Once they can be bought with a credit card and without waiting days for the block chain to be slowly downloaded, then maybe talk of the greater fool will sound more convincing. (Yes I realize there’s easier and faster ways to get the block chain, but only for one familiar with torrents and replacing files in directories) Most people just don’t want to work that hard for cheap easy money. Most people are just not that computer saavy.
All that being said, the author is dead on about parabolic trends. I’d much rather have seen a more linear appreciation…. But I do not share his pessimism regarding bitcoins inevitably doomed fate – due to this brief albeit rapid spike. The potential of this currency alternative is just too great. Over time bad money will always chase good, and there is a heck of a lot of bad money out there.
See here: http://bitcoin.org/en/choose-your-wallet
Electrum and Multibit are lightweight clients where you don’t have to download the whole blockchain,
Personally I used blockchain.info web wallet which is super easy to get started. Just make an account, it’s super easy. https://blockchain.info/wallet/
It’s the public ledger (block chain) that is the importan innovation. It essentially creates the perfect money substitute. Since every transaction is public, and each bitcoin is cryptographically unique (satisfying a certain algorithm), counterfeiting is pretty much impossible. Bitcoins are designed to behave like a scarce commodity (the factors of production rise in cost as bitcoins become rarer), so pegging bitcoin to some commodity would be redundant. But who knows what currencies will seem most promising.
And just the transactions are publicly traceable, it doesn’t follow that there is no anonymity. There are no identification requirements for creating a bitcoin wallet, nor are you legally obligated to declare ownership of any given bitcoin wallet. Proxy servers exist too. You can have a service where you have wallet A (buyer), wallet B (seller), and wallet x (proxy wallet). You can have wallet A give bitcoin.1 to wallet x, and then have wallet x give bitcoin.2 (say a bitcoin that has never been used in an illegal transaction) to wallet B (seller). Voila and your money is laundered. It is easy to conceive that wallets could pool legal and illegal transactions and act as a laundering middle man that way too. This can all happen on a TOR browser, or even done via VPN, which would make things pretty much impossible for the government.
As the currency appreciates in value (as it has been doing until now) payments for products will be made in smaller units. (So, in a few years, say, you might buy a bike for 250 Satoshis. If Bitcoin ever gets “mainstream” nobody will be trading in Bitcoins, they’ll be using Micro BCT, Milli BCT and Satoshis. (The smallest unit a bitcoin can be broken into is a “Satoshi”. There are 100,000,000 (one hundred million) Satoshis in a Bitcoin)
It was remarked by an Australian business analyst that if only 2.5% of “demand deposits” (thats current accounts around the world, not savings or deposit accounts) went into Bitcoin, its value would reach $700,000. (About 3 quarters of a million dollars per Bitcoin).
Thats no Ponzi scheme though – just simple division. If you have a lot of people sharing a finite amount of something, it gets spread thinner but its value goes up.
You can watch every single bitcoin transaction here as it happens. http://coinlab.com/ You’ll see lots of people buying tiny amounts of Bitcoin – 0.02 BCT and the like. Its not such a dumb thing to do as an “insurance policy” in case it gets big. At least you’ll have a horse in the race!
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