I’ll admit it from the beginning that I have no proof I just know it to be true. (Thanks Bill Maher). Buying into BTC is the highest order of speculation there is. The “investors” are only there because of greed and not because some good will come of it for humanity.
Start with this: What if I could trade a paperclip for a house
Credit cards work because [a] the transactions are insured. [b] the cardholders outnumber the merchants and the transactions are insured [c] and because the merchant pays the insurance.
Debit cards work because unlike credit cards which work on “credit” the debit card is secured by case. However, just like credit cards the transactions are insured and the merchant pays for it.
Crypto Currency, if you could buy a gallon of milk at the grocery, is essentially a secured non-insured transaction medium. And in the case of most BTC the entity who initiates the transaction/block-crypto pays the fee… but the fee is not insurance it’s a proper processing fee.
So question #1; what benefit does the consumer or merchant get from crypto currency over debit/credit? None! The gallon of milk is going to cost the same whether the transaction is completed in USD, CAD, EUD or BTC.
What we are seeing here is that BTC is seeing a gross amount of speculation which looks like inflation. For it to become a currency and not an instrument of speculation it has to normalize. And if/when it does the actual ratio to existing currencies is anyones' guess.
Blockchain itself has a number of serious problems.
The winner of the blockchain race depends on a voting majority of miners and potentially easy to corrpt. Which this is unreasable for the individual it’s not impossible for the syndicates… and when was the last time you reviewed you latest miners source code? (See poisoning the supply chain).
What we know is that early adopter are making what looks like coin. A recent article talked about investing $1000USD a month ago in one currency yielded $1.2B. Of course that really depends on whether the USD could be extracted from the system. Assuming the honest broker sends you a wire… there are all those fees too.
Assuming you buy that milk and someone does not steal your wallet. Does Uncle Sam know? Well, maybe… YES. First of all the transactions are stored in a ledger. The ledger is secured by the miners in the block chain. If anything this says two things: [a] the transaction is good [b] it’s also evidence with clear chain of custody. Which is way more difficult to fake but possible. Also when the merchant purchases the milk and has to declare his taxes chances are the complete ledger will be provided as well as the cost of products like when the merchant purchased the milk from the farmer. In order to offset taxes.
Second, networking query theory has been around for a while. Should you receive coins they can track the flow of coins through the network. The time will come when they will be able to put a face to the wallet account numbers. So while the blocks may be anonymouse to the miners they are not anonymouse to the wallet, the brokers, or the banks when you ACH/wire money in/out of your real world banks.
Crypto currency is an echo chamber of greed that looks like a ponzy scheme. The early adopters depend on fresh investors to inflate the value. They do that in social media and in price manipulation. It only takes one small transaction to inflate the price. Not to mention there are absolutely no guardrails.
Still think you know everything? How about “it only takes 51%”. While it would still be a challenge it only takes a slight majority to change the ledger. However, without the proper incentive to keep miners running the number of miners will get smaller as they move to more profitable transactions.
When looking at purchasing a miner for myself to earn fractions I realized that the ROI calculators are an illusion. First of all it depends whether you’re actually lucky enough to mine something valuable (think lottery) or that you are in a pool and only earning a smaller fraction. The calculators take into consideration the cost of hardware, the electricity, and the value of a BTC. They seem to intentionally omit MTBF (mean time between failure), physical security, air quality including temp, humidity, quality; insurance, disk storage for the ledger, redundant power and internet. Then when things go wrong you will always need hands and eyes on location.
Still think you know something? So you’ve decided to build your own pool. Great. Do you know anything about how to compute and generate commissions? I’m not sure what it’s called but investors in this sort of pool contribute cash, capital, or both. Some are founders and some are common. As hardware depreciates who invested in what is now part of the commission formula. Now you have to hire an accountant and a tax accountant year round.
Now? Try this. Lookup the following in the dictionary. Currency, crypto-currency, digital currency. Now define: legal tender. By these definitions BTC et al may or may not be currencies but they are not legal tender.
By the numbers there will be 21M BTC and then no more. BTCs are divided into fractions called satoshis. Most people cannot afford a complete coin so they trade in fractions. There are 350M people in the US and less than 1% own or trade. Most of the current 17M coins are at rest; leaving between 2-4M coins in play.
Crypto currency is a gamble. Therefore it’s better to play with the house’s money not your own.