Article from The Guardian
"So you're thinking about investing in bitcoin? Don't. "
It's a long and interesting "takedown" of the cryptocurrency market.
Most of the points aren't wrong. Yes, you can get hacked. Yes, money has been stolen by hackers. Yes, you have pump and dump schemes. Yes, the same dangers that plague you on the internet will also haunt you in crypto. However, for those of us who resolved ourselves to embrace this wacky internet, we know and accept these risks. It's simply a part of life.
I'm not against warning people of the risks of any new technology, but I have a problem with scare tactics. This entire article is designed to scare people off. Especially those who know nothing about computers.
When speaking of gold, tulip bulbs and Beanie Babies he says:
"These are all things that people have bought in the past, driving them to absurd prices, not because they did anything useful or produced money or had social value, but solely because people thought they could sell them on to someone else for more money in the future. "
Remember the real estate market in 2007? That entire thing was pure speculation. I can recall sitting in my middle-class neighborhood in the US, watching the values of the houses next door double and then triple. Meanwhile, I was wondering if I would ever be able to get a job to afford a house next to my parents. The people flipping houses did not, and are not, trying to provide value for anyone. They are doing it with the hope of selling it for a higher price to someone in the future. That was speculation. Honestly, if speculation scares you, then you should check out from the world entirely.
As if on cue, he says:
"Investing means buying an asset that actually creates products, services or cashflow, such as a profitable business or a rentable piece of real estate, for an extended period of time."
Well, I just talked about real estate speculation and the bubbles they can produce. However, this indicates to me that he really doesn't understand much about the power of the blockchain and the coins they produce. Dentacoin wants to use its blockchain and cryptocurrency to improve communication between doctors and patients, and subsequently improve patient care. Does that provide a service? Steem has created a blockchain social media community that is designed to pay content creators instead of selling their content to advertisers. Does that provide a service? Ripple is using the blockchain to improve the transfer speed of money, from days to actual seconds. Does that provide cash flow?
For those of you who don't understand much about how crypto works, I'll try to give you a quick rundown. Every crypto coin is based on something called a blockchain. The blockchain is a public ledger that keeps track of transactions. However, it can be used to keep track of anything.
The blockchain technology's main point of focus is decentralization. If you have a Visa card, Visa keeps track of all your purchases to prevent fraud and to prevent you from spending the same dollar twice. If they didn't not only would you have unlimited credit, you would also be at the mercy of people who stole your number. Miners are the people who help secure the blockchain to prevent fraud and double spending. While Visa keeps its ledgers on its servers, miners across the world keep a copy of the ledger on their computers. Because of this, the bitcoin (any cryptocurrency) ledger is made public and decentralized.
Miners also do computational work to verify that your transaction is a legitimate one. In order to keep it decentralized, you have to incentivize miners to hold the ledger and continue to verify transactions. The main incentive is paying them for the work they do. This is why the coins are important.
The blockchain is not simply "nifty software". It is an entirely new way of thinking about community. I've read many white papers that focus not only on technology and mathematics but also social organization and economic theory. Why? Because the community is important. The bitcoin community started in 2008 and bitcoin had no value. Yet, but by virtue of community involvement and belief, the value started to rise.
I know what people will say next. Bitcoin has nothing behind it. Honestly, neither does the dollar you hold in your pocket. There is literally nothing behind it. You believe it has value because we, as a community, have agreed that it has value. But beyond the theoretical, I decided to get involved in this community by taking my some of my dollars to buy these coins. Others choose to invest in computational power, and its energy cost, to mine coins. At any rate, what you are seeing is the transfer of value from the traditional financial market into the cryptomarket. A few years ago the total market value of crypto was a hundred million. Today that value is over 500 million.
The author warns us to not "be one of these fools". However, I happen to believe in the future of this technology, its applications, and future value. So, in the spirit of Philip Mudd, I'm a proud fool.
