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ANSWERED on Sun 5 Jun 2011 - 12:24 am UTC by Roger Browne

Question: Bitcoin

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montecristo 

Customer

 4 Jun 2011 10:40 UTCSat 4 Jun 2011 - 10:40 am UTC 

What do ucluers think about Bitcoin? I am not so interested in its potential as a solid currency, but as a way of getting rich.

 

myoarin 

User

 4 Jun 2011 12:59 UTCSat 4 Jun 2011 - 12:59 pm UTC 

This may be a start:
quezi.com/13527

 

montecristo 

Customer

 4 Jun 2011 18:37 UTCSat 4 Jun 2011 - 6:37 pm UTC 

What I am really after is the judgment of ucluers - I realise Quezi another ucluer website, but that answer is factual only. I am as familiar with the facts as one can be with this weird and obscure service.

 

Roger Browne 

Answer

 5 Jun 2011 00:24 UTCSun 5 Jun 2011 - 12:24 am UTC 

Hi montecristo,

As Uclue does not provide investment advice, this answer is in the form of overview and opinion, which I think is what you are seeking anyway.

The potential to get rich with Bitcoin is inexorably linked to Bitcoin's potential as a solid currency; or rather to Bitcoin's potential for wide adoption and extensive use, which is not exactly the same thing but is closely related.

Bitcoins are being traded now for more than a hundred times what they were changing hands for a year ago. In that regard, it seems that investing in Bitcoin a year ago would have been a spectacularly good decision. But that's with hindsight, and at the time the picture was not at all clear. No-one really knew whether anyone would start using bitcoins for real transactions. There was the guy who bought two pizzas for 10,000 bitcoins, but that was more a "proof of concept" than a regular transaction. So people who invested by buying bitcoins a year ago were taking an enormous chance against overwhelming odds, and they were lucky that it paid off.

Fast-forward to today, and the picture is much the same: only the scale is different. The risks are now slightly lower (but are still enormous), and the price has risen so the upside is not quite so high (but is still enormous). So the decision to be made is just as difficult.

The market price of a bitcoin is already "pricing in" the risks perceived by the market participants. If the risk of failure is lower than that priced into the market, then it could be a good investment. If the risk of failure is higher than that already priced into the market, then it is certainly a poor investment.

There are several reasons why Bitcoin might not become widely adopted, and any of these could lead to a total failure of the investment. If enough governments around the world tried to prohibit Bitcoin, it would prevent Bitcoin from achieving critical mass. If a corporation like Google or Facebook came up with a peer-to-peer currency that was significantly easier to use than Bitcoin, that could trigger the failure of bitcoin.

The early adopters of Bitcoin are acutely aware that it's not as easy as it might be to keep your coins secure. To avoid losing your coins, you need to have robust backups of the file that holds your private keys (the cryptographic keys that your software uses to enable you to spend your coins). To avoid others spending your coins, you must not let anyone else get access to that file. There's no doubt that virus writers are working on ways to "steal" people's bitcoin wallet files. A major loss of coins to a bitcoin-stealing virus or trojan could dent people's confidence in Bitcoin to the extent that it might not recover.

Naturally the software developers are working on ways to make Bitcoin more robust. But the Bitcoin software is a volunteer-driven open-source project. There's no organization "responsible" for Bitcoin (no central bank, no government, no corporation), which of course is one of the reasons some people want Bitcoin to succeed. This means that each user is responsible for securing their own system.

Services that exchange bitcoins for national currencies and vice-versa are springing up, and by far the most developed of these at the moment is MtGox
https://mtgox.com/
None of the exchanges has been able to make it really easy to get your cash in so that you can buy bitcoins (because convenient payment mechanisms such as credit cards and PayPal are fraud magnets when used to purchase non-cancelable items such as bitcoins). For most people outside the US, a bank wire is the most practical way to get money to the exchange, but the "friction" of doing this probably takes a little pressure off the exchange rates.

The number of bitcoins is limited algorithmically to 21 million (but they are subdivisible, so there's no economic problem here). Many people have published optimistic estimates of the evantual value of each bitcoin, based on wild assumptions such as that all uses of national currency will be replaced by bitcoins. Of course this leads to stratospheric but unrealistic projections.

More likely in my opinion is that the bitcoin community will grow, but will remain a minority. I would draw a parallel with other "niche interests" such as Esperanto speakers where there are a million or so adherents. If a million people were to actively use Bitcoin, the average person's holdings would be 21 bitcoins.

This leads to an interesting investment possibility. If you were to buy, say, 210 bitcoins, and if Bitcoin becomes successful and is adopted by a million people, you would have ten times the Bitcoin "wealth" of the average user. The worth of those 210 coins might end up being zero, or it might end up being a lot. But whatever the value is, the investor who holds 210 coins will be ten times as "rich" as average. Bitcoins are trading around £11 each today, so a holding of 210 coins would cost £2310.

There is a meme circulating in the Bitcoin community that 2100 coins could be enough for a retirement fund, being one ten-thousandth of all the coins that will eventually be "discovered"/"created".

Are these these the angles that you were hoping to explore with this question? Let me know if you need a different slant on this.

Regards,
eiffel

 

montecristo 

Customer

 13 Jun 2011 09:40 UTCMon 13 Jun 2011 - 9:40 am UTC 

 

David Sarokin 

Researcher

 15 Jun 2011 17:01 UTCWed 15 Jun 2011 - 5:01 pm UTC 

 

Roger Browne 

Researcher

 15 Jun 2011 18:18 UTCWed 15 Jun 2011 - 6:18 pm UTC 

Now that WikiLeaks has started accepting BTC donations, I think we'll be hearing a lot more about Bitcoin from the mainstream media.

Forbes: WikiLeaks Asks For Anonymous Bitcoin Donations
http://blogs.forbes.com/andygreenberg/2011/06/14/wikileaks-asks-for-anonymous-bitcoin-donations/

 

probo 

User

 22 Jun 2011 05:40 UTCWed 22 Jun 2011 - 5:40 am UTC 

Well, as usual, Roger is right yet again!

http://www.theregister.co.uk/2011/06/18/bitcoin_stealing_malware/

http://ftalphaville.ft.com/blog/2011/06/21/600441/george-clooney-roils-the-bitcoin-market/

http://www.bbc.co.uk/news/technology-13857192

Of course, he's far too modest to say, 'I told you so', so I will say it for him.

Well done, Roger!

 

Roger Browne 

Researcher

 22 Jun 2011 09:14 UTCWed 22 Jun 2011 - 9:14 am UTC 

That which does not kill Bitcoin will end up making it stronger.

Although the MtGox exchange has not yet re-commenced trading, Bitcoin is trading for around $14/£9 on the other (smaller) exchanges. That's way down from its peak of over $30, but it's still pretty strong considering that Bitcoin had never traded above $10 until last month.

 

ribuck 

User

 8 Nov 2013 14:26 UTCFri 8 Nov 2013 - 2:26 pm UTC 

At the current price of $320 per bitcoin, that's a compounded return of 231% per annum since the answer to this question was posted!

 

montecristo 

Customer

 19 Nov 2013 05:08 UTCTue 19 Nov 2013 - 5:08 am UTC 

Roger, how do you mine your Bitcoins? On your regular PC, or through a USB miner, or other? And how are you finding the rewards, as the difficulty gets higher?

 

Roger Browne 

Researcher

 19 Nov 2013 08:10 UTCTue 19 Nov 2013 - 8:10 am UTC 

Hi montecristo,

I have not mined Bitcoins for a few years. The electricity prices in the UK are so high that it's usually cheaper to buy Bitcoins from someone who mined them in a country with cheaper electricity. Of course, had I known a few years ago that the price would rise this high then the electricity price would have been irrelevant!

The difficulty level is now so high that a regular PC is totally unusable. A high-end GPU card can still (just) be used, but only if you have free electricity.

Current-day Bitcoin mining uses ASICs (applications-specific integrated circuits) which are the most efficient arrangement. These are available as a USB miner (low-speed) or as boxes containing many such chips (much more expensive but much higher speed).

The performance of ASIC-based miners depends greatly on the silicon technology that they use. In particular, those that use silicon with narrower track widths will run much faster and substantially cooler.

As I haven't been keeping track of what's currently on the market, I have no suggestions as to which of the current dedicated mining platforms are likely to be cost-effective.

However, I can say that mining brings with it a lot of hassles: software re-starts, hardware failures, and noise from the cooling fans. It's much easier (and almost as cheap) to just buy any Bitcoins that you need.

The current rapid price rise is obviously unsustainable, but I don't know whether it will stop later today or in a few weeks, and I have no idea where the price will settle. So far, each spike has been higher than the previous spike, and each low has been higher than the previous drop.

 

fp 

User

 28 Nov 2013 08:36 UTCThu 28 Nov 2013 - 8:36 am UTC 

In the news ...

"A digital 'wallet' containing 7,500 Bitcoins [...] is buried under four feet of rubbish":
http://www.theguardian.com/technology/2013/nov/27/hard-drive-bitcoin-landfill-site

 

David Sarokin 

Researcher

 23 Jun 2017 17:15 UTCFri 23 Jun 2017 - 5:15 pm UTC 

Fascinating to revisit this question now that it's popped back up. Bitcoin's value today is close to $3,000 per coin...about a 9-fold increase from the last (2013) post. The increase is not due to its widespread use as a viable currency, (its still inordinately difficult to use Bitcoin for everyday transactions) but rather because....well....I'm not really sure!!!

Another coin, Ethereum, is growing even faster than Bitcoin.

What a strange world we live in.

David

 

Roger Browne 

Researcher

 23 Jun 2017 20:51 UTCFri 23 Jun 2017 - 8:51 pm UTC 

> "...its still inordinately difficult to use Bitcoin for everyday transactions..."

Oh David, I can't let that statement go unchallenged!

With a well-designed wallet where you hold your own keys (such as Andreas Leitner's Bitcoin Wallet for Android), it's easy to transact coins. Just point your phone's camera at the Bitcoin barcode on the website (or paste in the Bitcoin receiving address), and type in your PIN. It's very smooth and easy.

The friction comes at the interface between Bitcoin and fiat currency, where (due to government requirements) you will need to submit scans of identity documents before you are able to make an exchange. But you don't have to buy your bitcoins on an exchange; you could work for them, or sell stuff for bitcoins on sites that work like a bitcoin-based eBay.

Bitcoins are widely used amongst tech enthusiasts as a way to make online donations - to open source software projects (such as OpenStreetMap), or to media providers such as podcasters. They are also widely used in countries not serviced by PayPal. But it's true that the largest part of their use seems to be as a store of wealth. That's ironic, because no-one guarantees that Bitcoin will hold its wealth.

OpenStreetMap funding drive list of donations
https://donate.openstreetmap.org/
(shows 4.15 BTC donated)

Tatiana Moroz
https://bulldozer00.com/2017/01/02/the-bitcoin-guitar/
(singer/songwriter with BTC barcode right on her guitar so that fans in the audience can donate from their phones - and the writer of that blog post also has his own BTC barcode in the right-hand column)

 

montecristo 

Customer

 24 Jun 2017 08:35 UTCSat 24 Jun 2017 - 8:35 am UTC 

I tell myself that had I bought early, I would have lost it in the Mt Gox debacle or sold out in one of the crashes. I don't want to hear otherwise, it's my coping mechanism.

On a similar note, I remember watching TSLA oscillate between $25 and $35 thinking the valuation was not sustainable.

 

marieabend 

User

 2 Oct 2017 13:57 UTCMon 2 Oct 2017 - 1:57 pm UTC 

Hey,

I have nothing against Bitcoins. It had it's purpose when it was created. Nowadays you can only buy, sell or use them to buy something in the darknet. Also a few weeks ago there was this big crash and the coins have a lower price now. As a result I think it would be the best to forbid them because their use is controversial.

 

Roger Browne 

Researcher

 2 Oct 2017 14:05 UTCMon 2 Oct 2017 - 2:05 pm UTC 

Hi marieabend,

Did you know that you can use Bitcoin to buy games, movies and apps from Microsoft, and to buy hotels and flights from Expedia? Would you count those as darknet businesses?

Add money to your Microsoft account with Bitcoin
https://support.microsoft.com/en-us/help/13942/microsoft-account-add-money-with-bitcoin

Expedia - Bitcoin Terms & Conditions
https://www.expedia.com/Checkout/BitcoinTermsAndConditions

 

montecristo 

Customer

 2 Oct 2017 23:31 UTCMon 2 Oct 2017 - 11:31 pm UTC 

Will no one rid me of this meddlesome reminder that I could have been a millionaire?

 

pearlschaffer 

User

 20 Oct 2017 06:07 UTCFri 20 Oct 2017 - 6:07 am UTC 

I have 2 bit coin so I am 10000+ USD owner. Yeahoo

 

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