****Update 9/30/2019: Yes I realize I'm an idiot****
I originally had drafted a nice little entry about what bitcoins are, how they work, why it's so popular, etc. but I couldn't get excited enough about the topic, and I really thought bitcoin was going to just fade away like any other internet fad. Then I saw Google Trends this week, and it's still the top-searched subject. I can't and won't ignore the fact that bitcoin is hugely popular now, and will remain so for the foreseeable future. Since everyone still seems to be interested, I decided to post the entry after all. I'm still getting used to blogging, and realizing that I can't always pick and choose the topics, I need to go with what's popular, so I can reach the most people possible and help them out any way I can.
Hope you like it.
Some bitcoin terminology:
Block -A record that contains and confirms a waiting transaction
Chain - The public group of blocks (transactions) in chronological order
Double Spending - Spending the same bitcoin in 2 places at the same time, in hopes they will process before either transaction is confirmed.
Mining - A way for bitcoin users to earn bitcoins by using their hardware's processing power to confirm transactions in the block chain
Wallet - The virtual container for private keys & signatures
Signature -The mathematical algorithm used to prove ownership of a bitcoin
1. Get the software.
2. Get the wallet.
3. Start mining.
4. Start spending.
5. Monitor the economy.
I originally had drafted a nice little entry about what bitcoins are, how they work, why it's so popular, etc. but I couldn't get excited enough about the topic, and I really thought bitcoin was going to just fade away like any other internet fad. Then I saw Google Trends this week, and it's still the top-searched subject. I can't and won't ignore the fact that bitcoin is hugely popular now, and will remain so for the foreseeable future. Since everyone still seems to be interested, I decided to post the entry after all. I'm still getting used to blogging, and realizing that I can't always pick and choose the topics, I need to go with what's popular, so I can reach the most people possible and help them out any way I can.
Hope you like it.
Some bitcoin terminology:
Block -A record that contains and confirms a waiting transaction
Chain - The public group of blocks (transactions) in chronological order
Double Spending - Spending the same bitcoin in 2 places at the same time, in hopes they will process before either transaction is confirmed.
Mining - A way for bitcoin users to earn bitcoins by using their hardware's processing power to confirm transactions in the block chain
Wallet - The virtual container for private keys & signatures
Signature -The mathematical algorithm used to prove ownership of a bitcoin
Steps to start working with bitcoin.
1. Get the software.
2. Get the wallet.
3. Start mining.
4. Start spending.
5. Monitor the economy.
My personal problems with Bitcoin, and why I won't invest until they're resolved: I have considered buying bitcoin just to reverse-engineer the system to learn how it works, but honestly after doing some research for this blog entry, that's not necessary. I know enough to steer clear of it. It may be great for short-term investment (if you're lucky) but here are the reasons I won't invest in Bitcoins for long-term:
1. Bitcoin is 100% dependent on technology and computer systems. You need it to create a bitcoin, send a bitcoin, and receive a bitcoin. What happens when our internet protocols change or evolve? What happens if a worldwide crisis (or local crisis) occurs where we lose connectivity? What happens when someone figures out how to counterfeit bitcoins? It's these reasons that make bitcoin unpredictable both long-term and short-term. This also cancels out the argument that people use regarding the "value of the U.S. dollar declining" because at least deflation is predictable. Bitcoins are not, there is no precedent for a digital economy of this scale, and there are no economic indicators to warn people when to sell or rumors that might benefit mass purchase. This tech dependency also precludes the poorer households or economies from buying bitcoins. This will expose contradictions in the people crying about government control and the 1% because not many people in the 99% will either afford or care about investing in bitcoin. The labor theory of value also comes into play here. Would the average person be willing to work as hard for 1.5% of one bitcoin as you would for $12 cash? No, they wouldn't.
2. Hard currency will always be better (more valuable to the most
people) than a representation of the same currency (reserve notes,
certificates, stock, bitcoin). Sure, you might not make $1,000 on an
ounce of silver in 1 year, but guess what? You won't lose it either.
There's less risk and more stability with hard currency, because the value is within the physical material itself, not the cost or risk of
transferring that value to another form.
3. Most of you will scoff and stop reading after this sentence, but we need a government at some level. You can substitute "government" for whatever word you want here, but some system has to be in place for checks & balances. The control does not have to be as high and invasive as it currently is, but we do need a government in place to help guide and manage the economy. Alot of people are looking to bitcoin as the government end-all, or a government "work-around". Governments are meant to be social guardians. Not all of them in the world are, but in the United States, it is our social guardian. The fact is that even if we're able to build up bitcoin to become the primary economy, there will still be structure, control, and rules in place. Guess what those things are collectively known as? A Government. Some might say "No it's not, it's a self-governing system" well, you might be right, but there's that word again right in the middle of your rebuttal: Government. Until people stop crying about the government and start working together to solve problems, I'm not investing. Same with DOTA2.
4. There is no way to safeguard your bitcoins. Over $1M was stolen from a company in 2013 because someone was able to pull off some simple social networking people have been using since the early 90's to gain access to unauthorized areas online. If you have cash in your hand today, who do you depend on? Who do you have to trust? Yourself only. If you have bitcoins stored online who do you have to trust? You have to trust the company hosting your bitcoin wallet, and all of the people involved with that company, along with the company you're spending your bitcoin on. Sure there's risks with cash, but it's much easier to mitigate than the wild wild west of the internet. It's not as bad as it used to be, but there's still more problems online than offline.
Sources:
Bitcoin Guide from Instructables
Risk factors
4. There is no way to safeguard your bitcoins. Over $1M was stolen from a company in 2013 because someone was able to pull off some simple social networking people have been using since the early 90's to gain access to unauthorized areas online. If you have cash in your hand today, who do you depend on? Who do you have to trust? Yourself only. If you have bitcoins stored online who do you have to trust? You have to trust the company hosting your bitcoin wallet, and all of the people involved with that company, along with the company you're spending your bitcoin on. Sure there's risks with cash, but it's much easier to mitigate than the wild wild west of the internet. It's not as bad as it used to be, but there's still more problems online than offline.
Sources:
Bitcoin Guide from Instructables
Risk factors
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