What’s a Bitcoin and why would you want one?

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	TOP STORY What’s a Bitcoin and why would you want one?
	By Woody Leonhard You might have heard in recent weeks about Bitcoin millionaires — people who raked in vast sums of real money riding this relatively new form of currency. Bitcoins offer both a fascinating, new approach to money and many potential pitfalls. Here’s what you should know about this online phenomenon.

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The full text of this column is posted at windowssecrets.com/top-story/whats-a-bitcoin-and-why-would-you-want-one/ (paid content, opens in a new window/tab).

Columnists typically cannot reply to comments here, but do incorporate the best tips into future columns.[/td]

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I read your full column concerning “Bitcoin”.
You do seem to be kind of promoting such abstract values?
The whole thing is flim-flam and when the likes of Woody Leonhard climbs aboard such things as “Bitcoin”, and takes so much trouble and time to explain the details of a scam/flim-flam like “Bitcoin” then it is time for me to jump off of WindowsSecrets, cancel my longstanding *PAID FOR* subscription, and wish for the days of “LangaList” to return.
Goodbye, WindowsSecrets, paid for – and I mean that most sincerely.

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I read your full column concerning “Bitcoin”.
You do seem to be kind of promoting such abstract values?
The whole thing is flim-flam and when the likes of Woody Leonhard climbs aboard such things as “Bitcoin”, and takes so much trouble and time to explain the details of a scam/flim-flam like “Bitcoin” then it is time for me to jump off of WindowsSecrets, cancel my longstanding *PAID FOR* subscription, and wish for the days of “LangaList” to return.
Goodbye, WindowsSecrets, paid for – and I mean that most sincerely.

Overreact much?! The whole point of the article was to explain what it is and exactly why it’s so volatile and dangerous. I thought it was great!

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I read your full column concerning “Bitcoin”.
You do seem to be kind of promoting such abstract values?
The whole thing is flim-flam and when the likes of Woody Leonhard climbs aboard such things as “Bitcoin”, and takes so much trouble and time to explain the details of a scam/flim-flam like “Bitcoin” then it is time for me to jump off of WindowsSecrets, cancel my longstanding *PAID FOR* subscription, and wish for the days of “LangaList” to return.
Goodbye, WindowsSecrets, paid for – and I mean that most sincerely.

The role of Windows Secrets is to inform, educate and help its readers on computing technology matters. Bitcoin is a trending subject in the technology area and the article does not promote it at all. Instead, it tries to provide a balanced overview of what bitcoin is, what are its main issues and why some people would want to use it.

Explaining what something is doesn’t mean you endorse it. In this case, the article tried to inform people on a subject that is showing up more frequently. If you do read websites on technology, you realize that the term bitcoin is showing up quite often. It’s better to be informed on something than being ignorant about it, even if all you want is to be able to decide you just want to steer clear of the subject, and that’s what the Windows Secrets newsletter is about.

Finally, about the promotion of such matters, the author has been pretty clear on where he stands, regarding eventual bitcoin purchases. If that is an endorsement, then I confess I must have never seen one.

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This is a fairly balanced article but rather too negative in terms of the association with criminality, however it provides a concise overview for those who may be wondering what this bitcoin noise is all about. The OP may be living out in the backwoods somewhere, but that’s fine, but please don’t assume that others are not interested in this subject.

My personal opinion on bitcoin is that perhaps it may all come to nothing, especially as those who control our currencies will not want to be outdone by this new kid on the block over whom they have no control; they are probably the ones behind the recent DoSS attack rather than “criminal gangs”. I have placed a punt of $100 on bitcoin and it is something i am able to lose in the worst case scenario but i am intrigued about the upside. I see bitcoin as a kind of digital gold and silver, far more practical than carrying bullion around, and something that will be quickly embraced by the youth of today and eventually we oldies will too, a bit like Facebook.

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“Like cash, Bitcoin transactions are untraceable.” This is false.
They are anonymous but they are hardly untraceable, every single person who downloads the block chain has a copy of your transaction saying what address the bitcoins were sent to, and where they came from. (Including where that address acquired them in the first place) So all it takes is finding out who one person in the chain of ownership is, then you can put pressure on them to find out who they sent those coins to (or recieved those coins from) and so forth. This is how many of the hackers were caught. They tried to spend their bitcoins and no one respects a thief.

So though you can use them for illicit purposes, you are taking a much greater risk than if you use straight up cash.

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I (no encryption or database expert) wonder if some of the Bitcoin magic might be used to create a gun registration system that would allow registration and tracking of guns, while guaranteeing the anonymity of gun owners. To satisfy criminal investigation needs, a specific gun’s ownership history might be acessible only in response to a conventional search warrant.

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Actually another very plausible explanation for the crash, if you think about it, – actually the run up and the crash – is that this bubble and crash were engineered by those who have the most to lose from its success. These are the large/ huge (private) banks controlled by the governments/ elites, including of course the various central banks, the US Federal Reserve via its proxies (Morgan Stanley, Goldman Sachs et al).

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Woody,
It seems the initial responses are mostly aimed at one person’s response. Hopefully a question or 2 about your article will be appropriate here.
I could have missed what I am about to address and if so please accept my apologies.
Bitcoin seems an interesting concept but if I wanted to purchase them do you need a credit card? If so wouldn’t that impact on the secrecy?
Also, if you pay in good old American greenbacks, where are they kept or who keeps them?
Finally, I purchase some Bitcoin with my greenbacks and later want my greenbacks, back, how is that handled?
It would seem that this could be another currency that could be ‘played’ like the other currencies of the world. Can you spell FOREX?
Other than addressing these type of questions, you article was informative.
Thanks.

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I’m surprised you didn’t talk about mining bitcoins. For readers of Windows Secrets who are more inclined to be interested in the compter aspects of bitcoins, mining them, the computing power needed to solve bitcoin problems to get them and the special computer setups offered for sale to mine bitcoins, would be of interest.

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Thanks for the article (and the history lesson!)! I had heard of Bitcoins a year or so ago. I looked into the concept briefly, thinking it was something else entirely. I’m no investment whiz kid by any stretch of the imagination but I’m pretty darn good with math. The more I read, the more I developed the beginnings of a potent migraine so I dropped my research and walked away.

Thanks to you I have a much better understanding of this “currency”. Guess that’s why they pay you the big bucks, right? 😀 Thanks again!

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Bitcoin IS money no matter what some people might claim. However right now the volatility makes it a not very good form of money. (great for speculation, not so great for transactions over the course of time)

I see Bitcoin as a possibility for implementing micro-payments. It is my understanding that overhead costs of conventional payment methods make micro-payments uneconomical. Bitcoin should be streamlined enough to allow micro-payments for profit.

However one aspect of commerce I do not see discussed much in relation to Bitcoin is arbitration. What do you do if you pay in Bitcoin and you do not get satisfaction? Traditional credit cards allow for some leverage in disputes and even PayPal has some slight protections. Bitcoin is like cash, once it has left your hands, what recourse do you have?

In theory Bitcoin transactions can be traced but I don’t hear much about dispute resolution.

If you want to do legal business, you need legal recourse and following right behind that, you need to allow for taxes. Those parts do not seem to me to be worked out yet.

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Quel coïncidence! I am writing a column for the Korea Monitor titled “Of Bitcoins and Bubbles” which is an expansion of a short paper I wrote for an April 10 meeting of a History Book Club in Rockville, Maryland. (The book under discussion was Kindleberger’s “Manias, Panics and Crashes”.) The first third of my column is similar to your article; the latter two-thirds will associate bitcoins with contemporary economic bubbles including the next one that I see approaching. I delighted seeing that our minds run the same paths regarding the bitcoin scam – which, incidentally, is attracting the drug trade money-launderers as well as Russians and others fleeing the defunct Cyprian banks.

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“The system works because the currency used remains relatively stable.” I would state it as, the system works because the currency used is trusted by everybody; it is trusted by everybody because it is stable.

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The ‘haircut’ in the Cypriot banks was mainly to get cash from Russian mafia who had huge deposits in those banks. They were the people who got their money out in a hurry, since in usual bureaucratic fashion, while Cypriots themselves couldn’t get much cash out after the announcement, the Cypriot bank branches in other countries had no restrictions. So the Russians got their money out and your bitcoin theory may be right since that money had to go somewhere, somehow.
Not too many Cypriots have the kind of bank balances to have to worry about the final decision which had a fairly large minimum balance.

"She was not quite what you would call refined. She was not quite what you would call unrefined.
She was the kind of person that keeps a parrot."
--Mark Twain

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The ‘haircut’ in the Cypriot banks was mainly to get cash from Russian mafia who had huge deposits in those banks. They were the people who got their money out in a hurry, since in usual bureaucratic fashion, while Cypriots themselves couldn’t get much cash out after the announcement, the Cypriot bank branches in other countries had no restrictions. So the Russians got their money out and your bitcoin theory may be right since that money had to go somewhere, somehow.
Not too many Cypriots have the kind of bank balances to have to worry about the final decision which had a fairly large minimum balance.

A lot of the Russian cash probably went into gold which then got hit with naked shorts of staggering proportions orchestrated by the Fed and their friends. The Fed and the Troika are trying their hardest to grab as much cash from not only criminals but also hard working people whose savings are stolen directly or diluted through near-zero percent interest rates to help them fill the big hole they dug whilst also lining their pockets through huge bonuses.

Anyway, this is an IT site, it would be great to learn more about the computing power needed to mine those bitcoins and whether it is truly uncrackable.

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This year, a Bitcoin cost $266 on April 10

So if I had one and wanted to spend only $5, what do I do? Break a bit off? :rolleyes:

Nil illigitimi carborundum

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Was it W.C. Fields that said “There is a Sucker Born every Minute” and/or “A Fool and his money is soon separated”? Maybe it was Ben Franklin. Bitcoins is another Scam like Carbon Credits and Global Warming.

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Let’s see now. We have a supposed “currency” which has no physical existence, whose value is not regulated nor officially tracked, does not trade on any regulated exchange, has no residual or intrinsic value, and whose ownership is not registered anywhere. No official sanction or backing by any responsible party either. Yep, great investment, folks!

If it smells like vaporware, maybe it is vaporware.

And the article, far from endorsing Bitcoin, gives a succinct critique of exactly why NOT to trust, use or invest in this vaporware.

-- rc primak

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Let’s see now. We have a supposed “currency” which has no physical existence, whose value is not regulated nor officially tracked, does not trade on any regulated exchange, has no residual or intrinsic value, and whose ownership is not registered anywhere. No official sanction or backing by any responsible party either. Yep, great investment, folks!

If it smells like vaporware, maybe it is vaporware.

And the article, far from endorsing Bitcoin, gives a succinct critique of exactly why NOT to trust, use or invest in this vaporware.

I could argue that most of your points apply equally to dollar bills in your pocket. They certainly would apply to any foreign currency in your pocket. Just because a bitcoin is not physical does not make it immaterial. Cryptography makes them unforgable at least as far as current cryptographic theory allows. That just leaves an agreed upon value to argue over. Bitcoins are subject to the same fluctuations that all the rest of the global currencies are subject to. The problem is that the current pool of value is too small so external influences can have unacceptablly large impacts in Bitcoin values.

Bitcoin exists there can be no argument so it’s not vaporware. It cannot be forged or double-spent, it’s not a ponzi scheme. Therefore it is an acceptable currency for short term transactions. It is not an acceptable long term store of value but it is a good way to gamble. (although I don’t think there is currently any way to bet that it will decrease in value)

Given time to grow and establish legitimate business venues, it could become a viable form of money but right now it looks like it is primarily good for untracable payments, efficient electronic transferrs, and speculation.

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I’m not buying it — theoretically or physically.

And I wouldn’t touch a Bitcoin with a ten-foot Greenback!

All US currency (even paper) is backed by the “full faith and trust of the Government of the United States”. True, that trust could be damaged by a default on the US debt. But not even the most rabid Tea Party Republicans will ever let that happen.

Bitcoin on the other hand, is not backed by the full faith and trust of anyone, other than your own imagination of its value to you. “Floating” a currency’s value vs. other government-backed currencies is a far different thing from “floating” a piece of imaginary currency against — WHAT???

Dutch Tulip Bulbs, anyone? Worth their weight in gold — or maybe even much, much more! Sound familiar?

-- rc primak

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