Bitcoin FAQs

Frequently Asked Questions about Bitcoin – and the answers

Theoretical questions
  1. What is Bitcoin?
  2. How does Bitcoin work?
  3. What is so great about Bitcoin, why should I care?
  4. Who controls Bitcoin?
  5. Why is a currency with limited supply better than an inflationary currency?
Practical questions
  1. I want to try Bitcoin out, what do I do?
  2. I want to invest in Bitcoin, what do I do?
  3. I want to buy something with Bitcoin, where do I go?
Skeptic’s corner
  1. Governments will regulate or ban Bitcoin, it will die!
  2. Bitcoin is a Ponzi scheme!
  3. Bitcoin is a bubble!
  4. Bitcoin is not a “real” currency!
  5. Bitcoin can be outcompeted by an altcoin like Ethereum or Litecoin.
  6. Governments will make their own Govcoin and outcompete Bitcoin.
  7. It’s all about the blockchain baby, Bitcoin is a fad.
  8. Investing in Bitcoin businesses is better than buying and holding Bitcoin.
  9. Bad guys can use Bitcoin, therefore good guys shouldn’t use it.
  10. Bitcoin got hacked and the CEO of Bitcoin has been arrested, it’s all over!
  11. That’s it, Bitcoin is dead!

Theoretical questions

1. What is Bitcoin?

Bitcoin is a free market monetary system (a currency and its own transactional network) designed to be resistant to government control, influence and attacks.

Economically Bitcoin is based on the understanding that currency with predictable and fixed maximum supply is superior and has civilizing effects compared to a currency with unpredictable supply and unlimited supply cap (an inflationary currency such as US dollar or Euro, but even commodities like gold or silver whose supplies continuously grow with time and are subject to the possibility of massive supply fluctuations based on random, unpredictable events).

Technically Bitcoin is an open source software (such as Linux) based on decentralization of information and simulation of central authority by a peer to peer network that cannot be easily shut down or censored by violence. This is the reason why Bitcoin is sometimes called the Honey badger of money.

Philosophically Bitcoin is based on the basic principle of Anarcho-capitalism that each individual is granted full control over his mind, body and private property, and all interactions with others and their private property occur strictly on a voluntary basis after mutual consent. If two subjects A and B decide to trade with each other, Bitcoin makes it impossible for C to modify, steal, obstruct, prevent, tax or even obtain information about trade settlements happening on the Bitcoin network. Bitcoin is like a StarTrek force field shielding financial assets of its users from governments and thieves. It also makes it impossible for central banks to inflate the monetary supply or manipulate interest rates in order to transfer wealth from the population towards the state, politicians and the special interest groups that finance and support them.

 

2. How does Bitcoin work?

The Bitcoin network consists of nodes, each of which maintains a public accounting book of all transactions that ever happened on the network from day 1. These nodes update their accounting books together and maintain a consistent state (everybody has the same copy of the accounting book) through a process called Bitcoin mining. Since all transactions are public and known, it is possible to calculate the balance of each account with absolute certainty and impossibility of fraud.

Bitcoin the currency is a token in which all transactions on the network are denominated (just as transactions in the Swiss banking system are denominated in Swiss franc, etc.). It has started on January 3, 2009 with a supply of 0 and is slowly released to the system as a reward for people contributing computational power to process transactions and secure the network in what is called “Bitcoin mining”. The supply is capped at 21 million Bitcoin units and is increased by a geometrically decreasing function – the amount of newly created Bitcoin drops by 50% roughly every 4 years. More data and specific numbers on supply here, a nice chart here. The killer features of Bitcoin the currency are predictability of supply  and known maximum supply cap of 21 million units.

Bitcoin (currency) belongs to the group of abstract token money. Unlike commodity money (gold, silver, cigarettes, sea shells or whatever physical commodity emerged as money in different communities), abstract token money is pure information that exists in the real world as data recorded in some sort of an accounting book. The US dollar and all other government currencies are an example of token money – they mostly exist as digital records in the banking system’s computers.

Bitcoin solves the usual problems of token money (constant inflation, unpredictability, unlimited maximum supply, fraud, moral hazard and corruptible central authority) by complete transparency of the accounting book and simulation of the central authority and enforcement of all rules as an emergent property of the network itself (this assures no single malevolent actor or group of actors can influence it for personal benefit, unlike a central bank for example).

 

3. What is so great about Bitcoin, why should I care?

 Bitcoin is the most important technology ever discovered for 3 reasons:

1) For the first time human civilization has created money with limited and predictable supply

For practical human purposes the amount of matter and energy in the universe is infinite. This means that supply of any commodity is potentially infinite too. Because of this, commodities are unsuitable for being money in the long run. Their supply can be wildly unpredictable and volatile, and is always growing as time progresses. This penalizes savers, sends incorrect pricing signals to the market and damages the structure of capital and production as a consequence.

Abstract token money (i.e. US dollar) suffer another problem – moral hazard and corruptibility of the central authority managing the supply. Whoever is in charge of controlling the supply of money wields one of the greatest powers at human disposal and is under massive pressure to use it for his own purposes. As history shows, every single abstract token monetary system has without exception always imploded after an inflationary episode as the people in control always kept increasing the money supply to finance their personal agendas to the point of destroying the system.

Bitcoin brilliantly solves this problem by adopting all the best features of abstract token money (supply management, no storage and transport fees, infinite divisibility, durability, transportability over any distance and single purpose use as money) but eliminating the weak points (moral hazard, central authority) at the same time – by simulating the authority and enforcing the protocol rules as an emergent property of the network itself (all people holding cash balances in Bitcoin enable the network to effectively enforce the rules, no single person or group of people are able to change them – the strength of the network grows with the amount of capital held in it).

2) For the first time human civilization has created money with its own transactional network that is resistant to violence 

This is probably the most important aspect of Bitcoin and it cannot be stressed enough. The entire history of mankind is basically a story of power hungry busybodies or outright sociopaths trying maximize their power and expropriate the general population’s resources to finance their own agendas – schemes, wars, social programs, bribes and profitable contracts for their political supporters, personal prestige or luxurious life styles. The easiest way of doing so is taking control over the financial system – issuance of new supply of money and control over the banking system which facilitates basically all transactions. The amount of long term economical destruction governments bring upon each of us individually as well as on the civilization as a whole is monstrous. Massive amounts of capital are destroyed and prevented from being generated with each government expansion and interference in the market.

Bitcoin has created a parallel free market economy where government has no power and each interaction is completely voluntary and anonymous for informed users. If subject A wants subject B’s money, the only way of obtaining it is to produce a product or service that A expects is worth more than the Bitcoin he gives up in exchange for it. B cannot tax A, threaten A with violence, laws, regulations, unions, monopoly rights, social contracts or any other pieces of paper. A and B either both agree an exchange is mutually beneficial and they trade, or they do not.

Not only are conditions of the exchange negotiated exclusively between A and B, A is now able to keep 100% of the money and turn it into capital investment to increase his future productivity instead of financing personal projects and lavish life styles of the ruling class. The state can no longer use the banking system to spy on the population and expropriate value from their economic transactions.

People taking part in the Bitcoin economy have a choice to experience exponential growth of wealth and living standard. All the money they earn is theirs and theirs only, and they alone will decide what portion and how to spend, save or invest at any particular point in time. The king, dictator or politician is able to have his hand in our pocket no more.

After 10,000 years of struggle the market has finally created a tool of personal financial freedom. It will unleash an era of prosperity and economic growth the world has never seen before.

3) It is the greatest investment opportunity of your lifetime

To understand where a price of an asset comes from it is necessary to study its supply and demand. The price of money, in other words its purchasing power, is no different. If we want to understand the price of US dollars, gold or Bitcoin we must analyze how their supplies behave and change in time and what factors influence the demand.

As far as supply goes, each additional unit of money entering the market (all other things being equal) will decrease its price (purchasing power). Thus from the perspective of supply, market will always be incentivized to use money that has a fixed and predictable supply. Bitcoin clearly dominates all its potential competitors in this area by an order of magnitude. Both government money and commodities have unpredictable and potentially unlimited supplies, while Bitcoin has a capped, mathematically guaranteed and predictable supply function at each point in time, even a hundred years from now (in contrast, try to predict the supply of US dollars or gold,especially considering asteroid mining, 100 years from now).

Demand for money, in turn, is determined by 3 main factors: liquidity / network effect, ability to maintain purchasing power (“store of value”), and ease of transacting (how costly, time consuming and difficult is it to exchange the money with other actors in various scenarios, geographical distances, quantities, etc.).

The network effect – number of people that are willing to hold cash balances in the currency and accept it in exchange for goods and services is a strong determining factor for demand. It is in fact so strong, that in case of currencies with similar/identical properties, market will in the long run always select the biggest network as THE money and eliminate all its competitors. That is also a reason why US dollar will never be displaced as a world reserve currency by any other government currency that has similar properties. The only reason why US dollar hasn’t eliminated its competitors is that governments around the world are able to threaten their populations into using an inferior currency managed by the local government.

Low network effect is currently Bitcoin’s only problem and competitive disadvantage. If all its remaining properties were similar or just slightly better than the US dollar or gold, it would be necessary to concede that it must inevitably fail as a currency and thus have zero expected market price in the long run.

However, Bitcoin totally dominates in the 2 remaining areas – as a store of value and as money with the best transactional network. Superiority in maintaining purchasing power comes from its fixed supply as discussed above. Bitcoin’s transactional network allows its users to send unlimited amounts of money – for a couple of cents – anywhere in the world – at any time – without anyone being able to prevent or censor it – with no permissions required – practically instantly.

Comparing Bitcoin to the banking system is like comparing internet to messages carried by pigeons.  While it would take many days, extensive questioning and investigation and massive fees to send a million dollars from one bank account to another bank account on the other side of the world, the same operation is instant, costs a couple of cents and is censorship resistant with Bitcoin. Bitcoin is like everyone’s personal Swiss Bank, carrying highly secured, anonymous accounts denominated in the strongest currency ever invented at disposal to every single human being on the planet on a couple of taps on their smart phone.

Because of these extraordinary advantages Bitcoin has been able to overcome the low network effect and grow exponentially by a multitude of metrics since its inception in 2009. This means that capital is leaving the paper money market and entering Bitcoin at increasing speed. It is, at this point in time, difficult to come up with a scenario in which this process could be reversed. The battle is between dollar’s network effect and Bitcoin’s limited supply and transactional network. If the network effect keeps increasing, it is necessary to expect that Bitcoin will slowly start taking over smaller government currencies and ultimately challenge the US dollar for the status of THE word’s money.

As a result, Bitcoin price would have to increase thousands or tens of thousands percent to account for the amount of capital stored in it considering its 21 million Bitcoin supply cap. The effect will be compounded by enabling people to remove their capital from speculative assets like real estate or stock market where it was forced by the destructive inflationary monetary policies of government central banks.

Target Bitcoin price: millions of current US dollars per Bitcoin.

4. Who controls Bitcoin?

The question of who controls Bitcoin is difficult to answer because it is not exactly the right question to ask. When talking about a machine, it is usually easy to determine the causal relationships of its operation and to refer to a certain actor as someone who is controlling it. It’s simple to tell who “controls that car over there” or who “controls the drill”. With social organizations it’s a little bit more complex because the term “controls” means “has influence on behavior of other people in the social system”. You can probably see that it is more complicated (but still possible) to say something about who controls a company, charity, soccer team or a political party than to answer who controls a hammer.

With Bitcoin the situation is even more difficult because the structure of roles and relationships between them is much more complex than in other social systems. One way to approach the question is to take a look at what different roles exist in the Bitcoin eco-system and how they influence it.

Role 1: the coder (software developer)

Bitcoin is an open source software project which means everyone has public access to all the code that constitutes the network. Anyone can review the code, make changes to it and also run it on his own hardware. The code contains a set of rules also called a “protocol”. It is enforced by all the computers (nodes) running the code and communicating with each other.

Anyone can make changes to the code and run it on his computer, but if they change the protocol other nodes will not allow him to be a part of the network. The coder thus must persuade other people who are running the code on their computers to adopt his changes. This happens on a regular basis as technical updates are released to increase the efficiency or add new functions. Most updates are of a technical nature and don’t influence the basic rules of Bitcoin, it is thus usually non controversial and easy for the coders to persuade people running the software to accept the changes.

One problem of the Bitcoin world is that the group of software developers writing the code is relatively small and well known and has a lot of attention of the Bitcoin community when suggesting and implementing changes. It is much more difficult for an unknown coder to get enough attention for his suggestions than for the Bitcoin veterans who also control the best known software depositories and communication channels. In this sense, famous coders mainly  have power over information – they control which changes and topics initially get the most attention.

The second biggest (and very interesting!) problem is that sometimes opposing views develop on more controversial changes and multiple camps of opinions develop. So far the issues have always been solved in a discussion, but it is possible and even probable that at some point in the future irreconcilable differences of opinions will develop in the community and they will have to be settled by a “hard fork” – a split of the network into 2 competing branches, where other roles than the coders decide the winner. That brings us to:

Role 2: the miner (protector of the network)

Miners are people running Bitcoin code on their computers which is responsible for gathering all transactions that occurred on the network and making sure the network achieves consensus (everybody holds the same information on which transactions occurred). Consensus is important in a distributed network because it eliminates cheaters who try to submit conflicting transactions to different parts of the network. The miners compete against each other in a kind of lottery where each ticket is bought by spending a certain amount of computational power. This lottery determines the authority on the network for 1 round (which is called a block and on average lasts around 10 minutes). The purpose of the lottery is to make it extremely expensive for a bad actor (someone who wants to damage the network or cheat) to be successful.

Miners have power in the Bitcoin eco-system because they determine how secure the network is. They determine how expensive it is for a potential attacker to do damage. In case of a “hard fork” – splitting of the network into two – the miners hold a lot of power because they decide which branch of the fork will be vulnerable and which will be more secure. This is true also because miners can themselves turn into attackers. If too few miners supported the weaker branch of the fork, big miners could try to exploit the situation and attack it. If the situation persisted, the branch of the fork would have very hard time surviving. In case of a dispute in opinion about which changes should be implemented in Bitcoin, miners have a lot of political power. But even miners are not the kings of the Bitcoin world, their survival depends on:

Role 3: the hodler (yes, HODLer)

The term “hodl” and “hodler” became popular in the Bitcoin community during one of the sharp price drops of Bitcoin in 2014. A Reddit user wanted to encourage his fellow investors to keep holding their investments despite massive pressure referring to the movie 300, misspelling the word “hold” in the process. “Hodler” thus refers to a person who holds cash balances / savings in Bitcoin and provides liquidity to the currency. As discussed at many places in these FAQs, a crucial feature of a currency is its liquidity. In a free market the currency without the highest liquidity could not hope to survive competition with the biggest player unless it offered significantly different properties. In case of Bitcoin liquidity directly determines the second crucial feature of a currency – the “store of value” property. Since the supply of Bitcoin is basically fixed, only demand determines how well a currency can succeed in this area.

Hodlers are thus the makers or breakers of a currency, everything ultimately depends on them. The way they have power over miners is by determining the purchasing power of the currency miners earn as a reward for securing the network. In fact, Bitcoin mining is just a regular business like any other. People make capital investments into hardware and hope to make a profit by providing services to the network. Since their income is purely denominated in Bitcoin, their profitability strictly depends on purchasing power of the Bitcoin currency. In case of a hard fork, even if a big majority of miners decided to support branch A, the hodlers could bankrupt those miners by moving liquidity into branch B. Since miners are just ordinary businessmen, their survival is completely dependent on their customers – the hodlers. As a result miners are very sensitive and don’t want to risk rocking the boat or doing anything that negatively influences the price of Bitcoin. It is not likely they would attempt to engage hodlers in battle.

There are many other roles in the Bitcoin world such as the nodes, wallet providers, exchanges, etc. but all of them are ultimately dependent on the hodlers. People who hold cash balances in Bitcoin are the ultimate kings of the currency.

If you want to have a say about Bitcoin too, better get started hodling some Bitcoin!

5. Why is a currency with limited supply better than an inflationary currency?

On a personal level, it’s pretty obvious – inflationary currencies like the US dollar slowly transfer wealth and resources from people who have any savings in it (you) towards people who get their hands on the freshly created supply first (in practice these are usually politically well connected people in the banking system and their friends). Every time the supply of a currency is increased, the purchasing power of units already in existence goes down, manifesting itself in the economy as rising prices.

Savers in an inflationary system experience constantly decreasing purchasing power of their savings as the prices rise. What actually happens is their savings are slowly siphoned off to governments and their friends, allowing them to take the population’s money without having to directly expropriate it through taxation. Since the average person does not understand how the system works, they do not feel aggravation and do not resist this theft the same they would if their taxes were increased transparently.

Simply put, with a fixed supply currency you grow richer with passage of time as a saver, with inflationary currency your financial wealth goes towards 0.

On a societal level, currencies with a fixed supply promote civilized behavior – saving, investment, deferment of gratification, lowering of time preferences, etc.

Animals have little to no control over their instincts and are not able to postpone consumption of resources to the future. As soon as they get access to resources, they almost immediately consume them. Humans, on the other hand, have the ability to forgo consumption in the present in order to use the resources as an investment that allows them to increase their productivity and consumption in the future. This behavior is the basis of civilization, economical progress and the continual increase of living standard.

Government currencies promote decivilized behavior as they punish savers and motivate them to consume as fast as possible in the present – just like animals. Not only do savers experience constantly diminished purchasing power of their savings, the effect is often compounded by artificially decreased interest rates. People are punished for saving and investing and rewarded for consumption and taking on debt.  Government currencies are a force in the direction of reverting us back to primitive barbarians and hunter gatherers who live from hand to mouth and are not capable of saving and capital investment.

A fixed supply currency – Bitcoin, on the other hand, promotes civilized behavior. Savers are rewarded by constantly growing purchasing power of their savings, the market offers them a premium for not behaving like animals and instead turning some of their money into capital investment. Deflationary currency, massive growth of economy, living standard and civilized behavior in general always go hand in hand.


 

Practical questions

1. I want to try Bitcoin out, what do I do?

Step 1

You need to install a Bitcoin wallet. The most convenient way for experimenting is getting one on your smartphone.

If you are an Android user, download Mycelium on Google Play or from the Mycelium website. If you are an iPhone user, download Copay on App store.

Bitcoin wallet is software that enables you to interact (send and receive transactions) on the Bitcoin network. Using a Bitcoin wallet might feel like working with PayPal or your internet banking, but instead of PayPal addresses or bank account numbers Bitcoin uses “Bitcoin addresses” or “Public keys”. In order for someone to be able to send you Bitcoin, he needs to know your address – the Bitcoin wallet will automatically generate one for you each time you want to receive a payment.

Step 2

Buy some Bitcoin. The easiest way is finding someone in your social network who is willing to trade some with you and teach you the basics. Join a local Bitcoin Meetup. If you don’t know anyone who is a Bitcoin user, head over to Bitcoin.com and select an exchange.

If you just want to buy a little bit of Bitcoin for playing around and don’t mind paying a premium for fast and simple purchasing, use Paxful. If you want to meet someone in your local Starbucks, buy some Bitcoin from them and pick their brain use LocalBitcoins.

Step 3

Now that you have some Bitcoin, make your first transaction. Ask a friend to install a Bitcoin wallet on his phone and try sending some transactions back and forth to familiarize yourself with the workflow.

Want to buy something real? Check out the where to buy section below.

2. I want to invest in Bitcoin, what do I do?

First of all, you need to remember the 3 golden rules of Bitcoin investing:

1) Always keep all your Bitcoin on your private hardware wallet, never at a third party or device connected to internet (exchange, web wallet, your cellphone or pc).

2) Always keep all your Bitcoin on your private hardware wallet, never at a third party or device connected to internet (exchange, web wallet, your cellphone or pc).

3) Always keep all your Bitcoin on your private hardware wallet, never at a third party or device connected to internet (exchange, web wallet, your cellphone or pc).

Don’t move forward until you understand this rule and are able to make sure you never break it – seriously, keep repeating it ad nauseum before putting any significant amount of money in Bitcoin.

Congratulations, by learning this simple best practice you will eliminate 99% of all the ways people managed to make a loss on holding Bitcoin.

Investing in Bitcoin is extremely easy, most of what it requires are two things:

  1. Buy a hardware wallet – hardware wallets are single purpose computers designed to store your Bitcoin private keys with maximum security, optimized to be resistant to all known attack vectors.
  2. Every time you have an available cash balance, buy some Bitcoin and store it on your hardware wallet.

The most important thing about Bitcoin investing is to remember that Bitcoin cannot be in a long term equilibrium with any other currency (government, commodity or crypto). It either completely dominates as the world’s only money at some point in the future, having a price of millions of dollars per Bitcoin or it will be outcompeted by another type of money and have a close to 0 market price.

The only reason to invest in Bitcoin is if evaluation of all available arguments leads you to assigning a non-zero probability to option 1. If that is the case, it doesn’t make any sense to “time the market” and try to find an optimal time to buy Bitcoin because the current price is orders of magnitude lower than the expected future price. The best time to buy Bitcoin was 6 years ago when it traded at a cent per Bitcoin.  The second best time is now.

Despite what technical analysts and investment advisers will lead you to believe, available research suggests it is completely impossible to consistently successfully predict future market price movements. The market is a complex random system, if you try to predict price of Bitcoin a day, month or a year from now, it is just a gamble with no knowable class probabilities – you might as well go to the casino instead, since there you are at least able to know the probabilities of different outcomes fully.

Investment in Bitcoin should instead be a bet on laws of economics and the inevitability of market forces selecting a single money in the long run (this does not apply to government currencies as they can coordinate and manipulate monetary supplies and force their populations to use them – neither is possible with Bitcoin).

In short, the investment strategy is: every time you can, buy some Bitcoin, store it on your hardware wallet, and wait for the market to do its thing.

If you want to invest instead of gambling, make sure to avoid:

  • trading Bitcoin on an exchange and otherwise trying to time the market
  • investing in Bitcoin schemes that promise you cashflow, interest or any return
  • investing in “Bitcoin businesses” (even legitimate ones as well known exchanges and payment processors – if Bitcoin succeeds, their business model inevitably dies as a result)
  • lending Bitcoin to “investors” or borrowers
  • doing anything that results in your Bitcoin not being held exclusively by you on your hardware wallet
  • breaking the 3 golden rules of Bitcoin investing

 

3. I want to buy something with Bitcoin, where do I go?

OpenBazaar will be a p2p free market version of eBay where Bitcoin is the only accepted currency, you can expect to be able to buy anything there.
Until it develops, you can buy directly from:

Buy indirectly for massive discounts:

  • Purse.io (buy on Amazon for average discounts around 10-15%, with massive discounts up to 40% achievable)
  • Foldapp (buy anything at Starbucks with a 20% discount – works in Canada, Mexico, Australia, Ireland, Hong Kong, UK, Macau, and Spain)

Search for retailers:

Search for online stores:

 


Skeptic’s corner

1. Governments will regulate or ban Bitcoin, it will die!

To explore this claim we must first look at the real meaning of the words “regulate” and “ban”. In their essence, they both mean “to issue threats of violence”. Specifically, the state threatens violence against people to are found to ignore its prohibitions or commands. How would such a threat work in the real world?

It could have 2 forms:

  1. people who are discovered to own or use Bitcoin will experience violence from government agents
  2. people who are discovered to run a Bitcoin node, miner or otherwise contribute to the network will experience violence from government agents

Ad 1)

“owning” Bitcoin in its essence simply means having access to a primer number that is used in calculation of certain mathematical functions. This prime number can be stored on a cellphone, computer, a piece of hardware, a piece of paper, or simply remembered or embedded in random objects using steganography. There is absolutely no way available to prove a person remembers some prime number. The state can ban and regulate remembering a number all the want, the fact is they lack any realistic means of enforcing it. If they issue threats of violence but consequently can never act on them, those threats are empty.

The same goes for “using” Bitcoin. It simply means calculating results of certain mathematical functions and then publishing the result for the network to see. Here again, by following simple rules, Bitcoin users can make it practically impossible for the government to collect enough evidence and enforce the threats.

Ad 2)

Threatening  violence against people who posses certain hardware or software is slightly more enforceable, but financially not feasible. First of all, all governments around the world would have to unanimously and at the same time agree to enforce such a threat – even governments that are completely antagonistic towards each other and seek to damage the other as much as possible or governments that currently guarantee at least a basic level of personal freedom.

They would then have to spend millions of dollars in costs to shut down each Bitcoin node that costs about 20 dollars to deploy. In the worst case scenario, Bitcoin network participants could simply keep investing 20 dollars to destroy 1 million dollars worth of investment on part of the governments. That hardly seems like a sustainable strategy on part of the governments, especially if people can simply protect their assets by owning Bitcoin and severely restricting governments’ incomes from inflation and taxation.

The one good thing about governments is their incompetence and inefficiency. They are so incompetent that after half a century of enforcing one of the strictest prohibitions of all – production and possession of drugs – it has never been easier for consumers to purchase drugs. Enforcing drug prohibition is an order of magnitude easier problem – your antagonists are people with below average IQs whose biggest asset is propensity to risk and who who have to manufacture, transport, store and trade all their goods physically, being open to endless attack vectors. If governments are so grossly incompetent to control drugs after half a century of threats and killing and billions of dollars spent, how likely are they to be able to enforce a prohibition on remembering numbers and calculating mathematical functions?

Regulation or banning of Bitcoin is a joke, it can never be practically enforced. Bitcoin has been specifically designed to make it as costly and difficult as possible, if not practically impossible. One reason why governments have never tried to openly ban Bitcoin is that it would reveal how utterly helpless they are in the face of it, generating a great marketing campaign for Bitcoin at the same time.

2. Bitcoin is a Ponzi scheme!

To tackle this one, let’s first take a look at what a Ponzi scheme is. Definition from Wikipedia:

A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.

Ponzi schemes occasionally begin as legitimate businesses, until the business fails to achieve the returns expected. The business becomes a Ponzi scheme if it then continues under fraudulent terms. Whatever the initial situation, the perpetuation of the high returns requires an ever-increasing flow of money from new investors to sustain the scheme. Read full article

From this we can identify some key features of Ponzi schemes:

  • they are operated by centralized entities (individuals, businesses, organizations)
  • they promise regular streams of “returns” (cashflow)
  • the cashflow comes from initial deposits of money in the scheme instead of business operation, dividends or spread of buy/sell prices of assets
  • they are secretive, the organizers don’t publish publicly verifiable information on how the returns are generated
  • the Ponzi scheme dies when the rate of new participants entering the scheme cannot generate enough cashflow for payouts

Comparing these features with Bitcoin:

  • Bitcoin is a decentralized, distributed, open-source monetary system designed to prevent manipulation by individuals or  centralized entities
  • Bitcoin is a currency, there is no stream of returns associated with owning it, just like there is no cashflow derived from simply owning US dollars of Swiss francs
  • Bitcoin is completely transparent – both as an open-source software project and as a publicly accessible accounting book of all transactions that have ever occurred on the network, anyone can easily get all information on Bitcoin any time
  • Bitcoin reaches maximum value (usefulness) when no more new participants can enter, ie. the entire world is using it

From comparing the features of both systems we can see that Bitcoin is the exact opposite of a Ponzi scheme. Not only is it the exact opposite of a Ponzi scheme, it is the best defense mechanism against Ponzi schemes because it has a fully transparent registry of ownership where everyone can check what is happening with any given Bitcoin. Investors of any business can easily demand the business operators to provide proofs of ownership and accounting for every single transaction made by the borrowed money.

Bitcoin investors don’t buy Bitcoin with expectations of casfhlows. They expect an increased market price for Bitcoin in terms of other currencies simply because Bitcoin has significantly superior properties compared to any other currency (and their transaction systems, as described above). If an investor in Argentina decides to exchange Argentinian pesos for US dollars because he believes properties of the dollar are superior to the properties of peso and subsequently makes an accounting profit on the spread of exchange rates in the future, that doesn’t make dollar a Ponzi scheme.

The worst case scenario for a Ponzi scheme (no more new participants can join the scheme) is the best case scenario for Bitcoin – as a currency is the most useful when everyone in the market uses it, but a Ponzi scheme dies as soon as everyone is in it.

Some people probably call Bitcoin a Ponzi scheme because they correctly observe that its market price can only keep rising (in real terms against prices of other goods and services in the economy) if more capital (at some point that must mean new participants) enters it. This is, however, true for price of every market traded asset. Holding supply constant, the price of US dollar against Euro can increase only if the change of capitalization of Euro subtracted from the change of capitalization of the dollar is positive. The same is true for price of Apple stock, gold, oil or anything else and is the point of value investing.

 

3. Bitcoin is a bubble!

Definition of a bubble from investopedia:

A surge in equity prices, often more than warranted by the fundamentals and usually in a particular sector, followed by a drastic drop in prices as a massive selloff occurs.

Looking at the long term Bitcoin price chart (use a logarithmic scale), we can see that Bitcoin has had 5 episodes of big price spikes (over 500% price increase in a short period of time), followed by sharp price drops. Every time this pattern occurs, people (especially in the media) start calling Bitcoin a bubble and predict its death based on the observation that other assets that went through similar bubble patterns hardly ever recovered and surpassed the peak price again.

Even a person with no particular knowledge of bubbles can spot a problem with the comparison. In every example or a bubble, the asset goes through a phase of big price increase, only to crash to a lower price (often lower than what the price was before the bubble started) and never recovers again. Bitcoin behaves in a completely different way. Each “bubble” is characterized by a higher price in the period after the bubble compared to the period before the bubble. The bubble always “crashes” to a price higher than what the price was before the bubble pattern occurred. Subsequently, the peak price of each bubble is then achieved at later point in the future.

An example from July 2011: Bitcoin rose from 0.72 USD to 9.20 USD, only to “crash” to 2.23 USD next January. In other words, Bitcoin rose from 0.72 USD to 2.23 (over 300% return of investment) in a course of couple of months, but the media cried bubble and end of Bitcoin. If the bubble periods where removed from the price chart, it would look like a steadily rising line (which in fact just describes gradual movement of capital from other currencies into Bitcoin).

The bubble pattern repeats regularly in Bitcoin and (surprisingly for some people) is completely inevitable. The bubble pattern is inevitable as a result of low liquidity in the market. Every time a significant amount of government currencies is exchanged for Bitcoin in a relatively short period of time, the price rises dramatically as the volume of Bitcoin available for purchase on exchanges in tiny (especially compared to other financial markets). Tiny available supply on exchanges leads to extraordinary price rises, even though the real increase in capitalization of the Bitcoin market is relatively low.

For example, if a hundred million USD enters the market through exchanges in a short period of time, it can easily double the price of Bitcoin, but real capitalization has barely moved a couple of percent (purely illustrative hypothetical scenario: if 100 million USD is exchanged for Bitcoin and price goes up from 100 USD to 200 USD, there is a 100% price increase, but at the same time market capitalization only changes from 1 Billion to 1.1 Billion, a mere 10% increase). Since price is simply an information – a gauge of capitalization, it must move down to account for the real underlying change of how much wealth really entered the market. Since exchanges are not liquid, the move of price downwards is also exaggerated relative to change in capitalization and undershoots it. After some time the price stabilizes and correlates with real capitalization and the pattern begins a new cycle again.

Bitcoin is destined to increase its price in bubbles and it has a long way to go to reach its potential of the world’s money. The market shall go through numerous bubble patterns in the future again, and the media as always will call Bitcoin dead despite its continued successful accumulation of new users and capital investment.

Some people refer to Bitcoin as a bubble not because of movements in price, but because they claim nobody holds cash balances (savings) in Bitcoin for other reason than to exchange it for some government currency at a higher price later in the future – as a mere speculation without any fundamentals. This mentality is indeed observable in investors in times of bubbles. For example investors in real estate in China or the US during a bubble buy houses only because they expect to sell them at a higher price later to some other investor, but they are not able to explain why those other investors in the future should be willing to pay a higher price. If everybody enters the market with an expectation to find a “greater fool”, one day the market runs out of new participants (similar to a Ponzi scheme) and the price collapses dramatically to account for the fundamental supply and demand of the underlying asset.

This situation will be analyzed in the sections below dedicated to altcoins.

 

4. Bitcoin is not a “real” currency!

Government issued currencies have a feature of being universally accepted as means of payment on an enclosed geographical area. This feature is a result of governments being able to force their populations into using a currency despite there being superior alternatives on the market. However, if a definition of currency would be that it must be a universally accepted means of payment everywhere, then no currency exists. It is obvious that Mexican peso is not accepted as payment in Italy, and Korean won in Luxembourg. Not even the currency with biggest network effect, the US dollar, is accepted everywhere.

The definition of a currency that makes sense is instead that there exists a network of people that accept it in exchange for goods or services and maintain cash balances in it. In case of Bitcoin, this group of people is not geographically concentrated in one area, but dispersed everywhere around the world instead. They mostly do business and economically interact with each other online instead of physically, which means people looking to spend their Bitcoin have a higher chance of doing so on the internet than looking for retail stores in their local area. Since we live in a global, digitized economy with international shipping available to basically every location in the world, this should hardly be considered a serious obstacle to purchasing goods or services for Bitcoin.

It’s difficult to get access to reliable data, but judging based on statistics from Blockchain.info, Coinbase or BitPay the number of people that have ever used Bitcoin is in millions, the number of businesses that accept it as means of payment is in tens of thousands and the overall market capitalization of Bitcoin (cash balances held in Bitcoin) at the time of writing is around 6 billion USD. These are by no means impressive figures, but already higher than some government issued currencies. The most important thing about these figures is that they are all rising exponentially, which means Bitcoin is going to challenge more and more government currencies for liqudity / market cap, user base and number of transactions every year if the trend continues.

It is definitely possible to purchase goods and services for Bitcoin, as well as find a large group of people holding it as savings. Furthermore, the number of (types) of goods or services that one can’t purchase with Bitcoin is decreasing fast as adoption accelerates.

 

5. Bitcoin can be outcompeted by an altcoin like Ethereum or Litecoin.

Currencies are demanded for 3 main reasons:

  • as a medium of exchange (how many people accept it in exchange for goods and services)
  • as a “store of value” (how the currency maintains or increases purchasing power in time)
  • for the transactional system that enables and supports payments using the currency

In case of US dollar and Bitcoin, the battle is between dollar’s superior liquidity and usability as a medium of exchange and Bitcoin’s superiority as a store of value and ability to use the Bitcoin network (which is in every respect better than the banking system).

Bitcoin skeptics argue that because of its initially tiny liquidity Bitcoin can never grow to compete with major currencies. Bitcoin proponents argue that because Bitcoin is a superior store of value with the best transaction mechanism, it will attract liquidity of savers and investors, which in turn increases the network effect (usability as a medium of exchange) – and this, in a virtuous self reinforcing loop, increases it’s usability as a store of value (since supply is constant in the long run, only demand determines the price and future purchasing power – as a result, increased demand for Bitcoin means higher price, means better store of value), which attracts more savers and investors, and the cycle repeats until Bitcoin slowly displaces all other competing currencies.

In the “crypto world” there also exist networks competing with Bitcoin. They are called altcoins and usually run a copy of the Bitcoin code with some cosmetic changes in parameters or system of transactions. Operators of these networks are trying to persuade investors that these networks (actually the native currencies of these networks) can compete with Bitcoin. The usual arguments for investing into these currencies are that

  • they will be more expensive in the future because Bitcoin is also getting more expensive compared to government currencies – investors will then be able to sell them with a profit
  • they might become “silver to Bitcoin’s gold”
  • just in case, you never know for sure what’s going to happen in the future – there is no mathematical proof that a random altcoin cannot replace Bitcoin, therefore you should own it
  • they have fancy features that Bitcoin doesn’t

The problem with altcoins and the arguments in support of investing in them is that they completely ignore the reasons why any currency is demanded in the first place. In case of Bitcoin vs US dollar there is a clear competition between very visible trade-offs. In case of Bitcoin vs altcoins, there is no competition of trade-offs at all since Bitcoin is superior in both liquidity (as a mean of exchange) and as a store of value, and neutral in respect to its transactional system because any major innovation that an altcoin can introduce can simply be added in the Bitcoin software as well.

People can never demand an altcoin as a mean of exchange, because Bitcoin outcompetes them by an order of magnitude (the liquidity of the biggest altcoin is 30 times smaller than that of Bitcoin). This in turn means that altcoins are also inferior stores of value – remember that liquidity and store of value move in a self reinforcing cycle. The smaller liquidity of altcoins also makes any investment in them more susceptible to losses and volatility since a much smaller amount is required to move the market price. For example one big investor selling 10 million USD worth of an altcoin can have a large negative impact on price (and the “store of value” property as a result, while at the same time have negligent or no effect on price of Bitcoin if selling the same amount).

The simple fact about altcoins is that they are a pure bubble. The only reason people demand them is because they hope that another person will be willing to pay a higher price for them in the future. At the same time, nobody is able to answer why anyone should be willing to pay any price for an altcoin at all (other than the gamble of a greater fool in the future). Since altcoins are inferior to Bitcoin in every respect (especially as currencies), they only rely on a steady stream of gamblers who hope some other gamblers will buy their altcoin holdings for a profit. The problem is, there is only a limited supply of gamblers and at some point the system will run out of them (just as a Ponzi scheme) and collapse.

Altcoins are a scam and the eco system has multiple types of altcoin promoters. Some do it simply out of ignorance (they don’t understand economics and the reasons demand for currencies exists), others understand that altcoins will inevitably implode in the long run but promote it as a gambling instrument. Others yet fully understand the nature of altcoins and as outright scammers simply try to take advantage of investors who are ignorant or don’t posses intellectual acuity to understand the economical nature of currencies.

Interestingly enough, almost nobody would get scammed by a person who created a bunch of pieces of paper and SQL database accounting records called the alt-dollars in his garage and who would try to persuade them to invest in them because alt-dollars have a realistic chance of displacing US dollar as the world’s reserve currency even though they have exactly the same properties and 0 liquidity. People get confused because they see Bitcoin successfully taking on government currencies but they do not understand where the success comes from. In ignorance they hope altcoins can do the same in competition with Bitcoin, which they can not.

 

6. Governments will make their own Govcoin and outcompete Bitcoin

Bitcoin and its architecture solves one very specific problem – protection against government violence. As promoters of free market currencies competing with government issued money have found out on multiple occasions throughout history, men armed with guns will break into their private property, drag them off and destroy their assets if they dare compete with governments. Cypherpunks thus had to solve the problem of running a free market monetary system that couldn’t be shut down by men with guns. This can only be achieved by building the system as highly robust, perhaps even antifragile. The technical means of implementing a system like this is called a blockchain. Blockchain is a distributed database that runs a full copy on a big number of peer to peer connected nodes which update the database in discrete steps (in Bitcoin on average every 10 minutes).

The problem with robust systems in general and the blockchain architecture particularly is that it is extremely inefficient and expensive. Robustness comes at a high price of both energy, complexity and extremely long times (compared to centralized systems) of achieving a consistent state. Running a blockchain based database makes no economical sense at all if protection against government violence is not a concern. In fact, it would be much more efficient to run a publicly available database with all transactions stored on Amazon cloud and available via a simple API. The only reason why such service does not exist is that the government would make 1 phone call to Amazon and shut it down in an instant.

Government will never make a blockchain based Govcoin, because it is a ridiculous idea. The government doesn’t need to protect itself from its own attacks against itself. The idea of Govcoin is laughable for at least 2 additional reasons:

a) governemts already have their Govcoins, they are called US dollar, Euro, Yen, etc.

95% of supply of government issued money is in form of digital accounting records in the banking system’s computers. Physical tokens – cash, only account for about 5-10% of money supply. The governments will not create Govcoins, because they have already created digital money decades ago and they love the power it gives them over their populations.

b) blockchain architecture takes away all control from the central authority

If governments one morning woke up in a frenzy of self destructive madness, they could decide to commit suicide by eliminating their greatest power and replacing their financial system with a p2p network. Since blockchain is a decentralized system, no actor (even a governmet) can influence what’s going on inside. In fact they would just create another altcoin (of which there are thousands already), over which they had no power and which would have no impact on Bitcoin whatsoever since altcoins must inevitably fail as explained above. At the same time they would lose their power to spy and decide who, how, when, with whom, what quantity and at what price is allowed to make financial transactions.

 

7. It’s all about the blockchain baby, Bitcoin is a fad

In 2014- 2015 the word “blockchain” became a hot buzzword thrown around in the VC and financial industry. Media reported on big banks investing millions of dollars to build their cool own private blockchains that will record everything from the ownership of your house and car, to the stock market and your toaster doing business with your fridge and apartment to pay for the bread and electricity. From every side we would hear about how Bitcoin is completely irrelevant and will be forgotten, the great idea that matters is the blockchain!

Let’s take a look at what a blockchain actually is. Blockchain is an architecture that solves a very specific problem – how to achieve consensus (simulate central authority) on a distributed network. Unlike a centralized database where every inconsistency can be solved by the central system (your SQL database always gives you a clear state of the data), p2p / decentralized databases can be in an inconsistent state – that means some nodes on the network have different data in their databases than other nodes in the network. This is a big problem especially if the database records financial transactions – it’s necessary to make sure every node has exactly the same copy of the database = network is in consensus.

Since there is no central authority (like a central bank in the financial system) on a decentralized network, it is necessary to figure out a way how to simulate its effects. Blockchain has solved this by something called proof of work – it’s like a lottery where each ticket costs a certain amount of computation power. In case of Bitcoin approximately every 10 minutes, on average, there is a winner of the lottery who becomes the central authority for 1 round. He gets to release a new block of transactions which will solve any dispute in case there are conflicting transactions.

The problem with this system is that it is extremely costly, slow and inefficient. There is a great price to be paid for the robustness of the network. In reality, the only reason to ever pay the high price is protection against government violence. A digital monetary system would be much more efficient if it ran on Amazon cloud rather than on a distributed network. The problem is that such a system would immediately get shut down by the government. If government violence is not an issue, it is much cheaper, faster and simpler to run a centrally managed database on the cloud.

There is no reason for the banks or any other public institutions to run a blockchain, because they must do what the government says. If they don’t, armed men in uniforms will break into their buildings and shut them down. Since they must what the government says anyway, they have no reason to store their data in a slow, expensive and inefficient blockchain.

The genius of Bitcoin is the fact that “a Bitcoin” is just an abstract token. It doesn’t exist in the real world, hence no amount of violence can steal or destroy it. Government can throw temper tantrums and threats, but they have no way of influencing who owns a certain Bitcoin. It is very much different with all other physical assets. If an ownership of a house, car, stock or any asset that can be physically seized or destroyed is in question, government delegates itself the authority to decide who the owner is. The final authority on ownership of anything is the opinion of government bureaucrats. If A and B are in a dispute over ownership of a car, government decides. If either party disagrees with the ruling and tries to use the car anyway, the government will use violence to assert its authority.

Government has no power in Bitcoin, because the rule of ownership of a Bitcoin is simply possession of a certain prime number. He who knows the number is the owner and no amount of violence can change that. In physical world he who wields the greatest amount of force decides who owns what. This is a reason why it doesn’t make any sense to record ownership of physical assets (or assets that are managed by individual person) on a blockchain.

Another reason why blockchain will never be used by centralized service providers (like banks or governments) is that it is immutable. It means that data once recorded in a blockchain can never be changed. This is a great security feature for free market money but a terrible drawback for centralized record keeping. Imagine the ownership of your house would be recorded on a blockchain and a hacker stole your private key and moved the ownership to himself. There is no way to modify the data in the blockchain so the thief would be recorded as the owner and nothing could change that. It is obvious that even in a free market voluntary property management system such record would not be honored (and there is absolutely no way any government would honor such record). As a result, the government or bank must run a centralized, mutable database that it can modify at its own discretion.

The main purpose of blockchain architecture is protection against state violence. In cases where state violence is not a relevant factor, standard databases running on the cloud will always be superior and outcompete blockchain solutions. Thus, the only use for blockchain is as a mechanism that enables Bitcoin. It is only because Bitcoin is so important and valuable to many people that blockchain has any relevance.

 

8. Investing in Bitcoin businesses is better than buying and holding Bitcoin

The argument for investing in businesses that provide services around Bitcoin instead of holding cash balances in Bitcoin goes something like this: since the price of Bitcoin is volatile and has dropped many times in the short run, it is better to buy shares of a company that works with Bitcoin and hope they can generate dividends or the price of their stock goes up.

The biggest problem with this idea is that “Bitcoin businesses” can generally be profitable only if Bitcoin is not too widely used. They are in fact betting against the success of Bitcoin. Let’s look at an example of a Bitcoin exchanges that generates profit by allowing customers to exchange US dollars for Bitcoin and vice versa, for a fee. This business model can only last as long as people have any reason to exchange dollars for Bitcoin on a centralized service. As Bitcoin gets more popular, people have gradually fewer and fewer reason to hold dollars at all. There already exists a fully fledged Bitcoin economy where all individuals transact and hold cash balances exclusively in Bitcoin, since they recognize it as a superior currency. As the size of this Bitcoin-only market grows, the number of people interested in exchanging money on a centralized service drops.

Once the Bitcoin liquidity reaches a certain point, it will make much more sense for people to exchange peer to peer (with your neighbor or colleague), rather than submitting all your personal and financial information to some government spied-on exchange. In case Bitcoin fulfills its ultimate promise and becomes the only world’s money, no currency exchanges will be able to exist at all.

The same is true for basically every other Bitcoin related business model because of the trend of dis-intermediation (removal of middle men) of services by software. There is no reason for a bank to exist and reap huge profits, if it can be easily replaced by a couple of thousand of lines of open source code freely available to everyone. Anything a company can do with Bitcoin, automated software can do better, faster and cheaper. In the future there will be no reason for any company to exist in the financial sphere at all. Even today, people who exclusively hold their finances and transact in Bitcoin have already replaced all the functions of banks by easy to use single purpose computers and applications.

The faster Bitcoin grows, the faster the so-called Bitcoin businesses lose purpose and die. They currently exist mostly as middle men to work with the interfaces between Bitcoin and government currencies, but there is no place for them in the future. Investing in Bitcoin business is thus a short term gamble at best, a gamble that Bitcoin with expected market price of millions of current US dollars per Bitcoin and the best performing currency in the world 5 out of 7 times since it has been created will under-perform a start up which in many cases has barely any cashflow or realistic revenue model.

 

9. Bad guys can use Bitcoin, therefore good guys shouldn’t use it

Certain politicians and mainstream journalists try to sell people on the idea that since “criminals” can use Bitcoin, it should be banned and destroyed. Let’s look at the abstract logical structure of this argument:

  • property P is bad
  • if an object has property P, it must be banned or destroyed
  • Bitcoin has property P
  • -> therefore, Bitcoin must be banned or destroyed

Property P in the case above is “can be used by criminals”. If this line of argumentation is valid, let’s just keep consistently applying it:

  • cars can be used by criminals, therefore cars must be banned or destoryed
  • food can be used by criminals, therefore food must be banned or destoryed
  • US dollar can be used by criminals, therefore US dollar must be banned or destoryed
  • anything can be used by criminals, therefore everything must be banned or destoryed

Only a clinically insane person can consistently apply this way of reasoning (since it would lead to complete destruction of all humanity). In fact this line of argumentation is  a typical weapon in the arsenal of statist sophists and manipulators. Their aim is not a logical argument but a negative emotional reaction on part of people with low intelligence by creating a negative emotional response to “Bitcoin” by associating it in a sentence with “criminals”.

Civilized society has a standard for dealing with destructive people – collecting evidence and proving given individual has an intent to damage another person’s property or bodily integrity. Governments usually completely fail it this task and only act after the damage has been done. Western societies generally tolerate this as people understand that it’s preferable to allow the government to attack, restrict and decrease the living standard of general population because some guy at some point in the future could do something destructive. This mechanism is exactly how dictatorships increase their power, by slowly eroding basic fundamental protective mechanism civilized society grants to individuals.

The problem also lies within the word “criminals”. Media and public institutions keep massaging people’s brains to associate the word “criminal” with “evil” / “destructive”, which in many situations is absolutely not the case. The word criminal simply means that a group of politicians in power currently find certain people and behaviors inconvenient to their power. These behaviors could or could not be destructive.

A typical example of this is the “smuggler”. Constantly reviled, the smugglers are supposed to by the great evil destructive force in society, they somehow steal from all of us by not paying government the fees it demands. Exactly the opposite is true – smugglers are people who take great personal risks to provide goods and services cheaper than they otherwise would be. Smugglers are increasing the living standard and quality of life of general population. People who are hurt by smugglers are politicians and their friends (usually incompetent businessmen who are not able to compete on the market by providing better or cheaper goods than other businesses and who subsequently bribe and lobby politicians to impose import fees or taxes on their competitors) – everyone else wins. Politicians hold the general population hostage and allow incompetent businesses to milk them for resources and parasite on them, while the smugglers are the heroes who undergo great personal risks to save us.

There are hundreds of other examples of people and behaviors that are labeled “criminal” but are actually beneficial or neutral to society. The only logically consistent categorization of behavior is whether it is damaging to any individual’s body or property / or decreasing the level of cooperation (voluntary production and exchange of ideas, goods and services) in society. Voluntarily exchanging anything for money can never be destructive in itself. What is destructive are individuals acts of aggression and violence. A civilized, rational and logically consistent society will focus on eliminating destructive behavior instead of arbitrary sub-classes of voluntary exchange.

Civilization is just a synonym for the level of protection individuals enjoy against arbitrary demands and acts of aggression coming from other members of society, but especially the rulers, priests and others in position of power. Bitcoin is the greatest force of civilization because it makes it difficult or impossible for anyone to extract financial resources from individuals by force. It incentivizes people to interact voluntarily with mutual consent. It is a wonderful technology that will bring peace, higher standard of living and civilized behavior to everyone around the world.

 

10. Bitcoin got hacked and the CEO of Bitcoin has been arrested, it’s all over!

Sensational headlines like these populate pages even of media that have a reputation of serious sources of financial information. It is alarming because they are factually wrong on a level that is trivial to research with minimal effort. They are a great source of jokes and chuckles in the Bitcoin community. In case of the headlines above, Bitcoin has no CEO because it is not a company but a decentralized open source project which makes in its principles centralized control (such as a CEO) impossible and it is mathematically provable (based on certain computational assumptions) that it cannot be hacked (if Bitcoin got hacked, the world would be in serious trouble because the same mathematics secures absolutely everything including the banking system and codes to nuclear weapons and other sensitive systems).

By writing complete nonsense such as an imaginary “Bitcoin CEO” (the exact opposite of what is possible in Bitcoin) the journalists writing them reveal themselves to be either incompetent, idiots, corrupt or incompetent corrupt idiots (or some other variation of the 3 concepts above). If you have your information about Bitcoin from the mainstream media, it is quite probably coming from corrupt incompetent idiots and thus – not very accurate.

Since we live in the age of internet / free access to information and Bitcoin is an open source project, it is very easy to get first-hand information about what it actually is and how it works. The Bitcoinist argues that Bitcoin is the most important technology ever discovered by mankind – even if the claim is false, you still owe yourself to form an opinion based on personal experience, facts and logical arguments. Get yourself out there and start researching, reading, experimenting and experiencing the wonder Bitcoin is first-hand, not by reading newspaper articles.

 

11. That’s it, Bitcoin is dead!

Various talking heads, journalists, academics and government shills have pronounced Bitcoin dead over 90 times in 2016 alone, yet it somehow keeps on growing exponentially despite being dead. Watching the toothless, impotent attacks on Bitcoin fail over and over again is a great source of amusement and fun, so get yourself some popcorn and enjoy the show since these funny commentaries are not going away anytime soon. Bitcoin takes away a lot of power and sources of revenue from governments and people financially dependent on them. They will not go down without a fight so the intensity and frequency of these attacks can be expected to increase as Bitcoin penetrates more and more markets.

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