46 AM PST

      [ Parent ]

    •  That's why I try to be The Contrarian around here. (1+ / 0-)
      Recommended by:

      You isolate yourself in a ideological bubble with people that agree with you and constantly talk about all the things you hate about Them.....its a recipe for ignorance and disaster. I don't care how good your intentions are.

      "See? I'm not a racist! I have a black friend!"

      by TheHalfrican on Wed Feb 12, 2014 at 04:27:12 AM PST

      [ Parent ]

  •  Great diary! (13+ / 0-)

    I was laughing as I read it.

    Which sort of seems like an appropriate reaction to any story about Bitcoin.

    Politics is the skilled use of blunt objects. Lester B. Pearson

    by TwoSolitudes on Wed Feb 12, 2014 at 12:09:06 AM PST

  •  It's all a mystery to me (4+ / 0-)
    Recommended by:
    rbird, Tortmaster, ShawnGBR, caul

    but I must say I enjoyed your diary very much.

    I was trying to figure out one day how I could get some Bitcoins with which to buy a pair of alpaca socks. I never figured out the acquiring part. I guess I'll be waiting until someone just gives me some.

  •  so...bcoin Value isn't in *value*, but in (2+ / 0-)
    Recommended by:
    Yasuragi, Ellid


    and Finance hasn't had a good novelty act since FDR made all that gold disappear?

    Righteousness is a wide path. Self-righteousness is a bullhorn and a blindfold.

    by Murphoney on Wed Feb 12, 2014 at 03:14:42 AM PST

  •  You mean it's not just for drugs and guns anymore? (8+ / 0-)

    Forget it--bitcoin has gone all commercial.

    It's not the side effects of the cocaine/I'm thinking that it must be love

    by Rich in PA on Wed Feb 12, 2014 at 03:40:27 AM PST

  •  You Can't Argue With True Believers (11+ / 0-)

    And I've tried.

    They're high on Bitcoin and don't seem to understand the reason that I'm not. Can I buy groceries with it? If not, then it's useless to me because none of the places I do my shopping at take the coins. Can I easily exchange it for dollars so I can go shopping? The answer is no. It's not easy. Yes, it's easy for someone who might sling bits and bytes around like mad, but I'm the guy that has never been able to get a torrent to work. Never.

    For me, technology for the people is only useful when it gets to a level of simplicity where you can put in the key, turn the ignition, shift it into Drive and go.

    Remember, the road to victory is paved with big words and professorial arrogance. Passion need not apply.

    by The Lone Apple on Wed Feb 12, 2014 at 03:42:33 AM PST

  •  Best description of Bitcoins I've seen: (16+ / 0-)


    Hige sceal þe heardra, heorte þe cenre, mod sceal þe mare, þe ure mægen lytlað

    by milkbone on Wed Feb 12, 2014 at 03:45:15 AM PST

  •  it's a tulip bubble (13+ / 0-)

    still, I wish I'd bought a bundle when you could get 100 for 25 bucks and a thousand for not much more than that.

    I'd have cashed over half of them out by now.

    Dawkins is to atheism as Rand is to personal responsibility

    by terrypinder on Wed Feb 12, 2014 at 04:27:23 AM PST

  •  Use of livestock as currency is more liquid (5+ / 0-)
    Recommended by:
    ShawnGBR, Yasuragi, caul, ferg, bryduck

    Of course, Bitcoins don't need to eat, pee or moo.

    •  To be fair, (0+ / 0-)

      cows don't need to moo. They just like the way kids riding by in cars mimic the sound.

      "Lone catch of the moon, the roots of the sigh of an idea there will be the outcome may be why?"--from a spam diary entitled "The Vast World."

      by bryduck on Wed Feb 12, 2014 at 02:00:40 PM PST

      [ Parent ]

  •  Doomed Concept (4+ / 0-)

    A currency is a medium of exchange and a store of value ... with a government behind it.

    "I'll believe that corporations are people when I see Rick Perry execute one."

    by bink on Wed Feb 12, 2014 at 05:23:41 AM PST

    •  Technically... (0+ / 0-)

      It doesn't have to be a government, there just have to be enough people who agree on a "close-enough" value for it to be a currency.

      For example, in Las Vegas, you can pay for some services (taxi, for one) using poker chips.

  •  My take (5+ / 0-)
    Recommended by:
    Major Kong, caul, Kevskos, Ellid, mmacdDE

    I am not an economist, but I do know snakeoil when I see it. BitCoin is snakeoil currency.

    Many an insightful opinion and observation can be found on my blog Occam's Razor. UID: 875

    by Guy Noir on Wed Feb 12, 2014 at 05:30:51 AM PST

  •  This is borderline FUD (1+ / 0-)
    Recommended by:

    I'll throw you a mulligan and suggest that you failed to grasp what exchanging currency really represents. You're literally selling the currency you have for the currency you want. Essentially, you're saying "How many (insert target currency) will you give me for these (insert currency you have)?" In this case, it's "How many dollars will you give me for these bitcoins?"

    As soon as you recognize it's a sell transaction and you actually Google "how to sell bitcons" or "how to sell bitcoins for USD" then you will find very simple and elegant answers.

    The answer really isn't that surprising -- you go to bitcoin exchanges and sell your bitcoins for USD. It's essentially the SAME transaction you do in a bank or in a currency exchange booth in an airport. Bitcoins, being a virtual currency, doesn't have physical exchanges like fiat currency.

    Also -- a few points of note:

    Volatility -- This is a fair criticism although it has less to do with inherent design flaws and more to do with standard financial behavior. Namely -- whenever a new shiny financial instrument comes along, you get speculators rush in and cause price volatility. If anything, this shows that Bitcoin has more in common with traditional financial instruments than detractors would have you believe.

    Complexity -- Another fair criticism. It's obviously super easy to begin doing commerce with traditonal money. Although as people move further and further away from paper and coin money and shift to all digital transactions, traditional fiat money has no physical superiority anymore. At that point, it's merely whether or not merchants accept Bitcoins.

    Regulation -- Governments cannot "regulate" Bitcoins. Can. Not. Happen. What they CAN do is regulate how their citizens are legally allowed to use them. This is a VERY important distinction because your Bitcoin money will always be free from direct government control and only subject to what the government can do to you directly. Let that truth sink in for a moment.

    Limited Supply -- This is both true and false. It's true in the sense that there are a limited number of Bitcoins that can ever be in existence. It's false in the sense that Bitcoins can essentially be divided into smaller and smaller increments. It's actually an interesting exercise in the value of money. Fiat currency managers (i.e. countries) "print" more money to increase supply. Bitcoins get smaller increments of divisibility. The mistake people make when having this discussion is to try to attach a one to one value to a dollar and Bitcoin. It's an invalid way of thinking. A single dollar today isn't worth what it was 50 years ago and everyone accepts this. Bitcoins aren't any different as they are divided into smaller and smaller increments and more people enter the market thus driving up the value of a single Bitcoin.

    Having said all of that -- I would exercise extreme caution with anyone deciding to jump into using Bitcoins. The advice is not really very different than other financial instruments.

    It's not perfect and carries with it inherent risk. Do not convert money into Bitcoins as an investment bet that you can't afford to lose. Make sure you have a firm grasp of Bitcoins before getting involved with them and best practices for protecting your money.

    •  someone had to do it (12+ / 0-)

      It's good to see someone trying to push back, but I have yet to see anything in your response to defend the assertion you make in your subject line.

      It is far more difficult to convert Bitcoin into USD than Turkish Lira. Whether you say "sell" or "exchange" or "convert" in your Google search the answers are the same. The process is difficult and confusing and seems to undermine all the "features" of Bitcoin as a currency. (And the exchanges all seem to have this funny feature of freezing up when the prices are going down.)

      While you do respond to certain elements of the argument, you don't actually get around to explaining why Bitcoin is better than a traditional currency.

      Maybe you think this is an advantage:

      Regulation -- Governments cannot "regulate" Bitcoins. Can. Not. Happen. What they CAN do is regulate how their citizens are legally allowed to use them.
      But that's like saying governments cannot regulate carbon dioxide because production of carbon dioxide is controlled by the laws of physics. It's true, but it's meaningless.

      If my government can regulate how I use Bitcoins (and they already do) then from my perspective it's a distinction without a difference.

      •  You're missing something: (7+ / 0-)
        It is far more difficult to convert Bitcoin into USD than Turkish Lira
        Yes, but there was a reason you had Lira in the first place, namely, to buy goods and services in Turkey.   There's no place where Bitcoin is accepted as currency.  

        So unless you're speculating, there's no reason to take on the additional costs and problems of exchanging from either Lira or bitcoin.   And there's nothing new about that sort of speculation: easiest form of currency trading in the world is simply buying a stack of notes or coins of a foreign currency with dollars and see how it goes.  But at least at the end of the day, I could take that stack of lira and buy something in Turkey, maybe even just as much, if the Lira depreciates against the dollar. Not true with bitcoin.

        The dossier on my DKos activities during the Bush administration will be presented on February 3, 2014, with an appendix consisting an adjudication, dated "a long time ago", that I am Wrong.

        by Inland on Wed Feb 12, 2014 at 08:49:31 AM PST

        [ Parent ]

        •  Yes there is (0+ / 0-)

          There are merchants accepting Bitcoins as payment right now. It's clearly not as ubiquitous as traditional fiat money of course.

          •  There's merchants accepting competitor's coupons. (2+ / 0-)
            Recommended by:
            TheLizardKing, Chinton

            But that's a long way from being a currency.

            The dossier on my DKos activities during the Bush administration will be presented on February 3, 2014, with an appendix consisting an adjudication, dated "a long time ago", that I am Wrong.

            by Inland on Wed Feb 12, 2014 at 09:16:55 AM PST

            [ Parent ]

            •  Not a very good analogy (0+ / 0-)

              You can go online or even in person to these merchants and buy ANYTHING in their store. Heck, you can buy everything they have in stock with Bitcoins if you have enough -- the same as you can with the native currency of that merchant. But a coupon?

              •  It's actually a perfect analogy (0+ / 0-)

                because the fact there are a few merchants who voluntarily accept bitcoin is different from all merchants having to accept legal tender.  It's really no different than clipping coupons, including the limited choices, and the time and effort, to....I guess the analogy breaks down in that with a coupon you save money, and with bitcoin, you don't.

                The dossier on my DKos activities during the Bush administration will be presented on February 3, 2014, with an appendix consisting an adjudication, dated "a long time ago", that I am Wrong.

                by Inland on Wed Feb 12, 2014 at 11:51:02 AM PST

                [ Parent ]

          •  Ubiquity is in the eye of the beholder (0+ / 0-)

            The diarist is right.

            The ideal currency is frictionless -- you just use it as a medium of exchange, a way of closing transactions at low cost.

            If it's difficult to find somebody who will take the currency, it doesn't have low costs.

            If you can't depend on the currency having a stable cost, then it has risk, which finance theory shows is itself a cost (with a discoverable price, even).

            Partial reserve central banking makes people crazy for some reason, but on the whole, it's a system that people understand well enough for most conventional currencies to at least be a reasonable store of value.  And as media of exchange, they are very efficient.  And the ability to keep the supply of money stable via changing the level of reserves works much better than the cement overshoes of any system that's build on a "mined" monetary base, be it bitcoins, silver, gold, or tulips.

            Part of the reason that things suck so bad now in Europe is that the Common Currency effectively works like a gold standard.  And gold standards caused all kinds of mischief in the 19th century.

            Bitcoin is a gold standard for the 21st century, with all of gold's drawbacks, and quite a few more besides.

            Besides the possibility of improving anonymity, it has no clear advantages.  And for anonymity, it's hard to beat good old, plain cash.  Which is harder to trace than even, well, gold.

            Quote of the week: "They call themselves bipartisan because they're able to buy members of both parties," (R. Eskow, Campaign for America's Future.)

            by mbayrob on Wed Feb 12, 2014 at 11:54:19 PM PST

            [ Parent ]

          •  Actually, almost no one accepts Bitcoins. (0+ / 0-)

            It's a technical point, but an important one:  most (maybe all) merchants who "accept" Bitcoins never see the coins.  They contract with one of a very small number of services who accept the Bitcoins and give the merchants regular money in return.  This is important, because it means the extent of Bitcoin's acceptance as a currency is reliant upon these conversion services.

            Merchants don't want your Bitcoins -- they want real money, but they are willing to assist you in converting your Bitcoins to real money so you can shop with them.

            And if you think this system will someday lead to merchants accepting Bitcoins "for real", think again.  No business run by sane people wants to store its wealth in a currency as volatile as Bitcoin.  If it ever stabilizes, it might be a different story.


      •  It's not meaningless (0+ / 0-)

        If you as an individual ever felt that you needed to not be a citizen of your country anymore, there ARE ways to do that. The use cases where Bitcoins plays into this fact are a bit extreme and hopefully/probably will never come to pass. But just the existence of Bitcoin and other decentralized crypto currencies ensures that should you be faced with this prospect in however dire of circumstances one could imagine, there are options for you to move some assets with you in a way that the government you wish to escape cannot stop.

    •  "Let that truth sink in for a moment" (7+ / 0-)

      Why do libertarians love that fake profundity so much?

      But on a more serious note:

      Governments cannot "regulate" Bitcoins. ...What they CAN do is regulate how their citizens are legally allowed to use them. This is a VERY important distinction because your Bitcoin money will always be free from direct government control and only subject to what the government can do to you directly.
      This is what you call distinction without difference. Your money is free of government control, but you aren't. you relocate to a place outside the control of all governments? And when you do, who stops the other people who have relocated there from relieving you of your bitcoins? Because, you know, they're free from government control.

      And this gets things entirely wrong

      Fiat currency managers (i.e. countries) "print" more money to increase supply. Bitcoins get smaller increments of divisibility. The mistake people make when having this discussion is to try to attach a one to one value to a dollar and Bitcoin. It's an invalid way of thinking. A single dollar today isn't worth what it was 50 years ago and everyone accepts this. Bitcoins aren't any different as they are divided into smaller and smaller increments and more people enter the market thus driving up the value of a single Bitcoin.
      So as more people get into the market, a single bitcoin is worth more. But as more people that get into the market, a single dollar is worth less. So bitcoins are deflationary. Deflation helps capitalists and speculators, and hurts workers and producers. Which means that bitcoins are a tool to transfer wealth from the poor and middle class to the wealthy. Sound wonderful.
      •  this ^ (2+ / 0-)
        Recommended by:
        ShawnGBR, duhban
        Deflation helps capitalists and speculators, and hurts workers and producers. Which means that bitcoins are a tool to transfer wealth from the poor and middle class to the wealthy
        That phrasing is a little harsh, but it succinctly captures the pain that a deflationary currency will cause. I'm pretty sure that Bitcoin enthusiasts don't think it's deflationary (even though it clearly is). I think they believe that it can be a "perfect currency". Meaning that it:
        1. gains value when you hold it
        2. loses value after you spend it

        And that is the advantage they believe it has vs. other currencies. It's like thinking that all countries operate a trade surplus. (Or that you can pull yourself up by your bootstraps.) And my impression is that kind of magical thinking is a major source of Bitcoin's (non-criminal) appeal.

        •  If that's what enthusiasts think, they're idiots (0+ / 0-)

          It's just another currency only one that isn't controlled by a government. Keeping all your assets in Bitcoins is not smart for the same reason it isn't smart to keep all your assets in USD or Euros -- all of your money is at risk of whatever whims are currently in peoples minds.

          As always, it's better to have your assets diversified so that you might not take such a huge hit if there's issues somewhere.

          •  it is not better to be diversified (2+ / 0-)
            Recommended by:
            duhban, Hey338Too

            it is better to be invested in things that you have confidence will increase in value and to store your money in vehicles that you think will not decrease in value.

            diversification does not make risk disappear.

            If USD has a 10% risk of losing 50% of it's value in the next 5 years
            and bitcoin has a 50% risk of losing 50% of its value in the next 5 years
            and I switch half my USD portfolio to Bitcoin
            I have now double my diversification and ~quadrupled my risk.

            (In reality, USD has like a 0.01% chance of losing 50% of its value in the next 5 years. And, IMHO, Bitcoin has >90% chance.)

            The moral is "don't invest in Bitcoins". You can gamble in Bitcoins, but I wouldn't advise that either (my rule is if you're gambling and you don't know who the fish is, you're the fish).

            •  Ummm ... (1+ / 0-)
              Recommended by:

              Diversification is smart. Diversifying across risk and investment types is the only way to strive for growth and minimize the possibility that all of your investments turn to junk short of keeping it all in liquid captial -- assuming the goverment backing that currency doesn't collapse of course.

              Even the most educated people make bad choices based on their "confidence". It's not a bad idea to make a bid in such things, but relying on your confidence alone is a risky prospect.

              Bitcoin at the moment certainly is a gamble due to speculators. No question about that. Will it always be that way? I would guess not, but I certainly won't be taking that bet at this moment.

              The way I've heard it said is -- "If you're at the poker table and you don't know who the sucker is, it's you."

        •  Crucifixion on a Cross of Bitcoin (1+ / 0-)
          Recommended by:

          Yep.  Debtors tend to be poorer and people who finance debt tend to be richer.  And deflation effectively picks the pockets of debtors and hands wealth to the rich.

          After the US Civil War,  which like most wars was heavily inflationary,  the US went on a gold standard, and for a couple of decades, prices fell.  One of the fascinating things about the 19th century fight between Midwestern and rural populists (who wanted a silver based currency) and East Coast industrialists and financial interests (who wanted a gold standard) is just how clearly the farmers understood how badly this situation screwed them, and just who was benefitting from their being screwed.

          The only reason things didn't completely destabilize by 1900 was this:  gold strikes in Alaska and South Africa increased the supply of gold, and in doing so, finally ended the post-Civil War deflation.  By the time William Jennings Bryan made his "cross of gold" speech, things were actually beginning to improve on their own.

          Central banking in the 20th century was actually a major improvement.

          We are still seeing "relations of power" effect how central banks are run,  since the rentier class has opposing interests to those of working people.  But at least in the current kind of system (a fractional reserve banking system), there's a limited degree of transparency, and a great deal more stability.  Debt right now is a huge problem, and better policies by central banks could help, a lot, by promoting a slightly higher level of inflation.  But central banks, and fractional reserve banking aren't the problem here.  

          Gold Bugs and Bit Bugs don't know their history.  Nor do they really understand much useful about how money works, and the role of banks in making it better or worse.

          Quote of the week: "They call themselves bipartisan because they're able to buy members of both parties," (R. Eskow, Campaign for America's Future.)

          by mbayrob on Thu Feb 13, 2014 at 12:12:21 AM PST

          [ Parent ]

      •  Not being a Libertarian, I can't speak for them (0+ / 0-)

        But I can speak for me.

        There is a difference. Namely -- you have total control over your money unless you give up your digital wallet to government or keep it on unencrypted hardware that they seize. I guess if you keep your money in a centralized exchange holdings they could seize it there too.

        But there's also a much more profound difference that you're missing. Let's say you have a significant if not all of your retirement money in safe instruments (savings accounts, CDs, etc.) and the government of your country collapses. What happens to your money? What if it takes decades longer than you live for the country to recover and your money (assuming it still exists) regains sufficient value?

        While this is a very extreme hypothetical, it is the most graphic way I can illustrate that while the value of your USD is inherently tied to the existence of the US Government or any government backed currency and that goverment for that matter, the value of Bitcoins is not and never will be.

        Note I'm not advocating anyone to move their money to Bitcoins. I personally don't have and never have had any. But that doesn't stop me from pointing out the purposes it can serve. Namely:

         1) A currency intermediary so you can convert dollars to another currency without going through big banks (or any bank for that matter).

        2) An easy way to do business with people in other countries without having to deal with the intricacies of currency exchange DURING your transaction (ever get a currency exhange fee on a credit card when buying something from a company overseas online?)

        There's no question that Bitcoin COULD be used to funnel money by the rich abroad. Inevitably, they will have to purchase something and unless they live out of a hotel and never actually own anything, they can't keep it hidden forever. Moreover, leaving it in Bitcoins is not a smart long term investment strategy anymore than keeping every dollar to your name in cash is. As long as governments are smart and work with each other, this shouldn't be a big problem. Certainly not anymore than it is now with people devising complex ways to move assets to tax havens.

    •  In short, it's a made-up currency (2+ / 0-)
      Recommended by:
      mmacdDE, cyberpuggy

      That's of value because people say it is, and it's backed by nothing more than the faith of the users that it's worth something.

      Got it.

      This isn't freedom. This is fear - Captain America

      by Ellid on Wed Feb 12, 2014 at 09:00:07 AM PST

      [ Parent ]

      •  USD is the same way (0+ / 0-)

        It only has value because people think it does. You should listen to the This American Life episode that discusses this. I think it was a story having to do with Brazil's economy. Maybe it was another South American country. Can't remember off the top of my head.

        •  Sorry, but I'll take (4+ / 0-)
          Recommended by:
          mmacdDE, ShawnGBR, cyberpuggy, LordRobin

          the "full faith and credit of the US Government" over a bunch of whiny libertarian speculators any day.

          This isn't freedom. This is fear - Captain America

          by Ellid on Wed Feb 12, 2014 at 10:37:42 AM PST

          [ Parent ]

        •  Uh, no. The USD has the force of law behind it. (0+ / 0-)

          The US dollar is legal tender in the United States.  That's not everyone agreeing to "think" the dollar has value.  That's the government saying by federal law that it has value.  The US Dollar is also the only way you can pay your US federal taxes.

          I get real sick of people claiming that the US dollar is just a delusion shared by all American citizens.  The law means something, and the law says the US dollar has value.  Unless the US government disappears, it will always have value.  And if the government does disappear, I will have more immediate concerns than the value of my savings account.


    •  Governments can also destroy money (1+ / 0-)
      Recommended by:
      Fiat currency managers (i.e. countries) "print" more money to increase supply
      One important point Krugman makes that's often overlooked: one reason he makes the distinction between instrument of exchange and store of value is, citing Brad DeLong:
      Underpinning the value of the dollar is...[taxes and]...the Federal Reserve is a potential dollar sink and has promised to buy them back and extinguish them if their real value starts to sink at (much) more than 2%/year
      Who's promised to extinguish bitcoins? Just curious.

      Use every man after his desert, and who should 'scape whipping?

      by UncleDavid on Wed Feb 12, 2014 at 09:23:29 AM PST

      [ Parent ]

    •  "Bitcoin money will always be free from direct... (3+ / 0-)
      Recommended by:
      sethtriggs, Ellid, cyberpuggy

      government control"

      So what? What am I suuposed to be running from by using bitcoin? What practical difference would it make in my life?

      •  Today? Probably nothing (0+ / 0-)

        Tomorrow? Probably nothing. But forever into the future? Who knows? Having a decentralized currency in existence ensure that if in fact you do need it, it's there.

        •  Sorry, but I don't see it happening (1+ / 0-)
          Recommended by:

          Bitcoin is the latest iteration of the sort of stupidity that goes back as far as the tulip craze, the South Sea Bubble, and all the rest.  It's speculation, pure and simple, and like its predecessors, it's going to crash.

          This isn't freedom. This is fear - Captain America

          by Ellid on Wed Feb 12, 2014 at 10:43:01 AM PST

          [ Parent ]

    •  Is it any different than a gold standard? (0+ / 0-)

      No government regulation, no ability to increase money supply....haven't we already seen that sort of system fail?

      Or is the usefulness in something else than being a, being a big ass laundering machine for illegal activity?  Or today's tulips?

      The dossier on my DKos activities during the Bush administration will be presented on February 3, 2014, with an appendix consisting an adjudication, dated "a long time ago", that I am Wrong.

      by Inland on Wed Feb 12, 2014 at 09:36:19 AM PST

      [ Parent ]

      •  As a single currency for a country, probably bad (0+ / 0-)

        as an intermediary currency, probably good.

      •  Really not (0+ / 0-)

        It's just another form of what Milton Friedman called "high powered money"  -- a "base" that might be used to store value.

        What we think of as "money" is actually a continuum.  Simplified, you can think of money as the combination of the base (reserves, gold, bitcoins, whatever) and deposits in banks and other financial institutions.  People that say "governments print money" don't know WTF they're talking about.  Banks loaning funds out essentially "creates" new deposits, which appear to other people as new money.  Central banks can and do "create" money by loaning it to the government.  But the relationship between that and the amount of money people have in aggregate is not a simple relationship, and is affected by behavior of how they want to hold their wealth, and how "risky" people perceive debt as being.  Which is why, even with a large increase in banking reserves ("printing money") we have very little inflation.

        Quote of the week: "They call themselves bipartisan because they're able to buy members of both parties," (R. Eskow, Campaign for America's Future.)

        by mbayrob on Thu Feb 13, 2014 at 12:20:29 AM PST

        [ Parent ]

  •  There is one advantage to BitCoin (1+ / 0-)
    Recommended by:

    Bitcoin and other cryptographic currencies (which I do not own, nor am I involved in the use of), are called cryptographic for a reason.

    A reason that has nothing to do with being "off the grid." (Many people who use Bitcoin want to use it for ordinary commerce, not shady, secretive commerice.)

    Bitcoin is cryptographic because its security is based on extensive encoding to prevent fraud. In theory (and, at the moment, in practice), Bitcoin should be much harder to counterfeit than standard currencies.

    That defense against counterfeit currency is a potentially real advantage Bitcoin has against other currencies. I say potentially, because that doesn't really work in the world. Yes, dollars are more easily counterfeit. But no one actually cares all that much about a few million counterfeit dollars in a world of trillions. Ordinary currency also benefits from this: the amount of currency in circulation can, essentially, expand and contract. The amount of Bitcoin that exists is strictly defined.

    The other thing I'll note about Bitcoin is that it's actually very hard to make. It involves massive amounts of computer calculations by specialized equipment. Every additional Bitcoin produced by 'miners' (miners = people who own large amounts of computer hardware specifically set up to produce Bitcoin) adds to the cryptographic security of Bitcoin. That is to say, the very act of producing Bitcoin makes the currency ever more secure against being hacked.

    Though not, as your article mentions, secure against traditional currency manipulation.

    Anyway, what I was getting to for this last point is that the supply of Bitcoin is actually very carefully managed. It's easier to create more dollars or more gold (two other famous currencies) than it is to create more Bitcoin. This would be the theoretical answer of technophiles for Paul Krugman: Bitcoin is less susceptible to inflation resulting from the production of more currency than gold or national currencies or diamonds, etc.

    Of course, the benefits I've noted do not, for me, outweigh the massive downsides of using a currency with so little social power.

  •  That's the best diary I've seen yet on bitcoin. (6+ / 0-)

    It's tiresome seeing diaries blasting it on a theoretical basis, rather than the realities of actual usage.

    It's essentially a foreign currency, accepted only at a very few places, by people who will always want their cut to exchange it into anything you can actually spend elsewhere, and then only in fixed large increments.

    Now obviously, if it were more widely accepted and useable, many of these problems would go away, but as I understand it, they plan to keep it very limited forever, which makes it more dubious to me than any concerns about theft or fraud.

  •  Wonderful post, thank you (5+ / 0-)

    the thing that gets me about BitCoin is that some of its most ardent defenders are the same guys who were defending gold a while back because it was a tangible thing that would forever hold value. YOU CAN HOLD IT IN YOUR HANDS!

    Glad I have all of my money tied up in Beanie Babies.

    •  I always enjoy the Rosland Capital ad.. (0+ / 0-)

      that has William DeVane asking "what's in your safe?" as he plugs gold for them. If it's full of gold that was bought two years ago, it's now worth about half of what you paid for it, Bill. "Never has been worth zero" still doesn't mean you can't lose your ass on it.

      Your black cards can make you money, so you hide them when you're able; in the land of milk and honey, you must put them on the table - Steely Dan

      by OrdinaryIowan on Wed Feb 12, 2014 at 09:01:16 PM PST

      [ Parent ]

  •  I think Bitcoin is an interesting concept but (4+ / 0-)

    I haven't invested in it nor will I. I can only tolerate so much volatility investing in biotech companies, there's no way I'm going to invest in something whose value can rise or fall 25% at a clip.

  •  Dogecoin is where it's at. (4+ / 0-)

    They at least recognize it's ridiculous.

    "Don't be defeatist, dear. It's very middle class." - Violet Crawley

    by nightsweat on Wed Feb 12, 2014 at 06:51:59 AM PST

  •  BitCoin Hacked (7+ / 0-)

    Update re Bitcoin

    This was bound to happen, it is getting ever closer to 'counterfeit' Bitcoins

    "Bitcoin taken out by hackers - Beware the mutations"

    by Nick Farrell in Rome...12 Feb 2014... 09:10

    "Cyber currency Bitcoin is being walloped by attacks from unknown computer hackers who are sending "mutated" lines of code into the program that runs the virtual currency.

    So far, the attacks have caused major headaches for the two Bitcoin exchanges that caused them to temporarily halt withdrawals by customers who stored bitcoins in digital wallets provided by the exchanges..."

    You Don't Happen To Make It. You Make It Happen !

    by jeffrey789 on Wed Feb 12, 2014 at 07:09:59 AM PST

    •  Mischaracterization (0+ / 0-)

      Bitcoin was not "hacked". It was subjected to a denial of service attack... basically the server was overwhelmed by fake connections to the point it couldn't complete operations. This happens to major websites daily and denial of service attacks are an ubiquitous annoyance in this day and age.

      It's disengenous to suggest denial of service attacks have anything at all to do with the future possibility - however likely or unlikely - of counterfeit bitcoins.

      If you are simply uninformed on the subject of denial of service attacks that's OK, it's a bit techie. But if you understood the article and posted what you did anyway, that's outright deceptive and wrong.

      Man is simply a monkey with an attitude.

      by rbutters on Thu Feb 13, 2014 at 09:34:12 AM PST

      [ Parent ]

  •  Excellent explanation and illustrations (1+ / 0-)
    Recommended by:

    Tipped, recc'd and Tweeted.

  •  The only thing likable about bitcoin is (2+ / 0-)
    Recommended by:
    wilderness voice, sethtriggs

    the graphic on the BitKanye.

    I bank online - it doesn't involve dollars that I can hold in my hand but I do know that there is a history of real worth. Sure it goes up and down but EVERYONE accepts it.

    Bitcoin is redundant.

  •  Bitcoin (4+ / 0-)

    has always been a libertarian techno geek's wet dream.
      It's only a matter of time it melts down.

    Eventually we will all look back on this and wonder what the fuss was about.

    None are so hopelessly enslaved, as those who falsely believe they are free. The truth has been kept from the depth of their minds by masters who rule them with lies. -Johann von Goethe

    by gjohnsit on Wed Feb 12, 2014 at 08:27:48 AM PST

  •  Short counter example. (0+ / 0-)

    Mined a bitcoin last year using my graphics card and joining a 'pool'. Probably cost about $30 in electricity costs.

    Decided to cash it in when it was worth about $800. Found an exchange and traded it in over the course of about 15 minutes or so.

    Easy-peasy, money showed up in my bank account the next day.

    I wouldn't think of Bitcoin as a currency, but more like a rather volatile commodity.

    I only wish I had been lucky enough to buy in when the exchange rate was ~$0.01 / Bitcoin. During the early days of bitcoin, someone spent 25,000 coins to buy a pizza.

    I sure hope it was a good pizza. :)

  •  Posting a comment (0+ / 0-)

    So that a year from now when I come back here to comment, it'll be easier to find.

    [URL=]Bitcoin Mining at CEX[/URL]

    by jbalazs on Wed Feb 12, 2014 at 08:41:41 AM PST

  •  Thanks for the tale (0+ / 0-)

    It's really interesting to hear about your experience. The group of developers who sit near me in my cowork space are into bitcoins, doing something or other. It doesn't make much sense to me, particularly given the high volatility. Right now, pretty much any developed country's currency offers far more stability in value. Bags of cash for a loaf of bread, anyone?

    Bitcoins, like so much coming from the internet and app world, tries to pass itself off as being new and unique, when it really isn't. Uber is just a glorified town car service that feels it doesn't need to comply with licensing requirements because it's an "app." Lyft is just a gypsy cab service that feels it doesn't need to comply with licensing requirements because it's an "app."  There really isn't much true innovation and creativity out there.

  •  One word: TULIPS (3+ / 0-)
    Recommended by:
    mmacdDE, Brown Thrasher, duhban

    This whole Bitcoin nonsense is nothing more than this decade's equivalent of the early 17th century tulipmania that nearly bankrupted Holland.   It's already showing signs of fading, and the crash will be quite spectacular.

    I'm looking forward to seeing all the smug little libertarian techy types wailing about it.  Should be most entertaining.

    This isn't freedom. This is fear - Captain America

    by Ellid on Wed Feb 12, 2014 at 08:54:16 AM PST

  •  The digital age (0+ / 0-)

    will always be contending with the problem of who gets to decide what money is.

  •  Haha, kudos on your lucky exit. Happened 2me... (4+ / 0-)

    ...with Intel employee stock options in 2000.

    I was leaving the company after 3 years, and had 3 months to cash in on my (modest, but respectable) employee stock options which most of the Hi-Tech world could still use in those days as compensation for underpaying and overworking you.

    Just before I left (June 2000) the stock was still going up like crazy, so I set up a sell threshold of $170 (which became $85 after a very optimistic split), at a time when the stock was still $120-130 ($60-65 post-split).

    1-2 months after I left, I realized the froth is coming out of the stock (the flimsier dot-coms had already imploded after the Microsoft court ruling in March that year). I reduced my sell threshold to $75.

    The stock rose just above $75, briefly in midday trading a couple of weeks before my options expired. It never closed above $75 but my options got cashed.

    A few weeks after that it was at $40, and since the 9/11 bust it has been hovering in the $20s - i.e., worthless (our employee buy rate was some $18 or so). $75.66 remains its all-time high.

    The Israeli taxman took about half of my gain as a cut, but still this was the luckiest monetary break I've ever had. So I can relate.

    Also, excellent expose of the Bitcoin mania. That's the nature of bubbles: they cater to certain segments of the population, for which they sound simply perfect. Too good to be true, in fact.

    This time, anyone whose a heavy Internet user with an angle into alternative blogging is a risk group (and this includes a large chunk of this site's members). So thanks for the well-substantiated warning.

    •  2000 tech boom was a bubble for sure (1+ / 0-)
      Recommended by:

      I remember Corning Glass stock going through the roof. They make glass. Some of that glass was going into fiber-optic cables, so they were considered a hot Internet company - the reasoning (if you can call it that) being that the demand for fiber optics was practically unlimited. Well, that didn't last. The stock peaked at about $100 and it's at $20 or so now, more than a decade later.

  •  I'll gladly give you a Bitcoin tomorrow (5+ / 0-)

    for a hamburger today.

    •  YOU WIN AT TEH INTERNETZ (0+ / 0-)

      This isn't freedom. This is fear - Captain America

      by Ellid on Wed Feb 12, 2014 at 11:39:25 AM PST

      [ Parent ]

    •  I'll gladly make that trade. (0+ / 0-)

      Please let me know how I can get that hamburger to you, and I'll gladly take the $650 bitcoin off your hands. Thanks for your generosity!

      The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

      by Eric Stetson on Wed Feb 12, 2014 at 04:07:11 PM PST

      [ Parent ]

  •  Backed by the full faith and credit of The Matrix (3+ / 0-)
    Recommended by:
    mmacdDE, Ellid, peptabysmal
    Morpheus: What is real? How do you define 'real'? If you're talking about what you can feel, what you can smell, what you can taste and see, then 'real' is simply electrical signals interpreted by your brain.

    No longer Hoping for Change. Now Praying for a Miracle. 🍞 & 🎪

    by CitizenOfEarth on Wed Feb 12, 2014 at 09:45:17 AM PST

  •  During the holiday seaon, (2+ / 0-)
    Recommended by:
    Ellid, ShawnGBR

    there was a pop-up gift store in my work neighborhood that advertised that they accepted Bitcoin. The people there were a bunch of nice young artisan types (most of the stuff in the store was handmade, and quite a lot of it was salable), and I just felt so bad for them. They'd worked so hard designing and making their merchandise, and they were willing to give it away for Monopoly money.

    "The only thing we have to fear is fear itself."........ "The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little." (yeah, same guy.)

    by sidnora on Wed Feb 12, 2014 at 10:08:53 AM PST

  •  all glory to doge. such profit. wow (4+ / 0-)

  •  Competition is Good (1+ / 0-)
    Recommended by:
    Eric Stetson

    Small businesses in the USA pay exorbitant rates, the highest in the world, to accept credit cards payments.    If a card is used fraudulently here, businesses are on the hook for the charges, not the Credit Card companies or their processors.     Small businesses get screwed coming and going.   The credit card companies have a monopoly, and little motivation to innovate.   Wall Street versus Main Street - you know the story.

    I don't think Bitcoin, specifically, is the answer.   But the rise of cryptocurrency has the potential to bring much needed competition to the payment processing industry, and I am all about that.   Anything that gives the CC industry motivation to take better care of merchants makes me happy. - the Birds and the Beads

    by Virginia Liberal on Wed Feb 12, 2014 at 03:52:52 PM PST

  •  Let's learn from Bitcoin and improve upon it. (0+ / 0-)

    I just wrote a new diary on this subject:

    Bitcoin: Don't Mock It. Learn From It.

    Bitcoin itself has its flaws. But the technology behind it, and the potential for revolutionary change in the economic system that the technology of digital currency makes possible, is amazing and should be seriously considered by progressives.

    The most serious problem in American politics today is that people with wrong ideas are uncompromising, and people with good ideas are submissive and unwilling to fight. Change that, and we might have a real democracy again.

    by Eric Stetson on Wed Feb 12, 2014 at 04:05:51 PM PST

  •  I'm gonna try my best to address some of the con (0+ / 0-)


    it's true that the bitcoin exchanges are probematic elements in that many of them are scams and that by the nature of what bitcoin is and does it almost inherently opens itself up to being an economy that will be exploited by shady characters. Hear me through though because i'm going to try to explain why this isn't as big of a deal as it sounds.

    Number one about the currency is that it's fees are  lower.

    number two is that it single handedlyy and innovatively has solved the connection of drugs to drug related violence.

    Those who have been long term early adopters of bitcoin like me who got in 2 or 3 years ago have found the experience to be quiet different to what the mainstream would experience. I fully agree that bitcoin isn't ready for prime time but I also realize it's disruptive and because of what it has accomplished has done a fatal injury to one key plank of the drug war- the violence problem.

    If you KNOW what you're doing in bitcoin what you do is you exchange for your currency and you don't do what I'm doing myself because the interest payments are too tempting to pass up on mcxnow but you withdraw your coins into your wallet and then you immediately after that back the wallet up, encrypt it and put it on an encrypted usb detached key and then hold the key up in a vault or somewhere secret and locked and NOT connected to the net. this way coinstealing viruses can't get at it even on an always on connection.

    unlike many analyst I don't think bitcoin is "just a fad" I can see it flickering into a more underground phase but never truly "Dying" the fact is the allure of Drugs without Violence or retaliation is going to be too much.

    Here's another thing. bitcoin is inherently deflationary but the market has come up with solutions. Dogecoin, and exchanging bitcoins for inflationary cryptocurrenices like that have given people holding a  release valve.

    understand this. The banks and the people who run our economy currently have been able to justify their control on the basis intellectually and their key argument that has many on their side is that the banks and creditors assume the risk therefore they should be the ones to accumulate the material gains.

    many of us are interested in income reredistribution and I put it that way because most of us don't want to steal things that aren't ours but we feel we were robbed and there's a huge difference.  We're taking BACK what we consider rightfully ours and stolen from us.

    so here's the thing. If you want to redistribute wealth  you 're gonna have to redistribute risk.

    I hold bitcoins. I realize I could fall on my own sword and end up suppuking but I like it for a number of reasons

    unlike gold the bitcoin community is dependent on energy. I think an interesting paradox exist here where  bitcoin holders and enthusiastist have an VESTED interest in clean and renewable energy so in many ways we transcend polarized politics.

    Although, admitedly, I am -9 or so and -7 or so on the political test.

    I belong here. Less so with the "Ron paul" Austrian types. If the dnc dscc or dccc send you mailers, send that link back to them and tell them you won't send money to people who defend democrats who betray progressive principals!

    by daeros on Thu Feb 13, 2014 at 01:02:13 AM PST

  •  Wow. (0+ / 0-)

    I remember the first time I heard about Bitcoin.  I remember thinking "That sounds like a great way to lose every penny I have."

    Everything I've heard about Bitcoin in the months since has only reinforced that idea.

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