We’ve followed the Bitcoin emergence into the American financial sector. It became the big buzz as a result of the Cyprus collapse and subsequent problems in recent weeks. We’ve written about it and we’ve even touted its purpose as one that fits into an ever-changing consumer’s needs. Now, though, some critics are saying it’s a “fantasy” and good only for illegal purposes. This week, we take a look at those claims and see if we can make sense of the very different opinions.
It’s defined as an open source person to person digital currency. It promises to revolutionize the way we see money on a global level. It can be used to transfer funds to and from one another, and it translates much easier from country to another. In fact, it’s a very versatile currency. But it also reduces fees associated with exchanging those currencies, which might have some credit card companies concerned. There’s no central authority, which sounds as though it could become problematic, but the simplicity of it can’t be denied.
It’s also easy to use. Users simply sign up on the Bitcoin site, choose their wallets based on the currency they use and then go about their business. Whenever you convert your American dollars (or any other currency) into Bitcoins, you also generate a unique address that “attaches” to the transaction. You can set your account up in any way you use. For instance, if you typically use PayPal to invoice clients, you can set up a more formal address. For friends, you can distinguish another address. It’s all up to you. You can even link your credit cards, too.
There are cards made for the Bitcoin app. One of those cards is the Withdraw2card. The service itself doesn’t require any type of identification, which, according to critics, is a big problem. Others, though, feel it’s time we remove some of the identity requirements that came after 9/11. With these cards, consumers aren’t required to provide the three digit code on the back of the card. The funds can be added to any credit card or debit card, anywhere in the world and in any currency. The cost is around $9, but wiring cash via traditional methods is far more costlier than a flat fee of $9.
So, with all of these many benefits, who could find anything wrong? Plenty, actually. And here are a few of their arguments.
One economics professor says Bitcoin is a fantasy and that the web’s currency as a “secure, private, decentralized type of money…contains the seeds of its own destruction.” He likens it to a Ponzi scheme and goes so far as to describe its claims as “wild” and are revealing from a “libertarian strain of thinking with deep roots in the American psyche.”
Farhad Manjoo continues and says that computers mine Bitcoins by sending intricate instructions to “complex problems” that are generated by the network and that the more Bitcoins that are created, the more convoluted the problems become and the more computer power required to solve those problems. He suggests that there are limits and because the currency is little more than strings of numbers. He also says that a central registry ensures the location of every single Bitcoin and that it’s impossible to transmit identical codes more than once, which, to many sounds as though that’s actually an impressive, even if it’s unintended, safety mechanism.
It Makes Sense
While it seems harsh, there are very credible points being made. For one, the currency isn’t exactly new; in fact, it’s been around since 2009. Its current value is being traded for less than one cent and that one year ago, Bitcoin as a whole was worth less than five dollars. In the past couple of weeks, its value has increased more than one thousand percent and is now going for an impressive $266 per share. He gives credit to the “infant brainchild of an anonymous brain”. Ouch.
The real controversy, however, is absolutely legitimate. There are many who are using Bitcoin to participate in illegal transactions. In fact, there exists a website where anything you can imagine is bought and sold – drugs, animals and no telling what else. We aren’t releasing the name of the site, though it’s easily found elsewhere.
Is it possible that there are some who are simply aggravated that this new currency exists that operates by its own rules with absolutely no government interference? And is that a threat to nations everywhere? Even Manjoo agrees that the possibility exists for inflation to simply become an impossible notion and bank fees could realistically be eliminated in one fell swoop. What do you suppose that would do for the struggling economy?
What some see as a problem, others see as an unexpected benefit. Just depends on you view the whole half full, half empty analogy. With Bitcoins, there’s simply no way to limit the supplies. Let’s face it – you can’t touch them or feel them; you can’t even see them. That could be problematic for both sides of the equations – how do you know there won’t be fake websites popping up? Who’s to say they’re not already? And then, if they are, and Americans are scammed, who’s responsible for the thievery? After all, it’s not governed, it’s not monitored – it, for all intents and purposes – doesn’t exist by most standards. And then what happens to the value of the authentic Bitcoins?
Many are predicting it’s simply a matter of a single crash, such as a successful scam that affects many folks, and the entire “experiment” – as many are calling it – will simply fold.
Therein lies the fear – whether or not it’s a realistic vision, the fact remains that no matter what ultimately happens, this is a bell that can’t be unrung. And if you were wondering what the Cyprus repercussions mean for the U.S., it could be the accidental discovery of Bitcoins.
So what are your thoughts? Brilliant or a bomb?