Bitcoin Q&A, responses to Bitcoin skeptics.
By Albert Szmigielski
I frequently talk with people regarding Bitcoin. I have noticed that skeptics tend to ask the same questions. I thought it would be useful to compile the top questions and concerns of Bitcoin skeptics
Anyone can create a new digital currency in seconds by copying/forking Bitcoin’s source code. Therefore Bitcoin has no value.
Bitcoin’s value over other cryptocurrencies is the network: users, miners, merchants, developers. You can create a new cryptocurrency in very little time, but to build an entire ecosystem around it takes effort and time. The analogy I like to use is as follows: you could probably create a copy of Facebook (there is open source social network software). However can you have 1 billion + users? Of course not, that takes time and effort, not to mention marketing. As a result creating a new cryptocurrency by simply copying Bitcoin is not a threat to Bitcoin.
What about Bitcoin Cash? Now we have more than 21M bitcoins.
The Bitcoin Cash experiment was very necessary. That was the only way for the entire ecosystem to vote on blocksize. If all the participants want bigger blocks we should see a flight to Bitcoin Cash. On the other hand if Bitcoin Cash’s value keeps on falling, then it is a clear signal that the ecosystem at large does not believe in it. The bitcoin cash experiment shows us how people vote in the Bitcoin vs. Bitcoin Cash debate with their money. After all, that is the most important vote, anyone can say anything, but putting money behind it is what matters. In the end only one of the two (BTC or BCC) will be relevant, the other will slowly fade. If the market decides to keep them both around then that means there is a legitimate use for both. As of this writing (Oct 9 2017) the market is pushing Bitcoin up, and Bitcoin Cash down.
Gold is better than bitcoin, if Bitcoin becomes too successful the governments will shut it down.
I believe that there was a time when the government outlawed gold. If you had gold it would be difficult to hide it from the government. Hiding Bitcoin is much easier thanks to brain wallets. Governments could make bitcoin illegal, but they will not be able to shut it down. It is decentralized and therefore there is no central point of failure to go after.
When i buy a Bitcoin I’m buying nothing tangible.
Bitcoin can be thought of as a protocol. If there was a way into investing into the Internet, that would have been a great investment. But there was no way to directly invest into the internet. Or imagine if you could invest into email. When you buy into Bitcoin you not only buy the cryptocurrency but you benefit from the entire ecosystem built around Bitcoin. There are hundreds of companies working on making Bitcoin better. Making it easier to use, making it acceptable in more places. There are hundreds if not thousands of developers working on improving the Bitcoin protocol. There are miners investing millions of dollars into mining hardware to make Bitcoin more secure. The result of all that work is that Bitcoin is getting overall better and easier to use therefore the demand for it increases. So in a sense Bitcoin itself is not tangible as it is only an entry on the blockchain,
What about tangibility?
There are arguments that bitcoin is not tangible like gold and therefore it has no value. This is a somewhat outdated way of thinking. We currently live in a world that places value on a lot of intangible things. But let’s take a trip into the past. Bonds between people or groups of people are not tangible yet they have value. Belonging to a group of people (or a herd of animals) has no tangibility but offers security and protection against attacks. This has been the case for centuries. Love is not tangible, yet it is very valuable. In more modern times we have radio waves (satellite, cellular, etc) that aren’t tangible but quite valuable. Any software company has not much tangible to show for their efforts, yet we value and pay for their products. Google search is not tangible at all, but it has tremendous value. Lack of tangibility does not imply lack of value. Ideas have zero tangibility yet they have the most value.
Network, why is it valuable?
Networks are hard to build but incredibly valuable. If only one person has a telephone, that device is kind of useless. The value of a telephone network grows exponentially with the number of its users. More precisely, to value a network count its connections. There is only one connection between two telephones, But add another telephone and we have three connections, add one more and we have six connections. To count all connections we can do the following: each of the telephones can connect to all the others (except itself), so for n telephones we have n * (n-1) connections. But here we are double counting connections as connections from a to b is the same as from b to a, so we need to divide by two. Therefore we have (n*(n-1))/2 or (n2 -n)/2
To give you an idea how fast that grows here is a small sampling
If you have other questions, please pose them and we’ll do our best to come up with answers.
Originally published at blog.cryptoiq.ca on October 19, 2017.