Bitcoin is Revolutionary.
Bitcoin is peer-to-peer, open source, and dependent on the membership at-large. No one owns Bitcoin, unless you count the 100,000 computers linked worldwide running the software day and night. Anyone can join this network by downloading the software. However, it takes days of downloading to get a complete copy of the ledger. The biggest whale on the system is the inventor, who allegedly plans on holding most of his coins in cold storage until 2020.
The genius of Bitcoin is that is employs a cryptographic race to thwart hackers, who cannot hope to keep up with the combined efforts of 100,000 computers working together to protect the system. Even though it’s at its initial stages, Bitcoin is already one of the most powerful computer networks in the world, probably surpassed only by the NSA and other similar government spying agencies.
New coins are “mined” by solving complex cryptographic equations, and those equations grow progressively more difficult every year to insure a steady but slow drip of new coins into the system. There are around 12 million coins in circulation, but all mining stops after the 21 millionth coin is extracted, something that cannot happen before 2140.
In the first few years, the value of bitcoins varied wildly from one day to the next or even from one hour to the next. Value goes up when coins are in high demand, and drops when sell-offs commence. A year ago a bitcoin was worth $12. Today they are worth $600 or so, depending on which exchange you use for purchase, and if you don’t like that price, wait five minutes, as value is constantly waving up and down. You cannot lie or cheat the system. Value is based entirely on supply and demand. But after frothing out a few times and peaking over $1,000 three times, Bitcoin settled in at $850, until the demise of Gox and ban in Russia. But value today is a fraction of what it will be worth some day. The system is designed so that the value of bitcoin has to grow over time, the opposite of inflationary fiat money.
If you haven’t joined the Bitcoin world, please stop reading this and buy one right now. There are several exchanges to chose from. I like Coinbase. There is also Gemini on the East Coast. If you won’t do that, get a wallet. They are free and easy and can be found at: bitaddress.org. To buy and sell coins, however, you need an exchange. I’d stick with the biggest and most reputable firms until you know your way around the system, so feel free to sign up with Blockchain. Blockchain is a peer-to-peer service and the number one wallet provider. Coinbase is the largest American exchange. Both companies pride themselves on security, but the ultimate security is to put your bitcoins in cold storage until you need to use them. Some wallets can be used for quick buy-sells, others you’ll want to keep as anonymous as possible. Access your wallets at home on your own computer and never in a public space. Would you count your money in public? Sensitive wallet information should be stored offline as well, and your passwords must always be 12 or more characters and numbers mixed.
And if you want to get involved in day-trading bitcoin, here’s the fascinating reality: the prices on the exchanges vary and values wave up and down to the extent you can make daily profits just anticipating the peaks. In fact bots may be doing this for many of the larger players in the system. It doesn’t matter what price you pay for coin. If someone dumps a large amount, value will be driven down, just as if someone makes a large investment, value goes up. The only thing you can count on is it likely won’t remain the same for long.
I’d forget about getting into mining unless you are interested in the tech or cryptographic side of things. In 2013 mining was a Wild West frontier anyone could cash in on and capture free bitcoins easily, provided you had a fast computer, but now mega companies have invested millions building massive mining platforms. The best way in now is probably to rent server space on one of those mega platforms because mining technology is advancing so rapidly you can easily get left behind. There’s still plenty of mining opportunity in the spin-off coins. Mining will be more profitable when coin reaches a new peak value.
Mt. Gox was the original bitcoin network. Based out of Tokyo, Japan, it began in 2009 as a site for trading cards. Three years later, it re-branded as the premier bitcoin site. The name stands for Magic: The Gathering Online Exchange. It was surpassed briefly by an exchange in China. And then after the price of coin skyrocketed to over $1,000, Gox went bust and blamed the software. In fact, it appears Gox scammed up the price of coin by flipping to itself. Whether or not they hacked themselves is the question.
Based out of San Francisco, Coinbase is the new kid on the block who has taken over, and a lot more user-friendly than Mt. Gox ever was. In December 2013, they received $25 million from Wall Street, at the time the largest investment in a bitcoin start-up, and just got another huge cash injection from Wall Street. You have to wait a week to get your bitcoin, unless you can pass the verification test, which can be a lot more difficult than you might expect. The site has numerous safety measures to prevent hacking and theft, which is the biggest concern when dealing with bitcoins. They have just announced plans to open exchanges across the world.
Blockchain is the biggest wallet service and they have some of the best charts and graphics for watching the trends. They are also extremely user-friendly. They only act as a wallet service and will direct you to an outside firm for buying bitcoin called Cash into Coins run by Will Wheeler, who like a lot of the Bitcoin shamans, seems like he might be right out of college in computer science.
Bitcoin’s price is fixed according to the number of people buying and selling and all activity is conducted in full view. The market cap has gone from zero to several billion dollars, but it’s still too small to achieve anything close to stability, so it’s easy to day trade by buying in the lulls and selling at the peaks. Bitcoin is risky since no one knows where the bottom of any lull might be, but there are so many advantages to bitcoin over fiat that it seems likely to succeed, unless something better comes along. Indications are Bitcoin will explode by 2020 and become the Next Big Thing.
China quickly grew to the biggest bitcoin market (probably because of a lack of trust Chinese have in their own currency), but many expect Central and South America to become major areas of growth. Why is bitcoin spreading so quickly? Price goes up when China is awake, and down while they sleep.
1) Bitcoin is an open-source code and thousands of the best software engineers in the world have taken it apart and examined every inch of it. There are no secrets. This likely makes it the most democratic financial instrument in the world, and since there will only be 21 million coins created, and since we are already halfway there, this tells me the price of bitcoin will rise as long as it stays popular. And right now it’s gaining popularity everywhere.
2) Western Union typically charges $7 to move $100, an outrageous fee considering you can move a bitcoin for as little as .08 cents. Since Western Union made $5 billion in revenue in 2011, one wonders how much longer they will maintain their profit share on wire transfers and how much of this action will move quickly into bitcoin, which will undoubtedly drive the value even higher. The World Bank estimates $515 billion will be sent by migrants to relatives outside their country of occupation this year.
3) Credit cards charge outrageous interest, late fees and have difficulty processing micro payments, which results in large fees for small purchases. Bitcoin solves all these issues with elegant ease, because unlike cash, it can easily be divided into micro units.
4) Bitcoin is smart money and can be programmed. Because bitcoin can easily be moved into escrow, sites will be created for companies to arrange their stock sales through bitcoin. It is much easier to use bitcoin in many legal agreements rather than checks or cash.
Any qualified organization can set-up a bitcoin exchange through Buttercoin. Exchanges are the interface between bitcoins and banks and they are required to keep customer data. So Bitcoin is not completely anonymous, although it can be quite difficult to trace the owner of any particular wallet. The trades, however, are all posted in complete transparency and conducted throug
h the Bitcoin mining networks. In fact, the company founders started as miners, so you know they have a deep well and lots of knowledge and experience to draw on.
Funny how so few in the alternative press seem to be even aware the Bitcoin Revolution is upon us. What little press Bitcoin gets is relentlessly negative. The reality, however, is quite different. Here’s a typical three-week chart. Notice the low around $500 near the middle? That’s when I started buying Bitcoin as well as advising my Facebook friends to do the same in my usual obsessive way when I stumble onto another important discovery. At that time, I predicted the price would reach a new high around $1,500, fall back to $1,000 and then hold for a while. Where these ideas come from, I have no clue, especially since the entire business press was predicting an imminent Bitcoin bubble breakdown. If anyone tells you they know what’s going to happen price-wise, they are just reading the tea leaves, same as me.
Why am I so confident in Bitcoin even though I’m not at breakeven on my investment? Simply because it is rapidly becoming a favored medium of exchange among spooks, smugglers, cannabis dealers, money