what is bitcoin

Bamboozled By Bitcoin: Pros, Cons, and Fallacies

The biggest topics of this week included: Some violent storm somewhere that wreaked havoc, some violent attack that caused mass casualties, something Trump said on Twitter that offended a bunch of people, and Bitcoin. The media loves to talk about events that push major emotional buttons for people, and generate mass hysteria in every single person on the planet. Bitcoin represents hope for some and dread for others. No matter who you are, you probably have a perspective…

…And I am not excluded from that conversation.

Reading several articles every single day for the past few weeks, I have generated my own views and perspectives. I am hoping to shed some light on some fallacies and define other ideas you may not have been aware of. If you are reading this, thank you for your time! I will do my best to enlighten you with as little fluff as possible.

My Background With Bitcoin

 The year was 2010 or 2011. Honestly, I have no clue when I first heard about this mystical currency that is now one of the most abused topics in economics today, but I remember scoffing. It was probably a sunny day with birds singing and rainbows abounding. I was not amused and I did not dive into the concept with a single dollar bill.

The idea of a global currency that transcends all boundaries was both alarming and absurd.

In 2013, Bitcoin made a meteoric climb to $800 per coin. I still had not bought into the idea of bitcoin. I had even joined a couple programs back then that said they mined bitcoin and gave us profits from using our computer’s resources. Bitcoin was of some interest, but the risks in my mind outweighed the potential.

Bitcoin became one of those fringe topics, kind of like the JFK conspiracy theory. A lot of people talked about it, but most people just dismissed bitcoin pundits as wishful thinkers. I largely ignored these people for years. It wasn’t until 2017 when I finally started to warm up to the idea of bitcoin as a viable concept with real-life applications. 

What Is Bitcoin?

Taken straight from Wikipedia: “Bitcoin is a cryptocurrency and worldwide payment system. It iswhat is bitcoin the first decentralized digital currency, as the system works without a central repository or single administrator. The network is peer-to-peer and transactions take place between users directly through the use of cryptography, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009.” 

Okay, woah woah! Huh?!?!

Let’s start from a broader view. Bitcoin is based on newer technology that wasn’t available 10 years ago. This technology is called, “blockchain technology.” This technology is so highly regarded, because it makes payments between people (called peer-to-peer) much simpler and accessible. We no longer need the middle man to make payments (AKA banks). This means anyone around the world can use it to pay anyone, anywhere with nothing more than a cell phone.

This is unprecedented.

When you look at the history of technological advancements, you can get an idea of how far we’ve come.

disruptive technology

As far back as 100 years ago, we did not have any kind of electrical appliances. There were no such things as TV’s, computers, cell phones, robots,  online banking, credit cards, or Fitbits. If you wanted to communicate with someone, you had to mail them a letter, or travel to see them. If you wanted to pay for something, you had to either visit the bank, or pay in cash.

We live in a world will everything is fast, immediate, and convenient. Bitcoin and other cryptocurrencies are the next logical step in our evolution in technology.

Entire businesses are now built on the technology. Many of them utilize crowdfunding campaigns called, “ICO’s,” or “Initial Coin Offerings” to further their cause instead of the traditional loan models (or having to rely on venture capitalists taking a piece of their equity) that started companies in debt. This way, they can reward investors with the promise of earning on their investments, while the companies are able to get a leg up without the shackles of debt or financial limitations.

The point I am trying to make here, is that while many are fearful that Bitcoin will crash sometime soon and disappear, there is a great case to be made for it’s permanence and longevity as an entity in the marketplace. 

Bitcoin: The Latest Example Of Disruptive Innovation

You’ve heard of disruptive innovation before. It is happening all around you at all times. Here is adisruptive innovation bitcoin great article to detail 11 disruptive technologies to be on the look out for. These ideas and concepts will drive economies and improve the overall well-being of millions, if not billions.

Below is a list of just a few companies/technologies that are disrupting entire industries as we speak:

  • AirBNB – Hospitality
  • Lyft/Uber – Travel
  • Netflix – Entertainment
  • Facebook – Social
  • Google – Information Gathering
  • Amazon – shopping
  • Tinder – Dating
  • Cryptocurrencies – Financial

What’s even bigger about many of the technologies listed above? They are disrupting entire industries without owning or renting the very resources that enable their success!

What does that mean?
  • Airbnb does not own any hotels. They simply connect people with other people who are looking to rent out their places.
  • Lyft/Uber do not own any taxis. They connect people who drive with people who need a ride.
  • Facebook does not create content. They enable content creators to share their content with the network of people as they socialize with their family and friends.
  • Google does not create information. They make it easier for you to find information with their highly technological algorithms.
  • Amazon makes it possible for you to shop without going to an actual store.
  • Tinder makes it possible to find dates easily by swiping through profiles, without the need for specific locations to meet random people.

Many of the above references are available as apps on your phone. All the companies had to do was create an app and their customers get what they need without any kind of middleman.

These concepts were not available 15 years ago. With this kin of technological growth, who knows what may be next? 

Cryptocurrencies are one of the latest forms of disruptive innovation. They allow people to send/receive payments without banks or credit cards. Despite the examples above, there are still plenty of people who disagree and warn people to not get into Bitcoin.

Bitcoin Pros and Cons

bitcoin pros and cons

I recently read an article that prompted me to write this post. It was aptly titled, “Seven Lies Bitcoin Fans Tell Themselves.” This article caught my attention because the author made statements about the technology that were based on his own personal bias. It almost seemed like he hated the idea of money coming from outside banks.

I have compiled a list of Bitcoin pros and cons below to help you get a more well-rounded picture of cryptocurrencies as a whole.

Bitcoin Pros

  • Represents a brand new opportunity for investors to grow their portfolio. Please note, there is some risk when investing in anything, but if you just use a small percentage of your available investing money, your risk will be lower with even greater upside.
  • It is much easier to pay for things around the World. Back in 2000, I went to seven different countries in Europe. I had to go to a currency exchange beforehand and get 5 different currencies to carry with me everywhere I went. Bitcoin is more widely accepted in other parts of the world, making it easier to travel.
  • Not regulated by any country or corporate entity. Fiat currencies are only valuable because the country that prints them says they are. Most currencies are no longer backed by anything other than the goodwill of the local government. That idea is scary, especially if you don’t trust your government has your best interests at heart. Bitcoin is completely decentralized and cannot be regulated by anyone, giving you more security.
  • The coins are limited, so scarcity provides it with intrinsic value. Most countries do not limit the scarcity of their local currency. Because there are more and more currencies being printed day-by-day, the local economy suffers inflation and everything becomes more expensive as time goes on. Bitcoin has been limited to 21 million coins, which imbues the crypto with intrinsic value as more and more people use it.
  • Transaction fees are generally lower. Most Bitcoin transaction will cost you 1% or less, depending on where you are sending your money from. Other digital payment methods can charge you 2 or 3% (or more).

Bitcoin Cons

  • Bitcoin is often times seen as a speculative investment. Given its high volatility, Bitcoin is very difficult to predict. Bitcoin is actually deflationary, which means the overall general value increases, but it is still very easy to lose money if your goal is to gain money with Bitcoin. Most inexperienced investors will not have the discipline to buy and hold until they get their money back.
  • No chargebacks or refunds. we have grown accustomed to calling credit card companies and demanding a refund if we change our mind on a payment. With Bitcoin, once you send a payment, it becomes completely anonymous. This means you won’t have to worry about your spouse discovering your late night entertainment choices… but you also won’t be able to get that money back if you need it.
  • Bitcoin is the target of con artists and a whole new black market. Once you go down the Bitcoin rabbit hole, you will get exposed to a whole new world of manipulation and promises of riches beyond your wildest dreams. The vehicle may be relatively new, but the story is the same old story. Be on the look out for swindlers trying to part you from your precious Bitcoin. They’re out there, everywhere!
  • Other coins could steal Bitcoin’s thunder. There are over a thousand types of cryptocurrency. I have personally invested in more than just a few. You never know which one will take off on any given day, so spreading your eggs to multiple baskets is key.
  • Bitcoin processing times can take a long time. The average time to process a transaction is between 10 minutes to two hours. But on busy days when there is a high volume of Bitcoin changing hands, it can take 12-72 hours. This can be slightly frustrating when you are trying to transfer the funds to an exchange to make a move on an alt coin poised to take off on positive news, but it is the nature of the beast. Best to be prepared ahead of time. 

bitcoin value

Arguments Bitcoin Naysayers Try To Make

Bitcoin and Cryptocurrency in general feels like a religion. Many are comparing the Crypto market to the stock market and even call it “stock market 2.0.” No matter who you are, you are probably either 100% for it, or 100% against it. As I alluded to in the article above, Bitcoin’s opposition will often times spread fear to inhibit more people from buying into the future. Let’s go over some of their most compelling arguments, one-by-one.

Bitcoin is a Bubble

They like to compare Bitcoin to the dotcom bubble of 2000 and the housing market bubble of bitcoin bubble2008. After reading up on these phenomenon, I am inclined to agree some caution should be heeded in the future. With the thousands of cryptocurrencies available, I do think many will die off and lose all value, but I don’t think all cryptos will dive and be of no value. Bye buying multiple alt coins on top of Bitcoin, you will ensure your longevity and mitigate your risk substantially.

The fact of the matter is, Bitcoin really can’t be compared with anything else to date. It is a global currency that has only gained popularity recently with mass adoption. while it may never completely replace fiat currencies, it may make a run for it’s money.

Here is a cool site where you can watch Bitcoins purchased in various countries around the world!

No matter what anyone says, the technology is here to stay! I’m just saying don’t expect Bitcoin to always be growing exponentially! It will go up and down and level off. The question is, when and how high?

Here is a compelling article explaining why Bitcoin will never pop.

Bitcoin isn’t backed by anything

This one is kinda funny. Back in the good ole days, money used to be backed by gold, hence the gold standard. Nixon did away with that concept in 1972 and now USD is only backed by the Federal Reserve. Everyday, new money is added to the market, decreasing the value of the money in your pocket. Many will argue that Bitcoin is just a complex idea, but let me illustrate the value of Bitcoin using basic Ecomonics.

Bitcoin economics

Whatever does it mean?

Bitcoin is limited to 21 million coins, which means demand will continue increasing to obtain those coins that are left. The majority of the world is just starting to become aware of this stuff. As more and more people learn about it, they will want to get some that stuff for themselves.

The basic laws of economics state that as remaining supply decreases, demand will increase, leading to increasing prices. People want what they can’t have.

Hopefully this all makes sense. The market says Bitcoin has value. Bitcoin is in fact, backed by the market. It’s not just air, it’s digital and it’s extremely secure. You give your money to the bank and they give you an electronic figure in your account… how is this different?

Jamie Dimon and Warren Buffett say Bitcoin is Stupid

This is my favorite argument. People like to point out lead financial experts who say Bitcoin is a foolish asset to consider.

Jamie Dimon bitcoin

Let me go on record, by first, showing respect to these guys. They are experts for a reason. While Dimon is the CEO for JP Morgan (Chase bank), and Buffett is the founder of a huge financial institution, their views are two in billions.

Let’s not forget, Dimon is the leader of a bank! Bitcoin does not represent a talisman of hope for banks. In fact, most of the opposition to cryptocurrencies have a background in banks. Buffett is not a bank guy, but he is a stock market genius. The threat Bitcoin places on the market is palpable. A lot of people are taking money out of the stock market and putting it into cryptos. This will affect the markets more and more as time goes on.

All I am saying, is you should consider their background before you condemn Bitcoin. How about all the famous Experts/Entrepreneurs that support Bitcoin? Here are just a few names: Bill Gates, Sir Richard Branson, Al Gore, Mark Cuban, Ashton Kutcher, Mike Tyson, Drew Carey, and Julian Assange. That is quite the list! 

Bitcoin has grown too much, there is no more room for growth

The same people that are saying that now were saying the same thing when bitcoin hit $1,000. I’m sure they have been persisting with the same mantra since 2013. Eventually, they will be right, but they are really missing out until that day comes!

bitcoin growth

Depending on who you listen to, there are quite a few numbers that get thrown around. Some people think $10,000 is the fairest price for Bitcoin, while others claim $40,000 or $100,000 are the limits to expect. Some experts even claim Bitcoin will eventually reach $1,000,000 per this article.

Can you imagine the decimal places you will have to contend with when buying a loaf of bread when Bitcoin reaches $1,000,000 per coin? It will be a pain to send .000000000004 BTC for everyday transactions! 

Again, I have to default to basic economics. If you want a great article that explains the Bitcoin price and breaks down the arguments for why you should consider Bitcoin, check this out.

How Do You Get Bitcoin?

There are many ways to buy Bitcoin. There are free mobile apps you can get to store your Bitcoin, while you can store them on paper, on your desktop, or even on a hardware wallet. My favorite place that is use is called Coinbase. It is a free Mobile app (or account you can visit on your computer) that allows you to send/receive or store your Bitcoin, Litecoin, or Ethereum. Eventually, they will add other Cryptocurrencies.

If you want to get your own Coinbase account, you can go here.  

Coinbase is free to join and you will earn $10 of Bitcoin once you buy your first $100 of Bitcoin. (Disclaimer: if you join through the link above, I will also earn $10 of Bitcoin. If you hate that idea, then you can just visit the site through a Google search, but I would greatly appreciate your patronage!)

Bitcoin Conclusion

Calling anything in history “a global-scale phenomenon” would have paled in comparison to Bitcoin. Crytpocurrencies have risen in popularity around the world as people turn to deal with each other instead of the institutions that stand in the middle to line their own pockets with various fees. The peer-to-peer mania continues to snowball as the world heads to a higher state of convenience and disillusionment.

There are people who will try to convince you otherwise, but I do not believe Cryptocurrencies are going anywhere. It is true that they remain speculative investments with a higher level of volatility than most other stocks or assets, but their overall value and applicability cannot be overstated.

So the question remains: Should you buy any Bitcoin? There is never any better time to get started than today. What have you got to lose? The potential far outweighs the risk. That is just my two cents.