Some time ago I wrote that I would write about it. Unfortunately that hasn't come to pass and I don't have the time to delve very deeply into it, but for a few observations. Instead, Jeffrey Tucker (also, his FB) and a few others just did an appearance on Glenn Beck's The Blaze and basically gave Glenn himself a newbie intro. Both parts are a total of about 15 minutes and well worth watching.
Next up is a Reason.tv interview of two documentary film makers who just released The Rise and Rise of Bitcoin. Another 8 minutes well worth your time.
So, a few quick thoughts from my end. Feel free to add or ask questions in comments. And, if any true experts out there think I've made a booboo, please let me know, as I'm sure you will.
- The cat is out of the bag. No State on earth, nor all of them put together, can do anything about it. At most, they could simply issue laws making it illegal to hold or trade Bitcoin (dubbed The War on Bitcoin). It would be about as successful—less so, actually—as conducting a war on a weed. Watch the videos to understand why. Bitcoin is rather analogous to a weed growing worldwide.
- It's been speculated that one way the governments of the world could kill Bitcoin is to simply buy it all up, and just hold it or delete it. Two problems; 1) The upper limit of Bitcoin won't be mined out for a substantial time into the future (I've seen estimates of 100-150 years), so new Bitcoin will always be coming into the blockchain and 2) This purchase activity will be quickly detected and holders of Bitcoin will hold out, many making millions and billions of dollars—or other fiat currency—as the price rises to insane levels...which fiat funds will then be used to buy in on the ground floor of Bitcoin 2.0, eventually making millionaires billionaires, and billionaires trillionaires.
- Governments could also outlaw online exchanges, but even now, many don't use exchanges to buy Bitcoin with fiat currency. They buy it just like they'd buy drugs: in person and in cash...you hand the guy cash, he transmits Bitcoin peer-to-peer.
- There is no central authority whatsoever, anywhere. Any person in the world holding Bitcoin can instantly transmit any amount of Bitcoin to any other person in the world, going through no single authority. No bank (everybody is their own bank), no clearinghouse, no credit-card or PayPal-like transaction, and no fees so long as you maintain your own wallet instead of using an online service (transfer fees for online services are pennies, not ridiculous, monopoly percentages). (If you do use an online service, make sure they don't hold your key—this is how some folks got their Bitcoin stolen by some of those now belly-up operators.)
- The true power of Bitcoin is that no person, State or group can control it. It's not in its potential use as a tax dodge. You already have a way to dodge taxes by operating only or mostly in cash or barter. Yes, you are legally required to report any cash earnings, but if you never deposit the cash in a bank and keep your dealings confidential—and you get paid in cash by someone equally scrupulous—you can fudge pretty easily, as many do already. Every Bitcoin transaction in the whole history of Bitcoin is publicly available. You can watch every single Bitcoin transaction worldwide in real time. If you know a Bitcoin address (the thing people use to send you Bitcoin), you can search all transactions from and to that address ever. In other words, it's transparent—it's true power—keeping everyone honest.
- Nobody in the world, including All The King's Horses and All The King's Men, can steal, seize, levy, or in any way take Bitcoin from you—unless you are coerced into giving up the key to your wallet, or you lose it, or get hacked. In other words, it's just like holding cash, precious metals or stones. The only way for anyone to get them is to physically get them, and if you have them buried somewhere, or in a safe, then they have to compel you to either reveal the location or combination, or crack the safe. Bitcoin's encryption is uncrackable, so it's pretty much down to coercion or hacking your system to find the key to your wallet if you keep its access behind a simple password.
- Losing money is relative to whatever any individual values Bitcoin against. One of the stupidest criticisms you'll see from naysayers is that "you lost money in Bitcoin" like, say, recently, when it lost about half of its value in US Dollars once all the buying by people in Cypress and other European bankrupt countries died down—after the State had simply raided people's bank accounts. I'll show you why this is dumb by way of illustration. When I moved to Japan in 1984, the Yen was trading at about 250 to 1USD. I got paid in dollars. I rented a little house and my rent, paid in Yen, was about the equivalent of $450 per month, as I recall. Then the US devalued the dollar against the Yen and within a year, my rent was the same in Yen, but required almost $900 to buy. Get it?
I don't look at the price of bitcoin. I probably made $30,000 in income paid in bitcoin in 2013. Don't know. Let the accountant deal with it. In 2014 I will probably make double that. Maybe triple? don't know. Don't care. It can go up, it can go down. Right now, bitcoin is up 4000% for the previous year or so? I don't know, I don't check the price.
Oh, next week I leave for an African safari. 12 days. I bought my airfare using bitcoin at cheapair.com. Paid for my safari with bitcoin in advance. I just returned from India in December. Met with 5 cotton garment suppliers. All of them are ready to accept bitcoin. My ink supplier in China? Accepts bitcoin.
No banks. Instant transfer. So easy.
So, if you can get to the point where you can make money in Bitcoin, and then spend Bitcoin for the things you want and need, internationally—a one-world medium of exchange—then what do you care what it's worth relative to any other currency, unless you see a way to make even more Bitcoin via arbitrage? Yes, to the extent that your trading partners are still heavily linked to their respective fiat currencies for various things, this will impact the relative price/value of Bitcoin, but this impact will diminish the more and more people and business shift more and more to Bitcoin, qua medium—and not merely fiat-surrogate—of exchange.
Alright, some resources for those looking to take a wade in the pool, as I have with a modest level to begin with:
- Bitcoin.org where you can find a lot of details on how to get started.
- A Review of a bunch of different wallets. I use Hive for the Mac, which is integrated with Coinbase for trading, such as buying Bitcoin with dollars. Note that I only use Coinbase for buying Bitcoin with dollars and once in my online wallet there, it gets sent to my Hive wallet which only I hold the key to.
- Marc Andreessen, a VC who's invest a lot in Bicoin startups, on Why Bitcoin Matters.
Finally, if you like this post, or wish to support the work here in general using Bitcoin...
Update: I ended up doing a follow up post.