[LINK] 5 Myths About Bitcoin You Need to Understand

[Jim Birch]

Kim Holburn wrote:

> 5 Myths About Bitcoin
>

5 dodgey myths.


> > MYTH #1: There is a finite supply of bitcoin
>

There actually is an upper limit of Bitcoin.

This could be changed by community consensus but this would fundamentally
change the ideology of the "currency" and would in effect convert bitcoin
into one of those dreaded fiat currencies - though admittedly run by the
good guys, not evil governments :)

> MYTH #2: Bitcoin users are anonymous
>

Bitcoin users actually are anonymous.  There is no requirement to identify
yourself to use bitcoin.  The fact that you can be identified by sleuthing
is normal for any real world process.  Bitcoin does have the feature (/bug)
 that the activity of each anonymous ID is public so if that anonymous ID
is breached activity is linked to the actual person.


> > MYTH #3: Bitcoin is beyond the reach of the law
>

Nothing is actually beyond the reach of the law but bitcoin does offer a
lot of scope for evading various laws.  Bitcoin is part of the "black"
economy.  The black economy is generally illegal thought tolerated to some
degree and often too expensive to tackle.  The black economy is typically
about evading tax and avoiding tax compliance costs, but also about trading
proscribed things like illegal drugs, fake medicines and guns.


> > MYTH #4: Bitcoin wastes energy
>

Bitcoin clearly wastes energy.  Current bitcoin generation is estimated to
burn energy at at a rate approaching that of New Zealand.  In an
equilibrium state (clearly not now!) the price of bitcoin would reflect the
price of energy.  It is worth generating bitcoin up to the point where the
electricity bill is higher than the bitcoin value.

>
> > But compare the overhead for various currencies. Banks pay for security
> guards (among many other security expenses), who often merely stand around
> watching the customers. We don't think of this as wasteful, because without
> guards, theft could undermine the entire system.
>

Hello? This is an argument for a digital currency, not an argument for
bitcoin's horrendous creation mechanism.  Digital currencies will become
normal over time.


> > The same is true for the raw power used by bitcoin miners. We don't yet
> know how to secure a decentralised ledger like bitcoin's blockchain without
> the energy-intensive mechanism.
>

And there is a bit of a rock and hard place problem here.  If there is no
cost associated with currency generation and anyone can do it then the
results seem pretty obvious.   That is why fiat currencies work, they have
a trusted issuing authority.  (Trust is fundamental to economic activity.)


> > MYTH #5: Bitcoin will replace credit cards and/or cash
>

This is actually correct, not because frictionless digital currencies can't
work - they can, they will - but because bitcoin is a fundamentally flawed
on several fronts.  Bitcoin is currently a fashionable vehicle for
speculation.  Reportedly, and not unsurprisingly, no one is using it as a
currency because it is too capricious.

Jim