Bitcoin is an electronic cash system where money can be transferred from one person to another without intervention of a bank or some other financial institution. The underlying thought is that the current system is based on trust. We trust the banks and other financial institutions with our money and that the transactions we make are safe and secure. However, the Bitcoin inventor thought the trust-based system wasn’t good enough and there had to be a system based on cryptographic evidence. So the main function of a Bitcoin according to the inventor Satoshi Nakamoto is to replace regular, unsafe currencies.
Please note: Satoshi Nakamoto isn’t the real inventor of Bitcoin. It is a claimed name by the people who actually invented Bitcoin. For more information on Satoshi Nakamoto, click here.
Who uses Bitcoin?
At the beginning of Bitcoin it was mainly used by criminals who wanted to buy illegal things on the dark web without revealing their identity -Bitcoin is anonymous-. However, today we see people who want Bitcoin to be a regular payment method. I am not in favour of this system, and in this article I will tell you why.
What bulls will say:
There are lot of people in favour of Bitcoin and they think it will replace the system we have today. As you may have noticed, I am against the Bitcoin as a payment method. Below I am going to take on three of the main arguments used by bulls and refute them.
- This is the future, this is the new way of paying. However, this way of paying will never work because it isn’t practical. If you want to buy a cup of coffee for 0.0001556 BTC, you have to be a maths-magician to determine what you actually paid for that coffee. Since almost no one can do this, and no one is willing to calculate it every time, it makes no sense to apply this in daily life. In addition, the price of Bitcoin is very volatile. This may cause that a seller has earned 10% less at the end of the day, just because the price has fallen, so you can say bye bye to your margins. This is way too risky for retailers, so they will not venture on a regular basis here.
- By paying without intervention by a bank or some other financial institution, we have more privacy. This is a true and valid argument but this isn’t a reason why people would buy and use the Bitcoin. Nowadays our whole life is on Facebook and everybody can see it everywhere. Financial institutions and banks are highly regulated by the government and they keep your information secure and private. And even if they watch your transactions closely, when you are not doing illegal things there is nothing to worry about.
- The banks will collapse, so we have to keep our money safe in Bitcoin. Banks are the most important institutions in the world, without banks you wouldn’t have mortgages and other types of loans and you wouldn’t have a place where you could put your money safe. You could invest in Bitcoin, yes, but then your money would be worth 10% less/more by the end of the day and that’s not a gamble most people are willing to take.
What bears will say:
As well there is a large group of bulls, there is also a large group of bears. Below you can find four of the main used arguments with explanation.
- It takes too long to settle a transaction, and the fees are way too high. Trading Bitcoin via a broker is easy, fast, and cheap. However if you really want to pay with Bitcoin you will encounter a number of problems. Because there are so much transactions and too few blocks to store all the transactions, it will take a long time to get your transaction a place inside the blocks. Because the demand for a spot in the block is high, the transaction fees are skyrocketing. At this point, you’ll pay $77 per transaction, according to http://www.blockchain.info. If the amount of transactions rises, these costs will only become higher and higher.
- Bitcoin can be hacked. Bitcoin can be hacked when the power of the attacking computers is larger than the power of the computers that currently work at the blockchain. However, this is very unlikely to occur, even almost impossible, but it still can happen. Recently was a Bitcoin theft of $64 million dollars from a Slovenian mining company. The intention of Bitcoin was that it was a payment method that was secure and couldn’t be hacked, but now the contrary is happening.
- Governments want to regulate Bitcoin. Currently South-Korea had already regulated Bitcoin exchanges, as well as Japan. The intention of Bitcoin was a system without a government or other institution. But now that the exchanges will be regulated this whole idea failed and is basically the end of the Bitcoin, because it isn’t anonymous and secure anymore.
Why is the price of a Bitcoin still high?
It is a basic economic saying: something is only worth what someone is willing to pay for it. Even though this doesn’t apply on stocks – they have an intrinsic value – , it does apply on Bitcoin. There are still people who think Bitcoin is an easy money machine and they keep investing money and keep buying Bitcoins.
However, the price of Bitcoin keeps falling and falling, so more people are realizing it’s nothing but a trap. Of course Bitcoin isn’t slaughtered in a day, it will take time to get the price to where it belongs: near 0.
This is my – quite aggressive – point of view on Bitcoin. If you have any comments/questions/additions, please don’t hesitate leaving a comment below! I will respond within 24 hours.
This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.