Status Report and Mail About Bitcoins

[From the Editor: We got this note from Dr. Pournelle: “Visited house today [Monday] to catalogue alterations needed.  Contractors coming.  Typing [easier] daily, up to 2 fingers now.  Maybe home in a week.  Think I think OK, so will begin writing.”

Dr. Pournelle sent this email along as interesting. We have arranged to have him pass along interesting emails, along with his short commentary. Today’s post is about BitCoins, from long-time subscriber Drake Christensen.]

This seems persuasive. If you have enough to withstand the risk… This is a good summary.

Here’s the article I mentioned on Bitcoin “Why Everyone With a Cell Phone Should Own Some Bitcoin” [link]

For me, there are two huge advantages to cryptocoins.  The first is, the extremely low transaction costs.  It is very much like cash in that way.  It’s directly from user to user, and you don’t need a bank in between, like you do with a checking account or a credit card.

But, probably the biggest advantage I see is that using cryptocoins are immune to the kind of hacking attack where credit card information is stolen.  With cryptocoins, I have to initiate every transaction.  Nobody can pull funds from my wallet with information they stole from some merchant I purchased something from.  I always have control of my own wallet.

Here’s the cookbook <!VWQO6>  I used to buy my coins.  I did a little research on each of the sites mentioned in that tutorial.  As far as I can tell, they’re legit and have good reputations in the community.  But, part of the value of these cryptocoins is that you don’t have to leave them in the online account.  You can transfer some or all of them into a wallet that you control.  The nature of cryptocoins is that transactions are non-reversible.  Once they’re in your wallet, those sites cannot take them back.  That means you don’t have to trust them for very long.  (Except Coinbase, which does link to a checking account.  But, that site is recommended all over the place.  My impression is that it appears to be about as legitimate as PayPal was when it first started.)

If you search around on Bitcoin, you’ll probably find mentions of the Mt. Gox debacle.  This was a case where people and businesses were leaving their coin in their online wallet.  I assume it was a convenience, for whatever service they were using their Bitcoin with.  I’ve not followed the latest information released about it.  I’m not sure if they’ve determined whether the money was embezzled by people who worked for Mt. Gox, or if it was taken by hackers.  But, the point I’m making here is, the Bitcoin taken was being held in online wallets.  Any Bitcoin transferred out of those wallets prior to being stolen is safe.

When Amazon first went live, I was a fairly early customer.  (I spent enough with them one year that they sent me a free coffee mug.)  For me, it was just kind of geeky cool to order books and movies online, back when that was an unusual thing to do.

While there is some of the geeky cool feeling in owning some Bitcoin, I do also think that cryptocoins are eventually going to win out over fiat currencies.  I don’t know that Bitcoin will be the eventual big winner.  But, that, or Darkcoin, or something similar is filling a need.  Someday, one of them could be as mainstream as Amazon and PayPal.

As an interesting aside, MIT is running an experiment  A couple of researchers gave $100 in Bitcoin to every undergraduate at MIT in order to create an instant ecosystem, to see what would happen.

And, finally, I found a couple of sites which chart the exchange rates in real time. and  Since I bought in, the exchange rates went up a little, and then went down, some.  Since, for me, this is just play money, I’m letting it ride.

I think I’ve babbled on long enough.  I’m interested in hearing what you think.

Drake Christensen

Peter Glaskowsky, a member of the Chaos Manor Board of Advisors, offers this view:

Bitcoin has some theoretical advantages, but the simple fact is that it was intended to prevent any kind of management or oversight by banks and governments, and that alone will prevent it from ever playing a major role in the economy. As long as it remains negligible, it will be allowed to continue, but as soon as governments believe they will be forced to change policies to accommodate it, it will be outlawed. The need for a discoverable ledger to log transactions means it’s trivial to shut down.

Bitcoin also has multiple technical disadvantages, but in light of the crippling political issues, they hardly matter.

Bookmark the permalink.

Comments are closed.