Bitcoin Insanity

Bitcoin is further proof that investors are out of their damn minds.

Originally, Bitcoin was supposed to be an anonymous, untraceable way of paying for purchases online, especially on the "Dark-net" or whatever it's called. I guess that's why it is called a "crypto-currency." I never paid much attention or considered using Bitcoin. For me, PayPal is the best way to make online transactions. That's how I pay for most purchases and how I get paid royalties from the United Kingdom.

PayPal is really convenient for me, because I can pay using one click, for most things, including garden seeds, magazine subscriptions and random eBay buys.

Using and keeping track of crypto-currencies appears to be a little more complicated. For one thing, there is a special removable hard drive, called a digital wallet, or something like that. This drive requires a very long and complicated password, without which, you could end up with a very expensive paperweight. In fact, that has happened to a few people. Several early users discovered they had lost their passwords about the same time they discovered their $300 investment was now worth more than the economy of Brazil.

In response to the success of Bitcoin, a number of other crypto-currencies have sprung up and they all seem sort of connected or related or something. Just thinking about it makes my brain hurt.

There are three ways to get Bitcoin: buy it, mine it, or have it grow in value, somehow.

Buying it seems fairly straightforward, although things have evolved to the point that buyers are most likely to go through a brokerage firm. Bit mining is something else. Miners use massive collections of computing power to solve puzzles in order to verify and keep track of crypto-currency transactions. None of it makes any sense to me, but theoretically, there are some people out there who understand it.

The part that makes the least sense is the gain in value, but that is beyond my understanding so I'll just skip it.

The pseudonymous creator of Bitcoin had a plan to limit the number of coins to around 20 million over a decade. Limited quantities makes things more valuable, whether they are actually valuable or not.

Investors have gone completely crazy buying and selling crypto-currencies and driving up the prices to unreal amounts as high as a thousand percent of their original cost. No one in their right mind would ever waste Bitcoin buying anything anymore--certainly not two Papa's pizzas like the first ever Bitcoin purchase. Bitcoin has become an investment vehicle with no intrinsic value. The Winklevoss twins, best known for selling their interest in Facebook for a couple of hundred thousand and later suing because they didn't realize it would be worth billions, have become billionaires buying and selling Bitcoin.

As if people making billions buying and selling crypto-currencies and driving up their values isn't bad enough, investment firms are now buying and selling crypto-currency futures. Futures are those things that drive up the cost of food, gas and other items and steal the extra cash. It's why food costs so much but farmers make so little.

The clincher in all of this is that Bitcoin, and all crypto-currencies, are imaginary. They don't exist, don't have any sort of backing (US dollars once had gold and silver backing them up. Now the US government backs them up by promising that the American people will make up the value with back-breaking work). If a broker takes your Bitcoins and walks away, you're stuck. And that has been happening. There is no governing authority, no central bank, no treasury, no mint, and while that was sort of the point of the original development, it is also kind of risky.

Frankly, I wouldn't care about any of this, other than having the benefits department investing my pension in imaginary, video game coins, but it is kind of scary to realize that "the smartest man in the room," is in his mom's basement somewhere playing Tetris with the world economy.

Stephen P.

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