Personally, I hope this drives out most of the speculators. They have, in my opinion, done little for Bitcoin except make it difficult to use as an actual currency.
I think the interesting thing the article points out is that bitcoin mining itself is inherently a form of speculation though -- you are counting on the value of the bitcoins you mine being at least as high as the money you had to expend to mine the bitcoins (hardwar, power, network access), or mining is a losing proposition.
And that's not necessarily true. It assumes that everyone mines bitcoin for the purpose of obtaining bitcoin, not to support the network.
Like someone is intentionally donating money in hardware and electricity in order to support the project? How many dollars a month would you personally spend to do this? Maybe there's some rich people involved who have the money to spare? At the current cost of mining, how many dollars a month are are required to keep the economy going (I have no idea), and would it be possible to get that much as "charity" donations to support the bitcoin project (I have no idea either)?
Speculation has driven the cost of mining way up, but the speculation isn't inherent to mining. If the network was run entirely on a "charity" basis, the costs to mine would be much, much lower.
Mining involves some speculation about future difficulty and future exchange rates (since you have to pay for electricity in real money), but at least there are some fundamentals that you can build a model around. With simple calculations (that ignored transaction fees BTW) I was able to correctly predict when mining would and would not be profitable and mine accordingly.
Personally, I see speculation as a feature, not a bug. It brought attention to the currency and probably raised its value from a doge-coin-like joke to a legitimate way of exchanging value and having it become the defacto electronic currency.
I keep hearing these arguments from bitcoin supporters and its ridiculous. Currencies are constantly being invested into, speculated, etc. If your currency can't handle that, then your currency sucks. The people trying to make a profit aren't going away. Heck, they may be the vast majority of bitcoin users! I imagine bitcoin's volatility is just never going to go away. Any cryptocurrency is going to have the same issues. Using bitcoin is making a risky gamble. This is why we're not paying our mortgages with it.
"What's wrong with speculation?"
"I imagine bitcoin's volatility is just never going to go away. Any cryptocurrency is going to have the same issues. Using bitcoin is making a risky gamble. This is why we're not paying our mortgages with it."
What a great "currency".
This is like saying the ghetto is great, its just the criminals and poor ruining it. Uh, yeah, that's a problem with the ghetto. The criminals and poor aren't going away, as the ghetto favors them. The ghetto is not fine.
- BTC tends to fluctuate a lot. I could buy a pizza with it today, or a car tomorrow, or a house in a week. Therefore, I am going to think twice about buying a pizza today.
- Tax implications of BTC are complicated. If you have never owned BTC, and this year decide to buy it to experiment with it, now you have additional paperwork to file about it. If you buy it via a BTC ATM, or some other cash method, you now have to keep track of all the records. (Presumably, places like Coinbase, etc. do this for you, I haven't checked). This is not insurmountable, but that's different than taking $20 out of an ATM and buying a slice of pizza.
- BTC is hard to acquire. Yes, yes it is. Coinbase requires a multi-day verification process.
- BTC is hard to keep secure. To do this properly, you have to know how to create an encrypted cold storage wallet and how to keep your computer safe so that when you unlock it, someone doesn't grab the wallet while you are using it. This is hard. It's so hard that intelligent people with domain knowledge get it wrong. I don't expect someone who is not a "computer person" to just get it. Coinbase and such are great for the "not computer persons", but are not secure (as in, you need to use 2 factor auth + strong password, which most people do not do; it's also not secure in that if someone does get into your account, you are done for. There is no reversal/insurance).
- BTC is weird when you are spending money. With fiat currency, I go on Amazon, punch in my credit card number, hit "buy" and viola! my order is all set. Theoretically, my credit card can get rejected later, but in practice it doesn't happen; if it does, I am familiar with the process. With BTC, I am suddenly shown number of confirmations, have to wait for minutes to know if my order went through, etc. Imagine buying Google IO tickets with BTC: by the time my confirmation comes through, someone else already paid with a faster method and got my reservation. (I know they recently changed it to a queue/invitation system, but my point stands for lots of purchases where the quantity is limited).
- BTC is weird to spend, again. If my BTC is in an encrypted cold storage wallet, as it should be, I now have to defrost it, decrypt it, push the BTC somewhere, then wait. Oh, and for some modes of spending, I then have to transfer BTC again, and wait again (localcoin for example).
So, where will BTC go from here? Well, I think it'll continue being a specialized currency. It's not great for buying pizza, and I don't think ever will be. It is great for transferring money in/out of restricted jurisdictions, or from person to person without leaving an obvious trail. That part works well. If you are a Snowden-type whistleblower and need your friend to get you money, this is as good a way to do it as any. Or if you are my grandfather who cannot get his money out of Ukraine due to the banks "not having enough USD on hand" to wire his balance to a US bank. Or if you want to make an anonymous donation. BTC is basically a faster and more secure version of stuffing cash into envelopes and mailing it.
It's very easy to secure.
Create keypairs offline. Print keypairs. Send coins to address(es). Store paper wallet in safe place.
The all or nothing thinking when it comes to currencies reminds me of hearing people talk about religions.
The mindset being that you're securing your life savings.
That mindset is prevalent in the bitcoin community, because many of them indeed hope that their bitcoin IS their life savings. They hope for the day when their bitcoin has appreciated to the point that it's a significant asset, worthy of significant pains to protect it. From that perspective, your mindset it rational and correct.
The problem is that when you advocate such complex storage and use methods, you are advocating unnecessary complexity for the people you are attempting to sway to bitcoin. The normal person who wants to send $50 to his mother in the Philipines, or wants to have $100 on his phone to buy beer and hotdogs with, does not need such complexity, and will quickly run the other way when bombarded by it.
Any normal person who looks in to bitcoin, is bombarded with crazy ideas that the self appointed bitcoin experts claim he must must jump through.
* Use multiple addresses for privacy. Nobody should reuse an address.
* Use offline storage
* Generate your addresses on computers not connected to the internet
* Use a trezor.
* Use a deterministic wallet
* Don't use coinbase or circle, or the government will track you
If you insist on making bitcoin the domain of nerds, only nerds will use bitcoin.
If Bitcoin is "too hard" to figure out for someone, they probably shouldn't use it.
2 & 3. Those are basically due to Bitcoin being so new. Governments don't really know how to deal with it yet.
4. That's true, though there will likely be a product that will solve that in the future (i.e. a USB key that contains your wallet and signs transactions for you).
5. The waiting for a confirmation is more a limitation of the service. There's no reason why Google IO wouldn't be able to reserve your ticket once it received the transaction (within a couple of seconds) and then give you the ticket once there was a confirmation.
6. You use a cold storage wallet to hold the bulk of your funds, then transfer them to a hot wallet as needed. (So, keep your $5k in BTC in your cold wallet, and transfer $500 to your hot wallet every week or something.) Decrypting a hot wallet shouldn't be much harder than entering a password.
I'm guessing the exchange rate for ukranian currency to bitcoin (and then to USD) is not such to make this a particularly useful thing to do. But maybe?