Posted by MarkB_MI on February 26, 2014 at 15:57:19 from (75.198.19.174):
In Reply to: Bitcoin posted by Traditional Farmer on February 26, 2014 at 05:21:45:
To paraphrase Mark Twain, reports of the death of Bitcoin are greatly exaggerated.
To put the problems of Mt. Gox and other Bitcoin exchanges in perspective, consider this: Let's suppose you had 100 troy ounces of gold that you put in a bank safe deposit box. And let's say you come back some time later and find your gold is gone. Does this mean gold is not worthwhile as a form of monetary exchange? Of course not. It would certainly cast doubt on the integrity of your bank and of its security controls. But ultimately the value of any financial instrument is whether or not someone will give you something else in exchange for it. If Bitcoin is washed up, then it should be trading for a few cents, not several hundred dollars.
I've followed Bitcoin since it appeared a couple of years ago, and although I haven't purchased any bitcoins, I don't see that there's any fundamental flaw with the concept. Although the original Bitcoin may fail, there are a lot of imitators using the same approach (indeed the exact same algorithms), and one of them will succeed. Why? Mainly because the credit card industry has a stranglehold on commerce, so there is huge demand for a form of exchange that avoids the usurious fees of the credit card companies. Right now, Bitcoin is being driven by the underground economy, solely because of its anonymity. But the market for Bitcoin is much greater than just criminals.
Because of the ethereal nature of bitcoins, there's a common misconception that they're not real. You might just as well say that the value of pi is not real. Just like pi, bitcoins are solutions to mathematical problems. They are actually manufactured ("mined" is the term used) at considerable expense. If bitcoins were easy to make, they wouldn't each be worth hundreds of dollars. Because the bitcoin algorithm makes them more difficult to make the more there are in circulation, it now takes a significant amount of electrical power to make them. That explains why their value has gone up rapidly even as the supply of bitcoins increases.
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