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Why I’m Putting All My Savings Into Bitcoin
- Someone 15y agoTake away the interesting technical aspects, and BitCoin, to me, looks like a pyramid scheme. The BitCoin economy is like a small country with a novel monetary system. Now, a big country, say the USA, wants to join because it sees benefits in that system. Normally, such a transition would have the USA print new money. In this case, the answer to "OK, sounds useful, how do we introduce this kind of money into our economy?" is not "together, we pick an exchange rate, then you can 'print' a BitCoin for every X dollars you destroy", but "you buy it from us, who got there earlier". There also are huge problems integrating this "nobody can check where money flows" scheme into current economies. Income tax? Forget it. Indirect government control over inflation and interet rates?. Forget it. In the end, I think some of the ideas of BitCoin may live on, but I do not see it live for more than a couple of years. Meanwhile, it will make quite a few people rich.
- scotty79 15y ago> Take away the interesting technical aspects BitCoin consists only of technical aspects. The rest is just noise that people do around them.
- eropple 15y agoAll human-created phenomena are social phenomena. "It's just tech" is said only by those who fundamentally don't understand this or want you to ignore those social aspects for their own gains. Contrary to what lots of the Bitcoin aficionados might like people to think, the social aspects of it are the only part that really matters outside of a crypto mailing list. And they're also the reasons it's insane to expect people to actually use it.
- scotty79 15y agoBitcoin is as much social phenomena as neodymium magnets. Lots of people buy bitcoins but thats just consequence of the fact that bitcoins are excelent at being scarce and seem to be excelent at staying scarce and at some other things.
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- dstein 15y agoYeah but it's a pyramid scheme that makes you tons of money! /s
- DennisP 15y ago> nobody can check where money flows The government actually provides a system with exactly that property. > Indirect government control over inflation and interet rates? Forget it. A lot of people see that as a benefit.
- luigi 15y agoThis violates two simple, and obvious, tenets of investing: 1. Don't put all your eggs in one basket. 2. If it sounds too good to be true, it probably is.
- kiba 15y agoThey are only heuristics, not iron law of investment. Even so, don't put all your eggs in one basket pretty much apply to all situations.
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- splat 15y agoAndrew Carnegie would respectfully disagree with your first tenant: "Put all of your eggs in one basket -- and watch that basket!"
- diego 15y agoFor every Andrew Carnegie, there are lots of others who watched their basket and saw it destroyed. They just don't go around giving advice.
- vaksel 15y agoI recommend reading up on the MMM company. http://en.wikipedia.org/wiki/MMM_%28Ponzi_scheme_company%29 http://en.wikipedia.org/wiki/MMM_%28Ponzi_scheme_company%29 there is also a Russian movie called PiraMMMida that came out a few months ago, which is the fictionized version of history. Now that movie, is pretty much exactly how bitcoin tends to be covered by the fanboys. And as the movie points out, it comes down to pure greed, people give up real money in order to buy worthless paper, which they are hoping to unload before it depreciates...but they never do, because they keep seeing big returns...until the point when the whole "economy" crashes and you are left with nothing. An important point, is that these people knew that the currency was worthless, but because of their greed they continued buying it up and promoting it to others.
- kiba 15y agoBitcoin is not a company. It is a currency. It doesn't promise anything. The fact that it is an ingenuous social engineering hack is merely an effect of the money supply.
- scotty79 15y agoIf such silly thing as gold became money and paper printed by governments became money then a tool possessing qualities that bitcoin possess is bound to become money eventually. Only two real risks. Crypto weakness or Bitcoin 2.0 Gold is intrinsically similarly useless as bitcoin. We used it as money only because it was durable and rare. We used paper as money because strong, trustworthy entity declared that its supply will be limited and controlled. Bitcoin has this basic necessary quality but also much much more.
- thecabinet 15y agoWe use paper as money because a strong entity said they would accept those pieces of paper for tax payments. Rather than going to jail.
- pyre 15y agoWe originally used paper money, because it was backed by something (banks, gold, etc). Nowadays most (all?) paper money has been centralized to government control.
- raganwald 15y agoA few points: 1. There is a difference between "This is useful, I will use it," "This is useful, many people will use it, I think it is going to succeed," and "This is useful, I will invest in it." I have recently started using a text editor called Byword. I quite like it. But I am not rushing out to invest in it. 2. There is also a difference between "I will invest some of my money in it," I will invest all of my money in it," and "I will invest all of my money and all of the money I can borrow in it." If we take a thousand people and instruct each of them to invest their life savings and everything they can borrow into a single, randomly chosen investment, some will get very rich, richer than anybody who avoids borrowing money for speculative investments, and much richer than people who take a balanced portfolio approach to investing. But that doesn't mean it's a good strategy.
- palish 15y agoDoes anyone know of any balls-out investments that paid off (or didn't)? (I'm referring to "if this investment doesn't pay off, I'm jumping out a window" risk.) I'm just looking for interesting stories, and that sounds promising.
- carbocation 15y agoThose stories could be made any day. Take any volatile stock and stake out an extremely leveraged position on it for a day (or a few hours). If the stock moves in the direction you've bet, then congratulations, you've just made a bunch of money on a gamble. If not, you've lost everything.
- palish 15y agoI was asking for specific examples that have already happened. The point is to hear a fun story, not to learn any valuable or deep insights.
- rsheridan6 15y agoBob Parsons had already made tens of millions from an earlier startup, and he put all of his money into starting up GoDaddy, to the point where he would have been broke if it had been failed and he was almost out of funds to keep it going, before it turned profitable. He wrote an article about it but I can't find it right now.
- bcl 15y agobitcoin is somewhat interesting, I've been experimenting with it recently. One thing to note is that transfers aren't instant until your client catches up with the network -- when you first connect you currently have about 127k blocks to download before you are current. At first I had some trouble understanding why you couldn't just had a client and create easier coins. The thing is, you can, but the network won't recognize them. The key to the system's security is that as long as 50% of the bitcoin nodes agree on that the current difficulty level is you can't inject 'fake' money into the system. Right now moving money into and out of the system is a bit difficult. Mining is not worth the electricity it costs you, unless you have a GPU and join a mining pool. The 'value' of a bitcoin is very volatile, as tracked on the http://bitcoincharts.com http://bitcoincharts.com site.
- FooBarWidget 15y ago> The key to the system's security is that as long as 50% of the bitcoin nodes agree on that the current difficulty level is you can't inject 'fake' money into the system. Isn't it quite easy to spawn a few million malicious nodes?
- njs12345 15y agoYou have to have the computing power to beat 50% of the network - given the current size of the bitcoin network that's certainly not trivial.
- evan_ 15y agoUnless you're a malicious entity who doesn't mind using a botnet.
- wcoenen 15y agoThe individual in control of the DeepBit mining pool already has about 50% of the network's computing power. http://www.bitcoinminer.com/post/5328668205/deepbit-50-percent-threshold http://www.bitcoinminer.com/post/5328668205/deepbit-50-perce...
- zhoutong 15y ago"There is currently about USD 50 million in the bitcoin system, and just over six million coins in circulation, valued at $8 each. Up until now, demand has largely been driven by enthusiasts. The value of a bitcoin can’t be held constant — if 12 more million dollars is exchanged into bitcoin, the value of a coin will rise to $10. The more people who want to use the system, the more people will need to exchange a portion of national currency for bitcoin, and the more money will go into the system. The more money there is in the system, the more a particular bitcoin will be worth." This statement lacks economic sense. The total market capitalization of bitcoin ecosystem is $50m doesn't mean that $50m has been transacted. If I accept your offer of $800 per bitcoin, the market cap based on this transaction will become $5 billion instead. Therefore, the author has severely over-estimated how much money that people have put in to the market. He is probably thinking "So there are $50 million investment here, my savings are so insignificant that I don't have to count the risk."
- nasmorn 15y agoThanks I didn't catch that myself. Sounds awfully much like real estate where suddenly everyone was feeling rich because some idiot bought a house for too much money. (in this case aggravated by the fact that the idiot put zero money down.)
- synctext 15y ago"I predict that it has at least another thousandfold increase to go in the coming few years" Clearly a 'Bernard Madoff 2.0' pyramid scam. Only profitable for the early adopters, pay by the last suckers whom enter.
- weavejester 15y agoBernard Madoff ran a Ponzi scheme, not a pyramid scheme, and Bitcoin cannot be classed as either.
- gamble 15y agoYou're right, Bitcoin is actually more like a penny stock pump-and-dump scheme.
- weavejester 15y agoExcept there doesn't appear to be a whole lot of dumping going on. I suspect the majority of Bitcoin investors are more interested in seeing how far Bitcoin can go rather than dumping all their coins the moment they've made a reasonable profit.
- synctext 15y agoYes, that is the interesting bit. A lot of people are not in Bitcoin for the money primary. They are hoarders or altruists. Once some person tries to cash a $50,000 BTC account it will go down. The market depth is simply not there it seems. The money supply is not regulated vs. the trade volume, right?
- Tichy 15y agoI predict that the dollar has at least a thousandfold increase to go in the coming few years. Therefore I have shown that the dollar is a Ponzi scheme?
- rheide 15y agoThis person lost all credibility to me when he said that he borrowed money to invest. I'm a huge admirer of Bitcoin's technical aspects, but I would never even think of borrowing money to invest in anything, let alone bitcoins.
- carbocation 15y agoLeveraged positions are common, but leveraging yourself to the maximum possible and not leaving yourself a safety net, as is implied by the article, is crazy. I assume the author is speaking hyperbolically.
- henrikschroder 15y agoKnowing Rick, this is exactly the kind of thing he would do. You gotta give him credit for putting money where his mouth is, though. He previously took all his savings, and a bank loan to start the Pirate Party, and that worked out pretty well.
- po 15y agoThere's nothing more dangerous than a confidant gambler. Taking one high risk may wipe you out or make you rich, but taking a series of high risks will almost certainly wipe you out. His past success has nothing to do with this wager he's making now. It's like playing russian roulette 10 times in a row.
- niklas_a 15y agoYep. But it is those kind of people that end up making a difference in this world (for better or worse).
- amalcon 15y agoLeveraged positions are common, yes. They are also behind nearly every market bubble (and subsequent crash) in history.
- tobias3 15y ago"[Bitcoin is] an entirely new kind of currency that can’t be seized or frozen by governments" Simply not true. At the end of the day you need to change Bitcoins back to real money. The money that actually has some value because it (is supposed to) represents goods. The stuff you need in order to survive and live (food, clothes, ...). Goverments can declare these "banks" that change bitcoins back to real money illegal - mabe because bitcoins can be used to launder money (because it's advantage is, that "you can transfer any amount anywhere instantly without any authority knowing or interfering"). In this case all your money is worthless. But you can still write nice blog entries and get other people to buy the stuff from you ;)
- mdonahoe 15y agoPeople accept bitcoin as direct payment for things already, removing the need to switch back to dollars. Granted it's not a big selection
- tobias3 15y agoBut can you pay your rent in BTC or at the grocery store... As long as the essential things are not available via Bitcoins it is not an independent system and thus successible to goverment intervention. And even then. People tend to trust currencies issued by the government more and money is just an artificial thing based on trust.
- tzs 15y agoYou still need to switch some back to dollars, to pay sales taxes or VAT on the sales, and eventually to pay income taxes.
- weavejester 15y agoInvesting in Bitcoin is akin to investing in a startup. There's a chance the startup will become wildly successful and you'll make a tonne of money from it. But you also have to be prepared for the more likely chance that you will lose everything you put in. Investing all your savings in anything is a risk. Investing everything in a risky startup seems the height of madness... unless you don't have a lot of savings, I guess.
- tobylane 15y agoThe history of bitcoin is 14 months. How stable has it been over that time? It's only been in the news 2-3 weeks. I see the three bc/$ figures given, but it says nothing of stability. Other than that, it's fairly sensible. I'll stick with my 4.2%+ tax free isas.
- motters 15y agoThis is probably a very bad idea. It's too early to tell where Bitcoin will go, and whether it will achieve widespread acceptance as a currency. Putting all of your savings into something highly speculative isn't very wise, unless you can afford to lose them.
- leon_ 15y ago> Please make it possible to use milli- and microbitcoins as soon as possible Bitcoin supports transactions as small as 0.00000001 (1e-8).
- bluedanieru 15y agoWhat shall we call those? Micro-cents?
- gulbrandr 15y agonanocents I guess
- bluedanieru 15y agoThat's 10^-11, this is 10^-8.
- ashconnor 15y agoThe GUI doesn't support transactions of that size.
- ZeroMinx 15y agoLet's be clear that this is Rick Falkvinge, founder of the first Pirate Party. His title is now "political evangelist". It's not surprising that he's in favour of a currency that is free from government control. (Not that I disagree with him in general, I just thought this is something to take into account reading this article)
- puredemo 15y agoNot to mention that he probably already owns a lot of bitcoins and has a massive vested interest in seeing them become worth more.
- Duff 15y ago"They built a house of straw. The thundering machines sputtered and stopped. Their leaders talked and talked and talked. But nothing could stem the avalanche. Their world crumbled. The cities exploded. A whirlwind of looting, a firestorm of fear. Men began to feed on men. On the roads it was a white line nightmare. Only those mobile enough to scavenge, brutal enough to pillage would survive. The gangs took over the highways, ready to wage war for a tank of juice. And in this maelstrom of decay, ordinary men were battered and smashed. Except for one man armed with an AK-47, and a Honda full of silver"
- safeaim 15y agoWhere's that quote from?
- hugh3 15y agoI have no idea, but you'd be surprised how little silver a Honda can actually carry.
- nazgulnarsil 15y agowhat else? The Road Warrior.
- Duff 15y agoIts a Mad Max quote adopted by the Fuckedcompany.com BBS.
- littleidea 15y agoSummary question for the author: http://bit.ly/aorWMz http://bit.ly/aorWMz
- igrekel 15y agoIts hard to accept the author dismissing the threat of bitcoin being banned and then admitting it is difficult to buy bitcoins. If it is difficult to buy bitcoins, its most likely hard to get useable currency from bitcoins. Until you can buy groceries or other real life things in bitcoins, I'd say it is a a very real threat.
- stuhood 15y agoYou can buy groceries with Bitcoin: http://bitmunchies.com/ http://bitmunchies.com/
- igrekel 15y agoBitmunchies probably pays its suppliers using usual currency. I'd guess its is just a way to trade money for bitcoins and that they don't really convert those bitcoins to dollars to pay their suppliers. Just a guess.
- jpadvo 15y ago"The secondary uptake wave after enthusiasts is not going to come from those who use legacy banking daily and are comfortable with it. It is going to be people who don’t want or are not allowed to use the legacy banking system for their everyday transactions." This is also the point when governments will start aggressively working to shut it down.
- hugh3 15y agoThis article is crazy, and actually fills me with a little bit of schadenfreude. Asset bubbles run on the bigger fool principle, and they end when you run out of bigger fools to sell to. If folks have really started cleaning out their bank accounts and borrowing money to buy bitcoins (an amount of bitcoins which, incidentally, you probably could have picked up for twenty bucks just six months ago) then it seems to me that the world is about to run out of bigger fools.
- dualogy 15y agoFar from it because right now this is only being discussed in Hacker News... not in USA Today or FarmVille. However one defines "fools", I don't see a shortage. That said, I'm not invested, only observing here.
- hugh3 15y agoHowever one defines "fools", I don't see a shortage. In this particular case, foolishness is denoted merely by their willingness to pay high prices for bitcoins. While there may be out there in the general population plenty of people objectively more foolish than this guy, they're less likely to fall for this. This is the other big problem I have with bitcoin: it seems to exist in a very insular, very geeky world filled with people who don't really understand the non-geek world out there. Bitcoin will never really jump from the geek world to the real world, because the general population won't even understand its supposed benefits, much less give a damn about them. A few geeks may be able to talk their poor grandmas into buying some, but that's about it for general market penetration.
- dualogy 15y agoBut then, so was 15 years ago that whole Internet thing "too geeky", very insular with no connection to the non-geek world out there. So I suppose the BTC crowd sees that as a promising beginning.
- cletus 15y ago> In the past three months, the value has hundredfolded If this trend continues, my $8 invested for 1 bitcoin will be worth $800 million in a year! Seriously?
- limmeau 15y ago$800 millions should be enough to live comfortably by for a lifetime; no need to go all-in on bitcoins.
- pbreynolds 15y agoIt seems to me that a key move to stabilizing bitcoin would be finding a high demand product that can only be purchased with bitcoin. That along with offering retailers incentives (aside from the "no fees" aspect). A group of heavily invested bitcoin owners would be wise to organize such efforts.
- limmeau 15y agoThat would have to be something that cannot be resold. Still, a company which sells its product (which would have to be unique within its market segment) for "real" money today would have to say goodbye to all those dollar-wielding one-dot-oh customers and hope they come back tomorrow with bitcoins. Why would a company do that?
- adrianwaj 15y agoI feel I have that product, but cannot reveal what it is yet, because I have to add it on to my site, which isn't public.
- nazgulnarsil 15y agoBitcoin has aggravated the "layman talks out his ass about economics" problem again. 1. Gold is a proof of work system just like bitcoin. When someone accepts gold as payment for some other commodity or service they are doing so under the assumption that the value will be stable because it takes at least X amount of time/labor/ingenuity/money to "create" more gold by mining it. This is what backs non-consumption commodities. 2. Fiat currencies ARE backed. They are just usually backed by a service and not a commodity. The USD for example is backed by several things: the fact that it is the reserve currency for buying oil (all oil is sold in US dollars), the fact that dollars are avoid-prison coupons for tax burdens (how most fiat currencies have been backed), confidence that the US will inflate less than other regimes and meet its obligations, confidence that the US will enforce debt obligations denominated in USD with their military if necessary. I'm getting pretty tired of ALL CAPS hyperbole about gold and fiat currency.
- javert 15y agoI don't know much about economics, but... Gold isn't really a non-consumption commodity. It's used in things like jewelry and compter circuits. In other words, it doesn't just work because everybody agreed that it's a good mechanism for trade. It works because it actually has underlying value. Or, at least, I can't rule out that possibility, because it DOES have underlying value.
- adrianN 15y agoBut it has much less underlying value than other consumption commodities. Copper is more more useful than gold, for example.
- knowtheory 15y agoThat gold is overinflated doesn't diminish the fact that it has a utility outside of it's use as a financial instrument.
- adrianN 15y ago
- tpatke 15y agoBitcoin is a market which has buyers and sellers. Just because one more idiot is willing to buy $10, or $1000 for a coin does not mean there is a market to SELL $50M worth. This market sounds easy to get into and hard to get out of - especially in a hurry. ...saying that. I think the value of a bitcoin is probably going to go up. Everyone loves a bubble.
- netcan 15y agoInteresting side effect of these bitcoin discussions is the back & forward of "this is a scam" --> "This is insane social engineering hack" --> "This is no different from any other money" : Makes you think about what money is. We're so used to it that it seems trivial but if someone explained to you about their idea for this new thing called money you would probably think it was stupid, pointless and a way of scamming a goat for some stupid round things. So much of our world wouldn't exist without money. Serious question: Is there currently some easy way of buying and holding bitcoin without having to know anything about it, install anything, compile anything or be able to justify it or explain why to your wife? Perhaps some relaible online wallet?
- maxwell 15y agoMyBitcoin and Mt. Gox are OK, but are only for exchange. As far as I know, there isn't a web app for trading and mining yet. With browsers moving toward supporting hardware acceleration, it won't be long. The desktop client is pretty unfriendly to normal people; the whole scene reminds me of BitTorrent a few years back.
- netcan 15y agoI don't want to mine. I want to buy $100 of bitcoin, without having to do much more than put $100 in paypal and forget about it. Just an incentive to learn a bit more about it.
- eli 15y agoThese endless bitcoin articles seem to have less and less to do with hacking or startups. I suspect there are more appropriate forums for debating economics.
- orijing 15y agoThis reminds me of those penny-stock pump-and-dump articles/spam emails I used to receive. "Why I'm Putting All My Savings Into BITC". As soon as the pump scheme drives up the stock, you dump it and move onto the next thing. I'm not saying mazsa is doing this, just that it could serve the same purpose. "Now that I'm fully invested in bitcoins, please buy it up so I can sell it later at a better price."
- dspeyer 15y agoHe seems very impressed with the privacy: "In fact, nobody knows that he got it except me and him", "nobody can ... look at your account balance". But every transaction is public. Is there anything stopping the NSA (or Amazon, or me) from subscribing and adding up his current balance? Sure, it'll be linked to his bitcoin address, not his name, but that can't be all that hard to map, can it?
- swolchok 15y agoYou create a new bitcoin address for every transaction. Some money goes to the actual recipient, and the "change" goes back to your new address. In addition, you can attempt to "launder" bitcoins by executing bogus transactions from yourself to yourself. Posting a static bitcoin address on your website and saying "send money here" is not considered best practice.
- gulbrandr 15y ago> "Posting a static bitcoin address on your website and saying "send money here" is not considered best practice." Can you explain why?
- swolchok 15y agoIt breaks anonymity. Transactions are public and that static address is public, so anyone can tell how much money that static bitcoin address has received.
- scottkrager 15y agoCan I short bitcoins? If this guy is buying, I'll take the other side of that deal.
- synnik 15y agoEven if this were an otherwise good investment, I want know know: What stops the guys who run bitcoin from simply shutting it off? EDIT: And before people reply, "it is P2P", someone runs the web site. Someone owns the code repository. Or some group. There will always be a small group with power to muck with the system. What stops abuse?
- cobri 15y agoMy primary worry would be liquidity. -Because the demand to buy bitcoin is low, the likelihood being able to sell the bitcoin whenever he wants (ideally at height of bitcoins worth) is also low. This is the same reason that penny stocks are difficult to make a profit it. While the value may go up significantly, you can't realize this profit until you find someone to sell it to (and in order for them to buy it, they have to think it's going to go up even further). -Currently there aren't too many companies that accept bitcoin for products or services. -Any currency is only as valuable as the people using it believe it is (ie. the dollar is only a piece of paper, but because the seller believes that its worth is equivalent to a candybar, he will trade it). -Once people realize that they cannot use bitcoin for goods or services, the likelihood is that there will be a mass exodus, and the price will fall rapidly as people want to sell their un-useable bitcoin for a currency that still has value. With so few buyers, the discount will likely have to be pretty hefty in order to attract other buyers into a falling investment.
- ecounysis 15y agoThe fundamental question is whether enough merchants will accept it in exchange for valuable goods and services that people want. A currency is as valuable as the tangible benefits you can trade it for. It seems unlikely that it will replace the major systems of exchange, nonetheless, I still hold a small amount of my portfolio in bitcoin denominated assets because you never know. Twenty years ago no one could have predicted the impact of the internet on the banking system. Hell, ten years ago most people were still reluctant to use the online banking services offered by their financial institutions. And now we are at a point where a cryptography based ecurrency is the content of this discussion, which seems to be evidence of the validity of the concept. It's just a matter of whether it will catch on.