Is Bitcoin a Legitimate Currency or a Potential Scam?

  • Thread starter BenVitale
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In summary: I'm just summarizing here.In summary, the US government is shutting down Bitcoin because it is a threat to their power and control.
  • #1
BenVitale
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It is not clear to me why anyone would buy bitcoin. Is it a scam?

Find out what is a bitcoin: http://bitcoinme.com/

 
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  • #2
I would agree with the people saying it's a Ponzi Scheme. Imaginary money that only exists in a computer?
 
  • #3
MIT's Technology Review reports that Bitcoin is booming and makes the peer-to-peer currency secure and anonymous

http://www.technologyreview.com/computing/37619/page1/
 
  • #4
I would agree with the people saying it's a Ponzi Scheme. Imaginary money that only exists in a computer?

This is different from dollars, how? I'm going to guess most of your dollars only exist on computer. Indeed, you don't even posess the digital bits themselves - they're likely held in trust on your banks servers. At least in the case of bitcoins you have rights to the digital property itself, if I'm understanding the concept correctly.

It is not clear to me why anyone would buy bitcoin.

I suppose one would buy bitcoins for the same reason one might buy any currency: store of value, medium of exchange, investment instrument.

Whether it is a scam or not probably depends on how able one would be to find people willing to trade bitcoins on demand in the market. If you can readily buy them, but not sell them, then you're probably getting screwed. Of course, the same thing can be said for any currency.

The private currency market is far less "alien" to citizens of developing countries, where the public finance system is often woefully ineffcieint and underdeveloped outside main urban areas. I've heard that in some African countries, for example, private digital currency tradeable via cell phone text message is a more popular store of value than the official currency outside the main cities. This only seems exotic and/or redundant to you because westerns have strong, public institutions to handle this market function. You probably aren't the intended customer.
 
  • #7
Not to be negative, but probably some illicit transactions are taking place using bitcoin. The black market needs trustworthy currency as well. Alternatively, the federal government may be cracking down partially to limit piracy, human trafficking, the drug trade, sale of human organs, etc (stated purpose) and partially because it creates an alternative power structure to (their) legitimate one.
 
  • #8
You're spot on Digitalism, just look up Silk Road. It's a website shipping all sorts of illegal products and it runs with bitcoin.
 
  • #9
Bitcoin has always been (rightly) perceived as a threat to the establishment since it became popular. The banks and governments of the world cannot control (or "regulate", to put it euphemistically) a decentralised currency. Loss of control is loss of power, and this is something they fear above all else.

The US government is shutting down Bitcoin to protect its own narrow, selfish interest. It has nothing to do with protecting the interests of the people. I've never trusted the US government (I mistrust all governments on general principle, but the US government has given me a lot more reason to mistrust it), so this takedown by the DHS was a foregone conclusion to my mind.

Yes, The Silk Road provides access to illegal services. The Feds have probably had a devil of a time trying to shut it down, without success - because of the decentralised nature of the deep web on which The Silk Road resides. They can't shut down the principal currency either: BitCoin is also protected by its decentralisation. However, they can (and now have) gone after the soft target - the point at which BitCoin is exchanged into "common" currency - the US dollar. That's always been the one vulnerability in the whole system.

If people stop using "common currency" and switch over entirely to BitCoin or similar decentralised cryptocurrency, the governments of the world would completely lose their stranglehold over time.
 
  • #10
Curious3141 said:
The US government is shutting down Bitcoin to protect its own narrow, selfish interest.

Huh? I don't think so. Do you have a source?
 
  • #11
ModusPwnd said:
Huh? I don't think so. Do you have a source?

Hmm...I kinda knew that was coming on this site (which is why polarising social topics are probably a bad idea here). :-p Claims like this are naturally difficult to source. Surely you don't expect the US government to issue such a declaration, do you?

A news source is the best I can do. See:



I'm referring to the part at 1:14, where the reporter says "This, of course, threatens the long held grip that governments and banks have had on currency regulation and interest rate manipulation."

I'd say that falls under the umbrella of governmental "narrow, selfish interest", wouldn't you?

Now, if you want the reporter/news program to cite *its* sources, you're welcome to go ahead and ask them.
 
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  • #12
Meh, that's old news. Bitcoin is not "shutting down". Not by the govt or anyone.

I like bitcoin. I have been profitably mining for almost 2 years. Certainly people do have issues in converting to cash like you mentioned. I used a service that bought my coins and they stopped because of money transfer issues and a online bullion retailer I used also got dropped by their bank. These types of issues are to be expected but are not a sign of bitcoin being "shut down". They are a sign of the innovative, new and murky legal context that bitcoin is in. Banks and congress wrote the laws for mainstream and older style financing.

But there is still plenty of demand and use of bitcoin going on. Even without these online exchanges, I cannot keep up with demand selling mine locally for cash through Craigslist. Bitcoin is thriving, not being shut down. For now at least.

Check out my miners;
http://i.imgur.com/231wf.jpg
 
  • #13
ModusPwnd said:
Meh, that's old news. Bitcoin is not "shutting down". Not by the govt or anyone.

I like bitcoin. I have been profitably mining for almost 2 years. Certainly people do have issues in converting to cash like you mentioned. I used a service that bought my coins and they stopped because of money transfer issues and a online bullion retailer I used also got dropped by their bank. These types of issues are to be expected but are not a sign of bitcoin being "shut down". They are a sign of the innovative, new and murky legal context that bitcoin is in. Banks and congress wrote the laws for mainstream and older style financing.

But there is still plenty of demand and use of bitcoin going on. Even without these online exchanges, I cannot keep up with demand selling mine locally for cash through Craigslist. Bitcoin is thriving, not being shut down. For now at least.

Check out my miners;
http://i.imgur.com/231wf.jpg

Sure, I never intended to mean that BitCoin was shutting down completely. And while I agree with you that BitCoin is not in immediate danger from this, I will say that if the US government keeps up the "persecution" and basically freezes *all* exchanges of BitCoin into USD, then the situation will definitely come to a head.

What will happen then is quite uncertain. People who are BTC rich will have only three options: do nothing and hope things change (a futile hope), or try to barter for services with their existing BTC (but will others be willing to accept them?), or finally cash out into another common currency.

The last possibility is the most intriguing. If another fairly stable country decides it is going to make it much easier to exchange between BTC and its own currency, it has an excellent chance of gaining a leg up on the USD as a (possibly *the*) major world currency.

What do you think about LiteCoin, by the way?

EDIT: Also, where does the power for your mining rig come from? I think I've seen calculations to the effect that if you're paying for the power usage, mining is simply not profitable (or only very marginally so).
 
  • #14
Curious3141 said:
Also, where does the power for your mining rig come from? I think I've seen calculations to the effect that if you're paying for the power usage, mining is simply not profitable (or only very marginally so).

Its a home setup. It is using 4 circuits. My wife has to blow dry her hair in the living room because the bathroom circuit is one of them. :-p

I have some of the cheapest electricity in the country and live in a fairly cool climate. My hardware is becoming obsolete very fast, but it still manages to be profitable for now.
 
  • #15
ModusPwnd said:
Its a home setup. It is using 4 circuits. My wife has to blow dry her hair in the living room because the bathroom circuit is one of them. :-p

I have some of the cheapest electricity in the country and live in a fairly cool climate. My hardware is becoming obsolete very fast, but it still manages to be profitable for now.

Ah, lucky you - cheap power.

Anyway, it doesn't matter if BTC mining is not super profitable. As long as one doesn't make a loss, I think it's quite satisfying to "mint" your own money (legally).
 
  • #17
Someone just bought a Tesla with Bitcoins
http://www.businessweek.com/news/2013-12-06/bitcoin-meets-tesla-in-california-dealership-model-s-transaction
 
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  • #19
Untraceable anonymous currency. I don't think one needs to explain why their would be a demand. I don't see BitCoin going away anytime soon. Kind of scary, though.
 
  • #20
Now with e-wallets and some of them being hacked etc how are people going to secure their holdings?
 
  • #21
I don't know the details, but accounts get hacked all the time, BitCoin or not. Does it happen more in BitCoin or is it just more attractive for media to write about? I don't know. But anecdotally, I have friends that trade BitCoin and don't have any problems (they work with holding companies, a third party that ensures secure transactions).

On the other end, I also know someone who get ripped off trying to buy archaic gaming technology from an obscure website with BitCoin. So it probably depends on who you're doing business with more than the currency you're using (just like with real money). Obscure website = shady back alley.
 
  • #22
Digitalism said:
Now with e-wallets and some of them being hacked etc how are people going to secure their holdings?

Easy, don't use the e-wallet ;) Generate your private keys off line and never put them online. You can't hack an encrypted USB drive sitting in a safe, not plugged in.
 
  • #24
As I recall I don't think this would be the first time that BitCoin has had a massive drop in value.

Something just seems off to me about the whole bit-coin dealio. I sure wouldn't put any money into it :D
 
  • #25
Yeah, it's volatile. But that's also why people make lots of money off of it. It's a good example of high-risk/high-reward.
 
  • #26
Pythagorean said:
Yeah, it's volatile. But that's also why people make lots of money off of it. It's a good example of high-risk/high-reward.

Yes, and drug dealers may feel that half the money is still worth the ability to be anonymous. It's a form of money laundering and that isn't always cheap.
 
  • #27
Drug dealers among other professional criminals (the possibilities are frightening!). I was thinking more of people legally trading it like stock, though.
 
  • #28
phinds said:
Yes, and drug dealers may feel that half the money is still worth the ability to be anonymous. It's a form of money laundering and that isn't always cheap.

On Silk Road, transactions where hedged. As in, if you sold your drugs for $50 worth of BTC, you get $50 worth of BTC at the end of the transaction. (There was significant delay between the sell and the end of the transaction because SR had an escrow system.) I don't know how all the smaller replacements do it, but SR effectively removed that concern for the sellers.
 
  • #29
Pythagorean said:
Drug dealers among other professional criminals (the possibilities are frightening!). I was thinking more of people legally trading it like stock, though.

That is where most of the trading comes from. I mean, look at the volume (http://bitcoinwisdom.com/markets/btce/btcusd). Surely drug dealers and buyers aren't buying and selling BTC at around 5 transactions per minute. And at the exchange I frequent, there's consistently over 5,000 people on, trading.
 
  • #30
TylerH said:
On Silk Road, transactions where hedged. As in, if you sold your drugs for $50 worth of BTC, you get $50 worth of BTC at the end of the transaction. (There was significant delay between the sell and the end of the transaction because SR had an escrow system.) I don't know how all the smaller replacements do it, but SR effectively removed that concern for the sellers.

I don't get how you see this as "hedging". Hedging would be if you got your DOLLARS worth of bitcoins at the end of the transaction. If you did a transaction and the value of bitcoins halved, as it has done, then you end up with half your expected payment. That can hardly be considered hedging.
 
  • #31
phinds, I used dollar signs didn't I? Or am I missing some meaning in the way you worded that?
 
  • #32
phinds said:
I don't get how you see this as "hedging". Hedging would be if you got your DOLLARS worth of bitcoins at the end of the transaction. If you did a transaction and the value of bitcoins halved, as it has done, then you end up with half your expected payment. That can hardly be considered hedging.

Did you read what you quoted? It is exactly hedging and exactly what you describe. If the bitcoin value halves while your coins are hedged you get twice the coins.

"if you sold your drugs for $50 worth of BTC, you get $50 worth of BTC at the end of the transaction."

^^ This is hedging.
 
  • #33
TylerH said:
phinds, I used dollar signs didn't I? Or am I missing some meaning in the way you worded that?

OOPS ... my bad.
 
  • #34
ModusPwnd said:
Did you read what you quoted?

I did but I have a very minor form of dyslexia that bites me in the *** like this sometimes. My mouth or my eyes are doing one thing and my brain is doing something else. My worse offense on this forum is that a couple of times my fingers have typed "proton" while I THOUGH my brain was telling it to type "photon".
 
  • #35
"Bitcoin Becomes a Real Job and Wall Street Is Hiring"
http://motherboard.vice.com/en_ca/blog/bitcoin-becomes-a-real-job-and-wall-street-is-hiring
 
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