Bitcoin (cryptocurrencies) – Problem or Solution?

August 28th, 2014

The premise behind the creation of Bitcoin and other such alternative national “currencies” (also known as cryptocurrencies) like Tonal Bitcoin, Litecoin, Peercoin, NXT, Dogecoin and many others, is not well known. There are numerous working principles which include but are not limited to; tax evasion, backup currency in the event that the world reserve currency collapses, for the creator of the currency to become wealthy, privacy, to move away from all other forms of currency to a digital currency and added diversity.

Given the current state of our world; all nations in history at some point have come to an end and so have their currencies. It would be wise to prepare for this inevitability. Whether a collapse occurs in 2 weeks or 200 years is not easily predictable. Thus far however, only the currently existing nations have not ended simply because they still exist… for now. With this historical track record of failure and collapse, people recognize these patterns and make their best attempts at estimating when their nation will collapse.

It is my belief that this preparation mentality is a very attractive attribute of these cryptocurrencies. Many who are educated in areas of history and current events consider them a backup plan or perhaps some sort of insurance policy. While the premise seems sound, one thing to consider is that in our modern technological age, all these “backups” require several major dependencies. The problem is that these major dependencies are fragile and vulnerable. The electrical power grid, the internet and electronics in general could very easily be interrupted if not disrupted for extended periods of time. If any of these systems fail, whether the grid goes down, the internet is shut off with a kill switch or your computer simply dies on its own; you immediately lose access to your investment.

For those who think our world and/or nation is in a serious decline and headed towards an imminent demise, this would be a very poor investment. There is nothing tangible that you can get your hands on and hold as property should any of those dependencies fail. The one exception would be if you were actively ‘trading’ with your investment to acquire tangible items of value. That is, if you’re willing to work with the potential security issues or lack of long term practicality of these cryptocurrencies. Hackers always seem to find a way and with Bitcoin specifically, as the participants numbers grow, so does the hash key. At some point this key could easily become so large that it would take the average internet user several weeks just to access their wallet and funds. Not to mention the other known problems:
1. Wallet vulnerable to theft
2. Tracing a coin’s history
3. Sybil attack
4. Packet sniffing
5. Denial of Service attacks
6. Forcing clock drift against a target node
7. Illegal content in the block chain
8. Possible security vulnerabilities and bugs
9. Energy consumption

Information about these problems can be found here.

My advice… tread carefully and be smart about it.

My opinion? I think these cryptocurrencies are to be short lived. I also think the majority of them are in some way controlled by corporations or government in a fascist methodology to get a head start on a cashless society where people don’t have any way to protect their money. I suggest that if you want to get away from taxes, government and other control factors that inhibit your freedom, that you start bartering with tangible items of real usable value. Get some food storage. It can always be used, sold or traded and can last up to 25 years.

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