Why Bitcoin is hard work
Let me tell you about my first experience investing. A couple weeks ago I was listening to Charged tech podcast where the host Owen was talking about a thing called Bitcoin. I’d heard a lot about it in the news recently too — but the podcast really talked in detail about how the whole system works. One thing lead to another, and I was soon furiously Googling and watching videos on how things like mining work, or the public blockchain (2). If you are unfamiliar with the concept of blockchain or Bitcoin it’s basically a transparent way to send money, without going through a centralised system like a bank. If you’re interested in learning more, check out the footnotes (1), or take a look at this video:
One thing lead to another and the next day I didn’t go to school, I was engrossed in the technicalities of blockchain — I found communities of people talking about this stuff day-in, day-out. Bitcoin was the household name but I soon found Ethereum. Here’s why I immediately found it compelling:
- One of the biggest problems with Bitcoin is scalability, since there’s no dedicated team working on the platform — Ethereum fixes this by having one of the best design and dev teams I’ve seen.
- Bitcoin is simply a coin and a method of operation — Ethereum wants to be the next internet.
- You can’t mine Bitcoin with your PC anymore — with Ethereum you can. That’s really exciting!
I soon found Nick Harrow or @Ethereal_seal on Twitter who lived in my city and was an expert on Bitcoin, Blockchain and Ethereum. He introduced me to many more videos that really showed me the benefit Ethereum will bring to the world. I was utterly hooked.
That was Thursday — by Saturday I met up with Nick to get a better feel for the system and validate my theories, and by Sunday I had found someone on Reddit who was selling Ethereum in my city, and I invested real money into blockchain tech. Here’s my biggest problems with the whole system (remember, problems are opportunities that haven’t been taken advantage of).
1. It’s damn hard to buy
To get Bitcoin you have to exchange it for something. Most people buy it using standard currencies like US dollars and Euros. But you can’t just buy Bitcoin anywhere, it’s actually a bit of a mystery how you can even buy some. I know, I just told you how I found someone I could buy from in a matter of days, but that happened to be some wild coincidence — or the universe showing me my true calling — whatever. What I didn’t tell you was that I had to meet this person in real life, and hand over cash. Sure, not the most convenient way to buy but it worked. However, for the average Joe it’s near impossible to get into Bitcoin or Ethereum. Sure if you live in the states you can sign up with Coinbase, give your full name & address, show them your driver’s license, wait to get approved, download a wallet app to your phone, and then you can buy the coins… But then you have to transfer these coins from Coinbase into your wallet for safekeeping. OK, Find your wallet code which will look something like absolute gibberish, scan a couple QR codes, send the bitcoin over and then freak the fuck out when it takes 20 minutes to transfer.
Yes, there are problems with buying bitcoin or Ethereum right now. Here in New Zealand we can’t buy from Coinbase, which as a matter of fact is the easiest way to buy. We have to buy through a local exchange like LocalBitcoins which on top of dealing with a random person means you get charged a 30% markup. Don’t even get me started on selling.
I thought the point of bitcoin and blockchain tech is it’s supposed to be something I can do with a few taps on my phone. But at the moment it’s extremely confusing and hard for the average Joe.
2. It’s hard to know who’s messing with you
Ether (Ethereum’s token) is traded like the stock market — it basically is one. This means that you’re gonna hear a lot of conflicting voices telling you not to buy or alternatively “if you don’t buy now you're missing out” if you search ‘$eth’ on Twitter you’ll see what I’m talking about. What I’ve learnt is you just have to stick with your beliefs. I’m in Ethereum because I see the vision and I believe in the longevity of their ideas — I can’t see the point in banks in the future when things like the blockchain exist. I’m in it for the long run, I’m a “Hodler” as they say. I’ll give you an example of the trust issues in the blockchain space — or investment in general, the day before I bought my Ethereum I saw this Tweet saying:
“When people ask me if they should buy $eth right now” proceeded with this Gif:
It was damn scary buying at that point — Ethereum was at an all time high but I went with it. Something inside me felt like it was the right thing to do, and it really does pay off to go with your gut. I bought at $250 and in 1 week the price was at $400. You just have to trust your instincts in this game. That being said, I did trust voices from those around me such as Nick who’s been in the game for a long time and has seen this thing happen before. I took a lot of risk, and it can go either way. It was a hard and scary experience going against what everyone else was saying and it made the whole experience leave a bad taste in my mouth — that is, until the price shot up.
3. It’s hard to support the little guys
Okay, so you know how I was saying I love the tech behind Ethereum? Another cool thing it can do is act as a platform for blockchain Applications. These are made by companies who do something called an ‘ICO’ — or Initial Coin Offering — basically the blockchain’s version of an IPO.
There’s so many cool applications that people are building on top of Ethereum. One that I really like the sound of is called “Status” which allows users to easily buy and sell coins (See my earlier complaint), and talk to other applications with an all-in-one messenger style approach. So I said yeah I’d like to invest in them too! Turned out to be one of the most grueling processes of my life, requiring me to wake up at 2am and spam a button until I got in — I didn’t.
It’s moments like these that makes the whole blockchain technology really user hostile.
I wanted so badly to give this company my money, and they’re making it damn near impossible. I think there’s so much room for a smart, UX lead company to come in and change the way ICO’s work, because it’s such a genius way for start-ups to raise capital.
4. It’s hard not to invest everything you have
At the end of the day Ethereum is damn exciting. You constantly hear stories about people getting rich from Bitcoin because they got in early. A big motto in the investment world is “Don’t invest what you can’t lose” and it’s a really hard rule to abide by. I’ve heard VCs say that if you’re investing in Ethereum right now you’re not an early investor — you’re before early. Literally in April this year Ethereum was at $50 and it’s sitting around $300 now.
I constantly see comments on videos about Ethereum saying things like “I can’t believe I bought in at $0.30c – I’m filthy stinking rich!”
These FOMO inducing comments make me want to throw all my money at Ethereum now, because it has the potential to climb really high. I was for a while constantly evaluating each lunch purchase, every ticket to the movies against investing in Ethereum reminding myself of the people who invested when it was low – having an internal dialogue that “A chocolate bar worth of Ethereum could be worth $1000 in 10 years!” It’s a stupid theory I had going on in my head, because the value fluctuates so much in crypto markets (right now it’s back at the price I bought it for.) However as a first time investor — that was my thought process!
4. It’s not all that secure
This is the definition of Crypto — concealed or secret. Bitcoin and blockchain prides themselves on their secrecy and safety with things like end-to-end encryption, and not relying on a company with your passwords. However, some parts about this aren’t user friendly to me. I find it interesting that it’s called “secret” when every user on the blockchain can see who sent money where. Sure, their names are concealed by random numerical codes, but it doesn’t take Nancy Drew to track someone down.
What I find the most scary and frustrating part is the lack of security for my money. You see, with your “wallet” most of the time you’re given a string of words that are the only way you can recover your account, there are no passwords that can be hacked or lost, only these words. So, as long as you keep these words safe (IE, not online) you’re cool. The thing is, I just don’t trust myself not to lose these words! Sure you can write them on a piece of paper and buy a safe to keep them in, but if there’s some sort of natural disaster, or for some reason you can’t access it anymore — you’re screwed. Sure, there’s a lot of clever ways people have developed to keep their words safe, that’s not my point. My point is that I don’t feel safe keeping track of these words, I feel like there has got to be a more convenient way for blockchain to kick off.
I heard a great quote from someone, I can’t remember who — that said the blockchain space currently is much like the launch of the Web: a lot of people lost money, a lot of people gained it, but at the end of the day the thing that came out of that bubble was Google. There’s no doubt that Ethereum or some up and coming blockchain platform is the way of the future. If you’re a smart entrepreneur looking to create massive value, I’ve just given you 5 ways to relieve my headache, and I’ll pay for a fix.
(1) Bitcoin is a new form of money. Like normal money, Bitcoin is just information about how much value somebody is holding: if you hand me a dollar bill, that’s simply information that you own one dollar, that you’re now transferring to me. And like normal money, the value of Bitcoin is determined by the market — it’s worth whatever somebody is willing to exchange for it. But unlike normal money, no government or bank controls Bitcoin — it’s controlled by software and code that’s openly available to everyone. In theory, that means people can exchange Bitcoin without governments or banks being involved. But, as I found out, theory is not the same as reality.
(2) So what is blockchain? Blockchain is the software and code that Bitcoin and other digital currencies use. It’s essentially a database that anyone can read or write to. Like a normal database, it stores information. Unlike a normal database, blockchain doesn’t run on a single computer owned by one company (or government or bank) — it runs on normal household computers all over the world. You can run blockchain from your laptop. Since it runs on any computer, nobody controls it.