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BitCoin Myths, Questions, and the Future - Where Do I Start?

Hola my Daily Paul friends. I will be interviewing Mr. Steven Patterson from the Foundation for Economic Education (FEE) this evening regarding the viability of BitCoin, persistent myths surrounding BitCoin and crypto-currencies in general, and what the future may hold as they continue to gain popularity.

As such, I would love to be able to ask him some questions sourced from those here on the Daily Paul. So please do not hesitate to leave a question in the comments.



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Is Bitcoin an investment or a currency?

As an investment...it is volatile and seems bubbly. And it is nothing. Tulips anyone?

As a currency...it is volatile and therefore unusable as a currency. How do you use a currency that you don't know what it will buy from one day to the next. Today it buys a nice dinner for 2, tommorrow a weekend vacation with all the trimmings, next week a gallon of gas. Something like this can't be used as a currency.

It can

The reason is it's very flexible, being all electronic.

Many businesses simply peg their desired price to an external currency (now the dollar, bleh) and quote the required number of bitcoins.

If you look at a long term chart of Bitcoin value, in dollars, you see volatility but a very strong overall upward trend. This usually means increased purchasing power for holders of bitcoins.

think that thru

OK so you have no problem spending them if the retailer keeps his price the same in terms of bitcoin. well, how about when you accept them. you sell something for 1 bitcoin and you keep that widget the same price. but you have to pay the electric bill. today a kW is 1 BT, next week it is 2 BT. So do you accept the same amount of BTC for each sale when you can't maintain their value? At this point BTCs are way too volatile to be a currency. And they won't be until prices stablize, if ever.

Look at

this gold chart:

http://www.goldfritz.net/2012/01/gold-chart-2011.html

Gold pegged to USD looks similar to Bitcoin volatility, but would you say gold can't be used as a currency? Of course not, and I believe some businesses in places like Utah already accept bullion for payment.

Right now merchants can use BitPay which allows them to accept bitcoins, but gives them the option to convert those immediately into USD at time of purchase or keep it in bitcoins. Many of BitPay's merchants want a stash of bitcoins so many of them keep a portion, if not all, of their payment in bitcoins. You simply keep the number of bitcoins you want in your portfolio at a steady value, then conver the rest to something else like gold or fiat.

Pay your electric bill in whatever currency they accept.

Bitcoins is the Fed's fake competition

Nah, I'm not going to bother. Stick with Gold.

Bitcoins and the Fed

Currently most purchases with bitcoin are done by exchanging bitcoins for FRNs, often via a third party such as gyft or bitpay, then exchanging those FRNs for the actual goods or services. For bitcoin to hurt the Fed it needs to become a currency, with things priced in bitcoins and no FRNs involved, rather than a commodity that you can exchange for FRNs which you can then spend.

What does the roadmap to a true bitcoin currency, de-coupled from FRN pricing, look like? Consider how many obstacles there are for a retailer who wants to do business in bitcoin -- you've got your suppliers invoicing you in FRNs because their suppliers invoice them in FRNs, etc., and your employees want to be paid in FRNs because their rent and other expenses are in FRNs, and your customers want to know the price in FRNs because they're paid in FRNs, and the sales tax calculations have to be in FRNs, and the income and expenses and tax payments to the IRS are all in FRNs.

It hard to see how the intricately intertwined supply chains and tax structures, all based on FRNs, can change piecemeal, but even harder to see how it could all change in unison short of the whole economy collapsing and being rebuilt from scratch, which is probably not a good scenario for crypto-currencies.

snapcard

The easiest way to buy anything on the Internet using Bitcoin.

https://www.joinsnapcard.com/index.html

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

A complicated way to convert bitcoins into FRNs

You send them your bitcoins, they order the stuff and have it shipped to you. You pay a 2% fee for that, and since they're the customer of Amazon or whatever, if there's a problem with the product you have to go through them to arrange the return. It's just a complicated way of turning bitcoins into FRNs so you can spend FRNs at retailers that only accept FRNs.

They say that if you buy something with bitcoins, and return it, the refund will be in bitcoins. (https://www.joinsnapcard.com/faq.html) But since they're the actual customer, the refund they'll get from Amazon or whatever will be in FRNs. So suppose a bitcoin is $1000, and you buy something from Amazon for $1000. Two weeks later bitcoin goes to $3000. You return the item. They get the $1000 back from Amazon and have to make up the other $2000 out of their own pocket to get that 1 BTC for your refund. Meanwhile, you get your 1 BTC and now you can buy back the item you returned (from some other source, presumably) for 0.333 BTC. It makes me wonder if their business model is sustainable.

actually

they link into your coinbase btc account with permission of course. if you want you can set up two factor auth for safety.

i like gyft better for most things like amazon because gyft gives you around 3% back for using btc rather than charge 2%. 2% is however a cheap price to pay to free yourself from holding fiat fed bankster blood money. unfortunately some here prefer the digital fed money to BTC, they talk the talk but don't walk the walk.

their business model seems to be similar to cash for gold places. some days they win, some days not so much.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

You know better than that

One, you're not freeing yourself from fed bankster blood money when you're using a service to convert your bitcoins to FRNs to send to the retailer. Two, it seems to be the latest bitcoin pumper meme that anyone who thinks bitcoin isn't a sure thing must "prefer the digital fed money" -- which wouldn't be such a dumb thing to say if there were an alternative that actually avoided using FRNs. Speculators make the price so volatile that it's not usable as currency, then complain that people who aren't inclined to speculate are still spending FRNs, even though the bitcoin speculators themselves are also spending FRNs.

But hey there was some good news for bitcoin today that I didn't see anyone posting about here. The EU Banking Authority came out with a position on bitcoin similar to that of Chinas today, and so did France and Norway. The good news is that bitcoin didn't budge from trading at around $900, which means that pessimism about this kind of thing is already priced into it. Some good news could send it to your price target of $3000 $1500!

sure i am

i'm freeing myself from holding bankster blood money when i use btc as my bank. i also hold gold and silver for much the same reason but i can't easily transact in the internet age with gold and silver.

i bet most of the anti-bitcoin goldbugs here actually have most of their money stored in frn. if you're gonna talk the talk, walk the walk.
they hate the fed so much they will defend holding bankster fiat money over a decentralized libertarian based currency like bitcoin or other altcoins.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

Most people think of banking and gambling as two separate things

When you use btc as your bank you're adding a gambling component to your banking, and not everyone wants that. But you've also said that you're only "playing with house money" now, to put it in pumper lingo from the dot com era, because you've taken your initial investment out of it and all you're risking now is your winnings. So in that sense you're in a safer position than the people you're suggesting should be jumping to buy in now at $930 can hope for.

What are you advocating, specifically? Here's a budget, just the first thing that popped up for "average household budget":
http://www.money-management-works.com/average-family-budget....

Suppose someone makes $4,200 monthly after taxes, and that chart shows where all the money goes. They don't own gold or bitcoin, but they've become enlightened about the bankster blood money and they'd like your advice on what to do. What would you tell them? What *specifically* should they be doing with bitcoins so that they can say they're freeing themselves from bankster blood money?

only spend $100 on booze, get drunk and buy $344 in cryptocoins

my advice to them is to stop getting drunk ($444) and wasting money on junk and to invest in a little gold, a lot of silver(at these prices) but also make sure you have guns and a stack of ammo and water filtration and food and get some cryptocurrencies too. if you got money to buy extra gold then buy bitcoin, if you only got a little extra money think about buying "the next big" altcoin.
so yes, please do gamble a little and have some fun for Christ's sake.

i easily identified over $5000 wroth of waste not including the $5000 + "Pensions and Social Security" frn backed fiat ponzi scheme.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

Bitcoins instead of beer

Sure, okay, they buy less booze and put about half a percent of their after-tax income ($29 per month) into gold, silver, guns, ammo, water filtration, food storage ... and in the "gambling" and "having fun" category, crypto-currencies. I agree that they probably could find another few hundred a month to put into gold/silver/guns/food/filtration/etc, and that would be wise. If they've got a few bucks they can spare and want to gamble and have fun with it, buying some cryptos is way more respectable than buying lottery tickets, and with better odds.

But look at how different this is from what you were saying before about keeping money out of the bloody hands of the banksters by using btc as your bank. Kudos for putting into a sensible perspective in which a small fraction is put into cryptos for "fun" and "gambling," and the money for the bulk of their expenses isn't put at risk by gambling with it.

fortune favors the bold

not sure where you've been but that's the same advice i have been giving for a long time.
when i was talking "about keeping money out of the bloody hands of the banksters by using btc" i was responding to people who claim to hate the fed more than anything in the world yet hold most of their money in fiat bankster notes. they also seem quite gleeful every time their globalist banksters buddies try and do something to crush btc.

it's true i gamble with keeping 90%+ of my money in gold, silver and cryptocoins and only cash out when i have to. i do sleep better at night though knowing i not only talk the talk but try my best to walk the walk.
not owning any gold, silver or cryptocoins is a gamble i'm not willing to take.

like i said before, i easily identified over $5000 worth of waste not including the $5000 + "Pensions and Social Security" frn backed fiat ponzi scheme that could also be allocated differently. the $444 yearly booze tab is just the start.

what is your expert financial advice for them?

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

There are a number of recent

There are a number of recent developments in crypto coins/currencies that will be very interesting to watch. Both Google (currently) and Apple (soon, based on recently revealed patents) have digital "wallet" solutions. At least one of these solutions theoretically will take any kind of currency. It's going to get interesting real soon. Next year!

Bitcoins in a google wallet?

Now that would be interesting. There shouldn't be any major obstacle to that. The bitcoins would actually be held by google, just like the dollars you deposit into a google wallet (for google voice or whatever) now are held in some google account somewhere, so keeping track of how many bitcoins you have in your google wallet is not much different from keeping track of how many dollars you've got deposited there. Are you saying that google or apple have plans to support bitcoin this way?

I'm specifically saying Apple

I'm specifically saying Apple has a blockbuster patent that would enable them to take any kind of currency into your iTunes account, which would act as a clearinghouse, then you could buy, sell or trade using their upcoming wallet app. Here's the link to their patent:

http://www.patentlyapple.com/patently-apple/tech-nfc/

Although their patent does not specifically cite Bitcoin, Apple has been telling app developers to remove funds transfer capabilities from their apps, most likely because they will reveal that function in their own so-called "iWallet".

Sounds cool

So basically it's a way of generating a QR code that represents authorization of a payment from your account to some vendor's account? I didn't see it talking about your itunes account acting as a clearinghouse, just about authorizing transfers between clearinghouses in the banking sense of the word.

I'm not sure what the connection is to bitcoin there, except that if a merchant were accepting bitcoins directly (not via FRN), and if there were a bitcoin clearinghouse for accounts denominated in bitcoin, then it would make point-of-sale electronic funds transfers in bitcoin very, very easy.

What have you seen about apple telling app developers to remove funds transfer capabilities? All I can find is the one thing about "gliph" and bitcoin transfers, but for FRNs a number of banks have recently come out with apps that let you do funds transfers. It's pretty significant if they're also making the banks stop doing that. Not so much if it's just bitcoin.

You're right, Bitcoin apps

You're right, Bitcoin apps are specifically being told, not banks. It's speculation on my part that BTC could play a part in their wallet app, but it's informed speculation.

Another link: http://m.slashdot.org/story/187199

My speculation

The iWallet stuff I saw -- based on maybe ten minutes of skimming only -- was about in-person POS payments, and about authorizing transfers between banking clearinghouses, none of which seems like a good fit for bitcoin at the moment.

Plus, there's a much simpler explanation for apple shutting down bitcoin transfers, and it's that Apple is very cautious about being on the wrong side of regulations anywhere in the world. Even if it's just one country (Thailand) where they could lose sales by being involved in something that would get the government there to crack down on them, that's more than sufficient for them to just take the path of least resistance and block the apps from doing it.

But I could be wrong.

We'll find out soon enough.

We'll find out soon enough. And even if Apple doesn't allow it in-app for whatever reasons, web access still works.

You are Right

That is why the BitCoins NOT Bombs #HoodiesForTheHomeless campaign whereby actual TANGIBLE goods, i.e. clothing in exchange solely for BitCoins is HUGE.

I mean because think of this <-----at that Point Of Sale-----> where an actual market transaction took play. (there was no FRN $ involved.

OMG is that not beautiful. :)

Matthias Chang has an interesting perspective on Bitcoin.

He believes it to be a project of the Western elites and their intelligence services to replace fiat currencies while maintaining control of the payments system. Imagine the windfall for them if they hold the bulk of the Bitcoin issuance (in the millions) that they created out of thin air in 2009 and that is now worth 1000 times what it cost them to create and could easily be worth 1,000,000 times their original cost if their plans work out…profits in the $trillions. This holding gives them complete control of the market which may well be manipulated.

His concerns appear to me at least to be valid and he has an excellent record on insightful commentary.

http://www.globalresearch.ca/will-digital-currency-replace-t...

This is not to say that one should not buy bitcoins for this very reason if all one wants to do is make money or if one believes the elites will win and Bitcoin will be the new global medium of exchange. However if Matthias Chang is correct it would be ironic that the biggest promoters of the system are the very people who oppose the Fed…those who want liberty. Maybe the elites are having a laugh at their expense.

"Jesus answered them: 'Truly, truly, I say to you, everyone who commits sin is a slave to sin. The slave does not remain in the house forever; the son remains forever. So if the Son sets you free, you will be free indeed.'" (John 8:34-36)

Although Bitcoin (the

Although Bitcoin (the currency, not the network) is the biggest crypto-currency, it is no longer the fastest growing. In other words, there are a lot of up and coming competitors, so although there will be a relatively small group of millionaires and some billionaires created, there is a lot more room to grow.

Also, it doesn't matter who created the Bitcoin network, because the participants are responsible for its maintenance and security, not a central privately controlled organization. Mine your own currency and you increase the value of the "coins" and the stability of their value.

You should read the article I linked to.

It deals with the issues you raise here and others. As I said Matthias Chang has a good reputation and has been following the currency wars for many years, since even before the 2007/8 crisis.

The facts he points out will make anyone think twice about the nature of Bitcoin. Even if you are committed to this currency it is worth reading something from an entirely different point of view.

"Jesus answered them: 'Truly, truly, I say to you, everyone who commits sin is a slave to sin. The slave does not remain in the house forever; the son remains forever. So if the Son sets you free, you will be free indeed.'" (John 8:34-36)

I'm having trouble with my bitcoin business model.

Been spending on promotions but no response.

http://longtermstoragefood.com/DPR/flavoredbitcoinbrook1.mp3

I just don't see what I'm doing wrong. It's a great product.

(Updated) the more you neg this comment the longer the flavor lasts.

Be brave, be brave, the Myan pilot needs no aeroplane.

Bitcoin maybe a great product

Bitcoin maybe a great product but, not many people here in the states know about it, or what it really is, right now, nor will they go out of their way to obtain it or use it. Most of the fiat flowing (99.99%) into bitcoin happens in one country, China, from what I've read.

How does Gresham's Law apply to Bitcoin?

Gresham's Law dictates that when a government improperly values two forms of money, the overvalued money will drive the undervalued money out of circulation.
When the government established the value of gold to silver ration as money, the silver got bought up and exported.
There are two complaints I have heard: Bitcoin is not money & Bitcoin is not traded, it is hoarded.
The same has been said for gold and silver since fiat dollars are the government sponsored currency.
Is not the hoarding of Bitcoin Gresham's law in action? And though a currency may be driven out of circulation by hoarding, isn't it always available if the price in the circulating currency is right short of that currency becoming worthless as happened with the Zimbabwe dollar and a long list of other fiat currencies?

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