Bitcoin - It's A Safe Bet

Most people are unsure about this new technology and like any new disruptive technology seeds of fear and distrust are sowed by the incumbent players. Up to now the prudent advise is not to invest more than 5% of your portfolio, as one bitcoin may have the potential to be worth a million dollars or it can go to ZERO. Over the two years that I have been immersed in this technology, I have come to the conclusion that the chance of it going to zero is nil.



New disruptive technologies tend to come from the left field and Bitcoin is no exception. Born out of the domain of geeks and cyberphunks it has grown from nothing to a market capitalisation of 4.8 billion. These are some of the arguements against the survival of Bitcoin.

Governments Will Ban It.

By all counts any form of money will not be tolerated and allowed to take root because it threatens the monopoly of governments to control money. That it has survived and thrived is testament that Bitcoin is an idea whose time have come, and the incumbent forces are unable to squash it.

Previous forms of digital money have been shut down and the developers prosecuted as there was a central authority they could target as soon as it appears likely to succeed. Like bit torrent which evolved from the shut down of Napster and similar file sharing sites, Bitcoin evolved from the shutting down of digital curriencies like Egold and Liberty Dollars. It is built on a decentralised platform with no central point of failure. Governments are unable shut it down, short of shutting down the internet.

If Bitcoin was just money it could still be demonised and outlawed to slow it's progress but Bitcoin is also a platform. It is a platform for recording and moving value instantly and cheaply, of which money is only one asset of value. Many interesting uses of the blockchain and it's technlogies are being rolled out and will hit the market soon. Over 1 billion dollars was invested in these technologies in 2015 and many of these startups will roll out products in 2016.

These startups means jobs, investments, GDP growth and enlightened governments are loathe to see them move to other shores. It is hard to be the first to welcome them but all governments want to be second. A speech by a head of state of a global financial center extolling the virtues of bitcoin and the blockchain is a watershed event for bitcoin, and there is no going back. The genie is out of the bottle. The apex court of the European Union have decided that bitcoin is a currency and therefore not subjected to Value Added Tax.

The blockchain is an immutable ledger of the truth. When people make the connection, they will demand this of their governments to use and adopt to root out corruption and nepotism leading the way to good governance. Without corrupt governments there will be no wars.

There can't be money that is not legal tender and backed by government.

That is a myth. Money is a social contract between individuals who wants to transact. What form of exchange they choose to contract in, is their perogative. If enough people choose one asset then it becomes money for that group.

Bitcoin has the added advantage of being accepted globally. It can be moved instantly and cheaply in any quantity. It is programmable and you can conduct micro commerce with it. Machines can own it and transact with other machines without human intervention. It is money for the inernet, and is superior money in every sense of the word.

Government can force payment of taxes in legal tender in which case an exchange market will develop to facilitate the conversion, but in the end, most governments will choose to make it easier for the citizens they represent.

Bitcoin Is A Software and All Software Can Be Hacked.

Over the last six years many have tried. Wences Cesares paid a hacker thousands to break bitcoin before he invested millions in the technology. Government have all the resources they need to make the attempt and we can be sure that they did. Banks are directly threatened and it is a sure bet that they have also tried.

Bitcoin survived and grows stronger each day. The only conclusion we can draw is that a decentralised system whose code is  based on the proof of work consensus is unbreakable. The smartest and brightest brains in cryptography and programming are expanding the breath, reach and use of the bitcoin protocol software. The latest is checklocktimeverify-BIP65.

If anything it is the centralised software of banks and governments that have been hacked and billions worth of value and information stolen.

Another coin with superior properties will replace Bitcoin.

Netscape is the first to market but was soon replaced by Explorer and Firefox. Bitcoin would suffer the same fate. Not so, Bitcoin has achieve enough scale to enjoy the network effect. From this point on the more people use it the more people will want to use it. It would be difficult for another alt coin based on it's code to surplant it.

The closest that can come to doing this is Ethereum which is a complete rewrite and exploits Bitcoin's weakness in not supporting a turing complete language facilitating smart contracts. Ethereum is still in Alpha and have not been tested in the field. If Chris Odom is right, the proof of work consensus is still the best and bitcoin has the biggest infrastructure and investment for proof of work consensus in the world. Ethereum's consensus system have not been tested and it may very well be that Ethereum have to shelter behind Bitcoin's security.

In any case i is quite likely that a turing complete language will be incorporated into Bitcoin in the future either as an Op Code or sidechain. There are enough smart people to make this happen.

Banks will kill it

It goes without saying that any industry that is threatened by a new technology will do everything it can to kill it. We have seen the demise of the horse and carriage, photos and the recording media industry. They failed because the incumbent technology was way too superior to the outdated industry that they have invested in tried to hold on to.

Similarly bitcoin is way superior to the banking systems of today. The banks are rushing to build private blockchains without bitcoin trumpeting the virtues of the blockchain technology while demonising bitcoin. Private blockchains are limited in scope and also less secure. When trillions of dollars are at stake you will want the best security. Not second best. It's just not good marketing.

Oh it is so volatile nobody will use it.

One bitcoin is actually only worth one bitcoin. It's volatility is zero. National curriencies are volatile in terms of bitcoin with value depreciating every year from printing too much of it.

Bitcoin's value on the other hand increases every year because it's supply is limited to 21 million and the last coin will be issued in the year 2140. Because of it's appreciating nature most people will rather save it and use depreciating curriencies, unless the benefits or incentives for using it exceeds the gain from saving it.

Comprehensive Overview Of Bitcoin Ecosystem December 2015

Billionaires Are Investing In Bitcoin


Still want more ? Kyle Drake of IamSatoshi 


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