Thu Aug 22, 2013, 11:55 AM
OneGrassRoot (21,017 posts)
Pros and cons of Bitcoin?
I really have no content or stories or opinion to share about this.
I'm just posing the question and hoping others will chime in with their opinions (especially based on direct experience perhaps?), as well as resource links regarding the pros and cons of Bitcoin.
I've never completely wrapped my brain around what it IS or what it can do, and I see so much conflicting information about it that my head spins when I see the word "Bitcoin" now but I'm trying to keep an open mind as to the possibilities.
I'm hoping the DUers can educate and enlighten me as to the various potential pros and cons of Bitcoin based on your own experience or research.
For those who have no idea what Bitcoin is, here's the wiki link:
Thanks in advance.
12 replies, 1667 views
Pros and cons of Bitcoin? (Original post)
|Capt. Obvious||Aug 2013||#5|
Response to closeupready (Reply #10)
Thu Aug 22, 2013, 12:38 PM
bemildred (90,059 posts)
11. Pretty much, if they can't survive "underground", they won't survive.
And that seems unlikely, perhaps on a small scale, and that's why I'm not going to get into bitcoins.
Response to OneGrassRoot (Original post)
Thu Aug 22, 2013, 12:11 PM
frazzled (13,933 posts)
4. Aside from the fact that its value is wildly volatile and that
it's mostly a method for criminals to launder money ... there's this.
So why would somebody want to go and invent bitcoins? There is a certain theoretical elegance to the idea of a borderless currency, with its supply limited by the difficulty of working out very tough mathematical problems. But going back to where we started, money is useful inasmuch as it can be used to buy things. And two massive things stand in the way of bitcoin ever being anything more than a monetary curio. Ironically, both are byproducts of the things that bitcoin enthusiasts most like about it.
First, because it has the endorsement of no government, it will never be usable for official transactions. If you are an American, you will eventually have to pay your taxes, which means getting hold of some dollars, and as long as everyone needs to use dollars, that will be the way the currency in which an overwhelming majority of U.S. transactions occur.
Second, the cap on the supply of bitcoins may reassure people that there will be no inflation, but in fact it ensures that it can never go into widespread use. A currency needs to be elastic — that is, its supply has to rise and fall in order to keep prices stable even as people’s demand for money varies. Part of the reason the Federal Reserve was created a century ago is that the dollar was at that time an inelastic currency, its supply was basically fixed based on how much gold banks had in their vaults. That meant that when harvest season came around in what was then a heavily agricultural nation, there was always a shortage of cash and a spike in interest rates, and in some years a banking panic.
Bitcoin exacerbates that problem. Its supply is capped in the long run. That means that if it ever came under widespread use, demand for bitcoins would rise faster than supply (which is what happened between February and earlier this week), and the price rise rapidly. That may sound good — your money is more valuable! — but in fact it means that prices of goods and services are plummeting. That’s deflation, which as the Great Depression showed us, is not much fun. It is a situation in which everyone has every incentive to hoard money rather than spend it, leading the gears of commerce to grind to a halt.
In effect, bitcoin is a reminder of this fundamental truth: To function in a modern economy, you’re always putting your faith in something, whether you like it or not. And you may not like putting that faith in a powerful, independent central bank imbued with power from the state, but the alternatives may just be a lot worse.
But go ahead, be my guest if you want to convert your retirement fund entirely into bitcoins.