This article has actually made me curious about the validity of Bitcoins. The article misses the most important component of ALL currency. Confidence, followed closely by demand. Unadulterated barter between two entities engaged in commerce is not affected by the currency or any government. The entities must decide on what is traded, whether money, gold, bitcoins, goods, services, etc. Commerce should not be reliant on the government. So from where an agreed upon currency comes from should make no difference of its success or failure.
Bitcoin is supposedly limited to only 21 million units. Similar to Gold, it is a limited supply (no even yet fully distributed). Confidence may be a problem if you can’t hold it, feel it, smell it and taste it. You have to trust another entity to hold (or recognize) your bitcoin.
Demand is another story. A Bitcoin value is based on demand which is ironically based on confidence and security. If I have 4 tons of Gold divided into 1 once units in my basement, it’s a good bet it will always be of value to others. But if the power goes out, I can’t spend a bitcoin.
I’m going to look into it some more, but only as an investment, not as a viable currency. How could I make money on this and at what risk? When the dust settles, what will a Bitcoin be worth? How easy will it be to trade as the value goes up and down? How secure is it? Will it be recognized as wealth in a portfolio?
I have some deep doubts about bitcoin but for very different reasons.
“But if the power goes out, I can’t spend a bitcoin.”
Can’t spend ‘em if the internet goes down either. In fact, if the power or internet goes down I’m not sure they really exist any more. Of course, under those, circumstances the dollar is in almost the same boat, excepting the little bit of actual cash that might be stashed.