Of Two Minds: The Legitimacy of Bitcoins

Bitcoin lead

The Bitcoin. Internet funny money or the future of currency? You decide! Or don’t. Whatever.

 

 

Of Two Minds is a series of articles in which we tackle contentious issues by doing what any good schizophrenic does best, arguing with ourselves. In this installment we look into the legitimacy of the Internet’s favorite new currency, the Bitcoin. Let the master debating begin! What did I say? Why is everyone snickering?

 

 

So with the markets being as unpredictable as they are, was thinking of investing in Bitcoins.

 

Really, why?

 

I want to be ahead of this curb. More and more Internet savvy vendors have been accepting them as of late and the total market worth of Bitcoins are currently at to be around $5.6 billion.

 

You know what is actually a more savvy and sensible investment?

 

What?

 

Disney Dollars.

 

Ok, if you’re not going to take me seriously…

 

No, hear me out. Disney Dollars have been around for over 25 years, since 1987, and they are redeemable in any Disney theme park, Disney cruise ship, or Disney Store across the country. Logistically speaking, the Disney Dollar is accepted at more locations than the Bitcoin.

 

Please! You and I both know that it’s not the same thing!

 

HA! How so?

 

By their very nature, Bitcoins are fundamentally different from any monetary system out there. For one, they are completely decentralized from any cooperate and governmental entity. Instead they are overlooked by thousands of computer users when peer-to-peer transactions are made. Second, Bitcoins themselves are their own units of value. Unlike say credit cards, a Bitcoin’s value fluctuates based on other currencies like the US dollar or the Euro. So just to be clear, it not only makes you an ass for comparing Bitcoins to Disney Dollars, but incredibly ignorant as well.

 

I might be an ass, but my point still stands. It’s not like I can go to the any store and exchange Bitcoins for goods and services. What good is a currency if barely anyone accepts it?     

 

That’s because the Bitcoin is still a young currency. It has taken off over in ways people could never have imagined. It’s said that on any given day, around 60,000 people use Bitcoins as exchange for goods and services online. Major sites like WordPress, Reddit, and Ok Cupid have started to make traction by accepting Bitcoins for various things like web services, premium content for their sites, specialty goods…

 

 

Yup, not a tired argument at all…

 

Well it’s a legitimate one. Remember that blackmarket site Silk Road, where it allowed users to buy and sell narcotics and other illicit drugs? Well when the Feds finally busted them back in October of last year, they seized about 26,000 worth of Bitcoins. That’s approximately $3.6 million in funny money, which would make that site one of the largest procurers of that currency. Now you’re telling me that you don’t see anything fishy about that?

 

What? That people use money to buy drugs? Woah, stop the presses! And sure, you can buy drugs with Bitcoins. Now I don’t want to alarm you or anything, but you know what you can also use to buy drugs? Cash. No joke, look it up!

 

If you see this, know that you're probably about to buy drugs.

If you see this, know that you’re probably about to buy drugs.

 

Hey man, it’s the truth. Bitcoins have a nefarious history for being used to launder money and various other cybercrimes. In a white paper released by the cybersecurity company McAfee, they state that virtual currencies – like Bitcoins – act as a preferred payment method for illicit activities that enable cybercrime. You can’t deny that there are some shady people that associate themselves to Bitcoins!

 

See, that’s not fair! While true, Bitcoins are currently unregulated by any government authority, that doesn’t mean they are utterly lawless.

 

Really? Tell that to the people who lost around $480 million over the MtGox fiasco. Granted, if you decide to trust your money to a place that originally started as a Magic the Gathering trading card exchange, then at some point you were just asking for it. But still, MtGox – ridiculous name and all – was one of the largest Bitcoin exchange bases in the world at the time. If they can’t keep their shit together, then that’s just a bad sign overall. 

 

While, the MtGox incident was unfortunate, in theory Bitcoins should be one of the most stable currencies in the world, because there will only ever be around 21 million of them in existence. In turn this makes them resistant to stimulus and its value can’t be deflated by having more of them put in the system. In other words, Bitcoins keep their value once the market for them stabilizes.

 

Really now… then how do you explain current state of volatility?        

 

Well that’s the thing, there are only at this time just over 12 million Bitcoins in existence, so they’re still being mined. Plus it’s a young currency, so it’s only natural that there is some fluctuation in value.

 

Oh come on! If you were to ask any economist, they would tell you if a country’s currency fluctuated as much as Bitcoins have, that currency would have never been taken seriously as a medium of exchange!    

 

Not being taken seriously as a medium of exchange?! I suppose that’s why federal regulators DIDN’T meet with representatives from the Bitcoin Foundation back in August of last year to discuss the regulation of virtual currencies. Or members of the FBI, Department of Homeland Security, the IRS, and various members of the Treasury Department DIDN’T sit in those meetings discussing the legitimacy of Bitcoins. This didn’t happen because the US Government clearly doesn’t take Bitcoins seriously. I was being sarcastic by the way, if you couldn’t tell.

 

Yeah, real subtle…

 

Hey, all I’m saying that the Bitcoin has the potential to be the future of currency by being purely digital, anonymous, and surprisingly secure due to advance cryptography. Not only that but it also cuts the middle man – aka banks – out of the equation, which would make goods and services cheaper in theory. For all these reasons and more, why wouldn’t institutions take this new medium of exchange seriously?

 

Because, like everything, it all comes down to legitimacy! You know how hard it is to get even one Bitcoin out there? Ask Kevin Rose of the New York Magazine. It’s not as easy as whipping your credit card out and buying a Bitcoin. It’s much, MUCH tougher! How will the average person ever be able to understand something as obtuse as a Bitcoin Exchange?

 

I bet right about now these Mt. Gox protesters wish each one of them was worth 444 people protesting.

I bet right about now these Mt. Gox protesters wish each one of them was worth about 444.5 people.

 

Well of course it’s not easy…

 

Not only that, but the entire system is the ultimate trust-based economy. There is no conceivable way of a third-party to step in and legitimize the currency’s value if needed. So if things go wrong, they go VERY WRONG. AKA MtGox!

 

But doesn’t that pertain to basically any form of currency? Like isn’t all money just pieces of paper with numbers put next to them. Never really having any “real” value per say. Just the value we put to them…

 

In that sense you’re saying that all money is essentially…

 

Yeah. Worthless.

 

[Deafening silence]

 

[Deafening silence]

 

Ok, before we go any further down this existential rabbit hole of questioning what the “real” value of anything is, let’s just say we agree to disagree on the topic of Bitcoins.

 

Agreed. Let’s never speak of this again.

 

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