Bitcoin: The Major Difference

by Moose

This article is in response to Doorman's article that appeared in 37:4 entitled "Thoughts on Bitcoin."

I want to commend Doorman on his very well-informed article, and he made every effort to differentiate facts from his opinions.  His article is well thought out and highly informative.  I agree with all his statements and research.  However, I believe he missed a major fact about Bitcoin that changes everything: Bitcoin is virtual.

Being virtual changes everything about Bitcoin when comparing it to other forms of currency, or even just other items of value.  Again, I do not wish to say that Bitcoin should be avoided, but there are things to keep in mind when you start dealing in a virtual commodity.  There are major risks and a definite downside to Bitcoin.  I will also try to show the flip side of traditional investments with these factors.

If you are reading this magazine, you understand no computer system, network, or data storage system is completely secured.  It is only a matter of time before some clever people find a loophole or vulnerability that can be exploited.  In fact, it is already happened with Bitcoin a few different times.  Early in 2019, an attack on blockchains made it possible to "double-spend" cryptocurrency.

Not only does cryptocurrency have vulnerabilities, but there are also other weak points to attack Bitcoin: the companies trading and storing it.  In July of 2020, a France-based ledger had data stolen from it.  Once Bitcoin is stolen, it is most likely impossible to recover or trace it.

Flip side: yes, all traditional investments have similar risks, but there is also insurance for these risks.  If your credit card number is stolen, you are not responsible for any unauthorized purchases.  If your bank account is hacked, the bank will make good on it.  If your real estate burns down, your insurance company will compensate you.

Doorman rightly points out the autonomous nature of Bitcoin.  This is a good thing overall and provides a lot of the advantages he speaks about in his article.  The double-edged sword in this situation is that because there is no "overall ownership" of Bitcoin, there is also no one to fix or address a vulnerability that may present itself down the road.  This could render all Bitcoin worthless overnight.

Flip side: If a credit card company is compromised, they are on the hook to make customers whole.  Even if a government creates a problem with their currency, they are on the hook to fix it (see Greece).

Finally, there is the major downside of Bitcoin.  If there ever is a massive societal downfall, it would quickly be impossible to trade or spend any virtual asset without a highly functioning Internet.  Again, Bitcoin would become worthless overnight.

Flip side: I am not saying that gold or cash will be valuable in this situation.  In fact, quite the contrary.  But what will be valuable will be physical assets and items.  Firearms, food, clothing, shelter, medicine, and tools will be what everyone needs and they will be the most valuable items in this situation.  In fact, if you are a prepper and want to stock up on items that will be valuable after a societal crash, I would recommend vodka.  Vodka, beyond its traditional use, can be used as an anti-septic, a fire starter, a weapon, anesthesia, and a preservative.  Vodka also doesn't go bad or require any special storage (i.e., refrigeration).

I'm not saying that there aren't problems with current currencies, nor am I stating that Bitcoin can't be trusted.  I'm just trying to show that there are major flaws with cryptocurrency in general and they need to be factored into your plans and investments.  I would also not recommend you go invest large amounts of your savings in gold, cash, or vodka.  Just be informed that Bitcoin may have additional risks.

Shout out to Doorman for an excellent article, and a professional and responsible way to present the information.