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Bitcoin- A Virtual Mining Disaster Waiting to Happen?

Last week in The Case against Bitcoin I examined some of the flaws with Bitcoin that may prevent it from becoming a mainstream currency. I received some very intelligent comments and had a series of thoughtful conversations with many Bitcoin advocates who promoted Bitcoin’s value and efficacy as a currency. While I believe there is value in peer to peer financial transaction systems, I remain, however, unconvinced that Bitcoin will be a widely used digital currency of the future.

Here’s why:


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Totally lost me at:

"Greater Adoption Should Mean Lower, Not Higher Prices"

Money is a medium of exchange. Its sole purpose is to facilitate the exchange it for goods. Its value is derived from what you can buy with it.

If you only want to buy cuban cigars, and the cuban government only allows you to buy those cigars with gold. Then you really have no use for dollars, you just want gold so you can get your cigars. If I don't want cigars, and I want something else, something I can only use dollars to buy, then, for the most part, I really don't give a crap about gold.

Confederate dollars became magically worth something when they were printed. Why? Because they were able to be exchanged for goods (namely due to governmental threats). When the south lost the some currency became absolutely worthless, why? Because it was no longer backed by government threats.

As people adopt bitcoin the amount of goods you can buy with bitcoin increases, and thus its value as a medium of exchange increases, and thus its price increases.

If you want to use digital currency to send money

You can buy it at the time when you need to send it at that price.
If you want to buy something why convert into bitcoin first?
There is not need to hold bitcoin other than you expect it to rise,
If the main reasons to have bitcoin are to send money certainly ANY crypto currency will eventually do
Markets will drive the price of bitcoin down as more currencies hit the market that also allow peer to peer transfers
If that is the main selling point the unit cost shouldn't keep rising other than due to speculation.

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During the 70's a period of inflation and lack of confidence in

The dollar we saw the advent of fads like the pet rock and cb radio
Now we are seeing in a similar time - do it yourself currencies

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NY. Times on BItcoin fraud

Like I said over a month ago

The central banks will close the on off ramps for Bitcoin. Is this happening now? Maybe.

Surviving the killing fields of Minnesota

Todays brainwashing: GMO's are safe

Small collapse overnight as China warned on bitcoin

Comments ranged from end of bit coin to this is good news

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Bitcoin fraud exist at Mt. Gox too


Here says takes Mt. Gox 22 months to pay in USD. Ha. thats called insolvent by my bank.

Use Bitstamp instead.

that's great news

thanks for posting

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

you're done

at this point you have now lost all credibility.

counterfeiting bitcoin, really?

your sensationalized hate threads and post are getting old.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

Credibility depends on the audience

bitcoiners believe value can be created out of thin air via a computing program-that seems pretty far flung

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Follow the mania here

Remember if it doesn't exist they can't take from you. And it's in limited supply so start mining!

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That's a great site

Here's an in-depth analysis of altcoins to diversify your Cryptocurrency portfolio with. There's still time to get in and become a bitcoin billionaire or altcoin multi-trillionaire....

Beyond Bitcoin: A Guide to the Most Promising Cryptocurrencies

You might also like this article i just posted...

Bix Weir: Why Silver Bugs Should LOVE BitCoin!
Bitcoin will likely go to a $Million Dollars per coin as the fiat system fails because it is still much better than anything the Global Banking Cabal has to offer. But then what? What will those BitCoin multi-trillionaires do with their new found fortune?


Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

Bitcoins go on sale ... bitcoinity.com quote at one buck

and change.

http://bitcoinity.org/markets bid: 1.156 ask: 1.156
Yes, that's a period, not a comma. One dollar and 15 cents. Get your mBTCs while they're cheap!


Oh, yeah, there's that little "m" in "mBTC" and a notice at the top of the page:
Bitcoinity switched to mBTC as the default bitcoin unit. 1,000 mBTC = 1 BTC

I wrote earlier today that "A 'bitcoin split' would actually be very positive for bitcoin as a vehicle for speculation, just as it was for the dot coms" and what do you know, here's a fairly well-known site (sponsored by Gyft) quoting millibitcoins instead of bitcoins so that the price looks cheaper. I predict the other exchanges will follow. It's a smart move, and if you were watching the dot com bubble and the stock splits done for the same reason there this is no surprise.

When the shift to mBTC catches on, don't forget that instead of saying "it's scarce because there are only ever going to be 21 million of them" it now needs to be "it's scarce because there will only ever be 21 billion of them."

I have some issues with your analysis.

If Bitcoin is currency, it needs to be thought of in terms of exchange rate, not price.
If more people adopt its use while supply remains relatively constant, then the "price" will increase with demand, not drop. More dollars, or whatever currency you want, is competing for the same number of Bitcoin. Bidding for the limited supply drives the exchange rate. One man will trade $1000 for 1 Bitcoin while someone else bids $1010.
Its utility over fiat money and specie is its low cost of transmission.
Gresham's law dictates that bad government-backed money drives good money out of circulation. Therefore, we are getting people hording Bitcoin like gold, or silver, or wheat pennies, or junk silver coins. Some day my baseball card collection will allow me to retire. Some day.
Bitcoin is volitile. As it gains wide acceptance it will be more widely used.
Many currencies have come and gone. Currency has to be able to widely accepted. Bitcoin is becoming more widely accepted. Beaver hides used to be used as money, and beads, and tobacco because gold and silver were relatively rare. People who had it traded in specie. Those that didn't traded in something else.
The advantage of Bitcoin is it is divisible with out losing its utility, unlike cutting up a beaver hide.
It does not really matter if the dollar continues to drop against Bitcoin. If I want to transmit $1000 now, it will cost one Bitcoin in trade to be sent where it will be traded back for $1000 at the other end. If a $1000 was sent by a bank, the bank fee would be subtracted. If in two weeks a Bitcoin costs $2000, then I get to send half a Bitcoin instead.
If you fear the volatility, don't hold Bitcoin. Don't make long term contracts in Bitcoin. Prices in Bitcoin are rapidly dropping.
Can another digital currency be created to compete with Bitcoin? Yes, but that does not matter. Does the peso compete with the dollar? Did the peso destroy the dollar because it is so much more available? This is all nonsense.
As an investment, is Bitcoin viable? I expect the value will increase with acceptance. Is it in a speculative bubble? Maybe. It really depends on how widely accepted it becomes and remains.

[F]orce can only settle questions of power, not of right. - Clyde N. Wilson

Really the question is WHY bitcoin would even be considered to

Be a currency. After all it is based on an expensive computer mining game.
The pet rock on the 2000's

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Oh come on

It's neither of those things. Your criticism of bitcoin has gone off the tracks IMO.

What's the problem with calling them currencies? They're called digital currencies or crypto-currencies for good reason.

yeah that train derailed a long time ago

dudes all in on silver and gold and has no bitcoin to easy the pain as silver goes into free fall under $19 as i type. i feel the pain too but bitcoin is helping pay the bills right now.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

you must hate gold huh

i kind of like it but i'm a silverbug and don't really see any real intrinsic value in gold. what i mean is that we don't really need it because silver can do pretty much everything gold can do. sure there are a few things we like to use gold for but it's value is mostly just psychological. the waste and pollution the production causes is horrible, don't get me wrong i love gold rush but it's sad to see them take such beautiful land and turn it into a toxic wasteland.

one of the coolest thing i've seen in bitcoin mining was a group of usb bitcoin asic miners hooked up to a tiny computer and run off solar power. that's the future.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

good point- Bitcoin wastes ton of electricity, gold mining

Bitcoin wastes ton of electricity, gold mining pollutes as does silver.
Of the three, silver has by far the most real world uses and is the cheapest

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Satoshi Nakamoto is (probably) Nick Szabo

I recently became interested in identifying the pseudonymous creator of Bitcoin, Satoshi Nakamoto. I started from the Bitcoin whitepaper [0] published in late 2008, and proceeded to run reverse textual analysis –essentially, searching the internet for highly unusual turns of phrase and vocabulary patterns (in particular places which you would expect a cryptography researcher to contribute to), then evaluating the fitness of each match found by running textual similarity metrics on several pages of their writing.


"If this mischievous financial policy [greenbacks], which has its origin in North America, should become endurated down to a fixture, then that government will furnish its own money without cost. It will pay off its debts and be without debts. It will hav

Excellent article

If one goes down the canonical list of what makes for a useful form of money, Bitcoin fails completely on one essential requisite.

The underlying value of the Bitcoin itself is based on a Bitcoin computer mining system that wastes electricity to solve math problems that don’t need to be solved, and therefore is not a meaningful measure of value. Bitcoin mining is in effect, the solving of riddles for riddles’ sake. How can a value be placed on Bitcoins if they have no intrinsic value or unique properties?

Precisely. There is no intrinsic value.

Once you own Bitcoins you must necessarily believe that they are valuable and try and convince others that they are as well. Its hard to ascribe value to a currency that is not backed by anything. The common rejoinder is that government currencies are not backed by anything either and that Bitcoin has superior properties (ease of transfer,lower costs of transfer,anonymity) and therefore Bitcoin’s $1200 per coin price is justified. This is the repugnant ‘lesser of two evils’ argument – “Bitcoin isn’t backed by anything but the dollar isn’t either”.

Ah, but here I quibble. The dollar is backed by something. It is backed by the government's power to confiscate money, or even throw people in jail, if taxes are not paid to the government in dollars. Guns and prisons make a powerful backing.

Ĵīɣȩ Ɖåđşŏń

"Fully half the quotations found on the internet are either mis-attributed, or outright fabrications." - Abraham Lincoln

Jive Dadason-Thanks

I understand that and make the point right below the language you cited!
As mentioned in the Case Against Bitcoin:

While the dollar is not backed by anything other than the “full faith and credit” of the issuer, legal tender laws ensure its use.

Bitcoiners fail to recognize that and actually dismiss it-I am fully aware of it!
I lifted the language from a prior post - The Case Against Bitcoin

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If you say that the dollar

If you say that the dollar has backing, I can say that Bitcoin is backed by math. Who do you trust more, the government or math?

Math doesnt back bit coin

Math exists for everyone.It isnt limited in supply.

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You're right, math doesn't back Bitcoin

Bitcoin is backed by the faith of common people in thousands of others maintaining the ledger by chasing newly issued Bitcoins. I personally trust this new type of money because I'm confident that a large mass of common people highly desire the benefits its network offers.

But a protocol is limited in

But a protocol is limited in supply.

Common sense is in limited supply too


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