In Bitcoin We Trust?


You may have heard of Bitcoin so far, but can you define it?

Generally, it is described as a non-governmental digital currency. Bitcoin is sometimes referred to as network currency or, in terms of its source of encryption, also known as cryptocurrency. These descriptions are accurate enough, but they miss the point. It’s like describing the dollar as a piece of green paper with a picture printed on it.

I have my own way of describing Bitcoin. I think this is a store credit without a store. Prepaid phone without phone. Precious metals without metals. Public bidding, statutory bidding that does not disclose or does not disclose debts, unless the tenderee wishes to accept it. A musical instrument is only supported by the full beliefs and credibility of its anonymous creators, so I don’t trust anyone, except for ingenuity, I don’t give any praise to it.

I will not touch Bitcoin with a 10-foot USB cable. But there are already a considerable number of people, and there will be more soon.

Part of the reason is because the entrepreneurs Cameron and Tyler Winklevoss, known for their role in the origins of Facebook, are now seeking to use their technical knowledge and money to bring Bitcoin into the mainstream.

Winklevosses hopes to establish a Bitcoin exchange-traded fund. The ETF will enable investors who lack the technical knowledge to directly purchase digital currencies to use Bitcoin more widely. As of April, Winklevosses is said to have held about 1% of all existing bitcoins.

Bitcoin was created in 2009 by an anonymous cryptographer on the premise that as long as enough people decide to consider it as valuable, anything, even intangible code, can have value. Bitcoin only exists as a digital representation and is not linked to any traditional currency.

According to the Bitcoin website, “Bitcoin is designed around a new form of currency that uses cryptography to control its creation and transactions, rather than relying on a central authority.” (1) New Bitcoin Coins are solved by computer algorithms to discover virtual coins “mined” by users. The creator of Bitcoin allegedly stated that the final supply of Bitcoin will be capped at 21 million.

Although Bitcoin advertises itself as “a very safe and cheap payment method”, in fact, few companies have adopted the move to accept Bitcoin (2). Among those who have a blacklist, a considerable part of them work on the black market.

Bitcoin is anonymously traded via the Internet, without any involvement of mature financial institutions. As of 2012, sales of drugs and other black market commodities accounted for approximately 20% of the dollar exchange rate of the major Bitcoin exchange Mt.bitcoin. x According to reports, the drug law enforcement agency recently conducted the first Bitcoin seizure in history, after the transaction was an anonymous Bitcoin-only Silk Road “Silk Road” that combined a transaction with prescription drugs and illegal drugs. Sales are linked together.

Some Bitcoin users also suggested that the currency can be used as a means of tax avoidance. This may be correct, but only in the sense that Bitcoin contributes to illegal tax evasion, and not in the sense that Bitcoin actually plays any role in real tax planning. According to federal tax laws, taxable transactions can be made without cash. Barter transactions and other non-cash transactions still have to pay all taxes. There is no reason to treat transactions involving Bitcoin differently.

In addition to criminal factors, the main devotees of Bitcoin are speculators, who have no intention of using Bitcoin to buy anything. These investors firmly believe that the limited supply of Bitcoin will force its value to follow a continuous upward trajectory.

Bitcoin did indeed experience some notable spikes in value. But it also suffered major losses, including a drop of 80% in 24 hours in April. At the beginning of this month, Bitcoin fell to around US$90 from its pre-crash high of US$266 in April. According to, earlier this week, they were trading at close to $97.

Winklevosses allows smaller investors to make profits or losses based on actual conditions, thereby making it easier to invest in Bitcoin without having to worry about the hassle of actually buying and storing electronic coins. Despite claims of security, it turns out that there are problems with Bitcoin storage. In 2011, the attack on the mountain Gox exchange forced it to temporarily shut down and caused the price of Bitcoin to briefly drop to near zero. Since Bitcoin transactions are anonymous, if you suddenly find that your e-wallet is empty, you are unlikely to track down the culprit. If Winklevosses gets regulatory approval, their ETF will help protect investors from the threat of personal theft. However, the ETF does not help solve the volatility problem caused by large-scale thefts elsewhere in the Bitcoin market.

Although Bitcoin is wrapped in a high-tech sheet, the amount of the latest currency is surprisingly the same as one of the oldest currencies-gold. Bitcoin’s own vocabulary, especially the term “mining”, highlights this connection, and it does so intentionally. The mining process is designed to be difficult to control the supply, making it difficult to extract more conventional resources from the ground. However, this kind of wording is far from providing a sense of security and should be paid attention to.

Gold is an investment of last resort. It has almost no intrinsic value. It will not generate interest. But because its supply is limited, it is considered more stable than money that can be printed at will.

The problem with gold is that it can’t do anything. Since gold coins are no longer in use, most gold coins in the world are now stored in the vaults of central banks and other financial institutions. As a result, gold has almost no connection with the real economy. When the real economy feels like a scary place, this seems like a good thing. However, once other attractive investment options appear, gold will lose its luster. This is what we have seen from the recent drop in gold prices.

In the process of pushing Bitcoin to the mainstream, its promoters have accepted and in some cases sought to strengthen supervision. Gox was registered as a money service business in the Financial Crime Enforcement Network of the Ministry of Finance last month. It also adds customer verification measures. These changes are in response to the Financial Crimes Enforcement Network’s March directive, which clarifies the application of its rules to virtual currencies. The ETF proposed by Winklevosses will bring a new level of responsibility.

However, in the end, I hope that Bitcoin will gradually disappear in the shadow of the black market. Those who want a regulated, safe currency that can be used for legal business transactions will be from the many currencies sponsored by national governments that have sufficient resources, the real world economy, transparency and security far exceed those of the Bitcoin world Choose one. can provide.

After the Bitcoin bubble burst, we will not even be able to use the remaining coins as jewelry.


1) Bitcoin, “About Bitcoin”

2) Bitcoin, “Bitcoin for Business”