It’s easy to spot a reporter that doesn’t know anything about bitcoin. Very few reporters understand this emergent technology. Yet, it’s going to become more important for mainstream reporters to get a handle on the basics.
If you’re a reporter, and you don’t want to look like an amateur, keep an eye out for the following in your copy:
- “Bitcoin isn’t anything real.”
Bitcoin is software. Software is something real. Not only is bitcoin something that’s real, it’s a very special something that’s real because its a form of technology that allows individuals to send unique, irreproducible transactions to one another. This is something that has not existed in the financial industry until now, and it brings with it unlimited, extremely efficient potentials.
In other words, bitcoin is an industry changing software. That makes it really something.
2. “Bitcoin isn’t backed by anything.”
The dollar isn’t backed by anything. Therefore, such a statement lets the audience know that you don’t understand how the current monetary system works.
The dollar demonstrates that a currency doesn’t need to be backed. All that’s required for a currency to function as a currency is the belief by the participants that the particular symbol in question will function as an exchange of value.
Bitcoin is being used all over the world as a currency today, thereby demonstrating that it’s backed by the trust of those that are using it. It’s backed by something because it’s backed by that trust. That’s all that’s required to make it backed by something.
3. “Isn’t bitcoin used for illegal activities?”
All currencies are used for illegal activities. No currency has been used for more illegal activities than the United States dollar. If a currency must be banned because it will be used for illegal activities, then the dollar must go because it’s the most problematic of all currencies when it comes to illegal activities.
In fact, one of the advantages of cryptocurrencies is that they give average people greater access to resources which decreases the need to engage in illegal activities as a means to wealth.
What’s more, with cryptocurrencies like bitcoin you can see all transactions on the ledger. Therefore, though semi-anonymous, it has much greater transparency than the current system. It has the potential to be safer, more honest, accessible, faster, and more efficient than the system that we’re using at present.
Bitcoin, like the dollar, is also used for legal activities.
4. “Bitcoin is dangerous because it’s speculative.”
Bitcoin isn’t speculative. Bitcoin is a software protocol. The price to participate with the bitcoin system (i.e. acquire some bitcoin) is speculative.
The whole world isn’t using bitcoin yet, so people bet that the price will go up as more people get involved. If the money was already into bitcoin on a mass scale, bitcoin would no longer be speculative. Therefore, the true statement is that getting into bitcoin is speculative right now. Most people are investing in bitcoin because they see its future potential, and as more people put money into it, due to the scarcity, the value will go up.
Bitcoin itself is not speculative. It’s software that allows you to perform certain functions. The software isn’t dangerous. Betting on the price of bitcoin is dangerous. If you invest in bitcoin to use the software, then it’s not dangerous because you’re not concerned about losing your money because you didn’t put money into it to make money in the first place. If you’re making a bet on the price of bitcoin, then this is dangerous because you’re engaging in speculation, and that’s the nature of speculation. Speculation is dangerous. Speculation is not the nature of bitcoin itself, however.
The greatest danger to bitcoin right now is that the world doesn’t understand how cryptocurrencies work or have an interface that’s safe and easy to use that maintains the integrity of the cryptocurrency (i.e. allows people to control their private keys without risk of loss). User ignorance and user error are the greatest dangers when it comes to bitcoin.
5. “We can’t use bitcoin as a currency because we’ll have no money if the electricity goes out.”
Most money today is digital. So, if you make this argument, you’re also making it about the dollar. What happens today if the power goes out is that people have to wait for the power to come back on to complete a transaction.
But bitcoin isn’t dependent on the electrical grid. You can run a phone on batteries backed up on an alternate energy source such as sun or water or wind. The satellites are still running, so you can still send and receive bitcoin. If your local store has a cell phone with a bitcoin wallet, then you wouldn’t need the power grid to complete a transaction. This makes bitcoin more reliable than the current system.
Individuals have even sent and received bitcoin transactions over radio waves. Bitcoin isn’t hampered by a single point of failure because it’s a decentralized system. This is another feature that makes it unique. It’s not dependent on a single company, energy source, or government.
Cryptocurrencies are not going away and understanding how they work is more than a couple of hours of research. However, I’ve done my best to reduce it down. For background information about the structure of cryptocurrency itself, read “What is Cryptocurrency?” It will give any journalist or reporter a more solid footing on the subject and keep you from looking like a complete moron.