If you’re like me you understand the concept of Bitcoin as a virtual currency, but not the
finer points, you do not pay for anything with Bitcoins, nor would you know
where to GET Bitcoins (it’s called mining, by the way), let alone would you
invest in them.
According to the Wikipedia definition: Bitcoin
as a concept and the network is spelled with a capital “B”, the actual currency
“bitcoin”: no capital “B”. I’ll try to
keep them straight…
TechCrunch wrote
about a guy on February 28th, who was stopped for further search by
the TSA
looking for Bitcoins in his carry-on, which is beyond hysterically
funny. And of course it’s not,
especially if you, like me have been on the road so much you’ve slept less than
half the time in your own bed for a year.
With the closing of one of the major Bitcoin exchanges Mt.Gox,
last week, discussions about Bitcoins viability have been popping up in the
news. A second post on TechCrunch talks
about the mechanics
of Bitcoin. Writer Brian Armstrong gives some interesting insights
into the workings of Bitcoin and also explains why they have staying power and
what their true attraction is. Brian is a co-founder and CEO
of Coinbase, a leading consumer, merchant, and developer platform for Bitcoin
purchasing, selling, and payment acceptance… meaning: great insight and a very
vested interest in all things Bitcoin.
Bitcoins are not regulated – which is scary, but if you add
on: not regulated by any Government: less scary. So; much like emails – and that is the analogy
Brian uses – Bitcoins are an open network and that is its strength despite the
growing pains, which are significant – we’re talking DDoS (distributed denial
of service) attacks that have led to delayed transfers on several exchanges,
not just Mt.Gox that went out of business . But with each attack, Brian maintains, the
open network grows stronger, much like email providers that had to add layers
to protect against phishing scams and hack attacks.
Going back a bit: emails are an open network with a standardized
protocol and that is the reason why they are fast, free and work well worldwide.
There is no single country or company that controls email protocol – just like
Bitcoin – that means users around the world have choices and emails flow freely
between different service providers. Bad providers go out of business and successful
ones stay, but in competition with others’ and that keeps prices down (or free:
see Google, Yahoo, etc.).
In contrast to Bitcoin our current payment systems through
financial institutions are proprietary and limit the ability for consumers to
switch easily, which stifles competition and innovation, i.e. ease, reach,
speed and cost of transactions. If you’ve ever done a wire transfer continent
to continent with your proprietary financial institution, chances are
exceedingly high you will agree with me that it’s infuriating, on all levels.
So why are we not choosing from many different virtual
currencies today? The issue is: without an ‘oversight’ entity to watch
transactions (which is what the proprietary institutions do), who makes sure
there is no duplicate spending? To go
back to the email example: no one oversees or prevents you from sending the
same email multiple times (sic: phishing, DDoS: scary). Brian maintains that with each attack
Bitcoin, like emails before it, will become stronger and put better protocols
in place.
Bottom line: New technologies take time to mature. He
maintains that in the next few years it will become increasingly more difficult
to disrupt Bitcoins as the Bitcoin wallet software and protocol become more
mature and resilient. Brians second mayor point is: look at the TREND of how things
are growing or maturing over time, not the state of technology today. To the later I would say “amen”, BUT: My hard
earned money is not going to be the guinea pig for Bitcoin to grow on. Having said that – I might and probably will
invest in a few Bitcoins (or decimal points there of depending on its exchange
rate) just to see its mechanics work hands on and maybe buy a latte somewhere –
with a double shot and skim milk please – but I think that’s it. What do you
think?
Tags: Bitcoin,
Bitcoins, Open Network, TechCrunch, @Brian_Armstrong, Mt.Gox, Future of
Internet
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