Bitcoin: The Pros

Many will jump at the opportunity to ridicule what they do not understand. It has always been this way throughout the history of humanity. The facts, however, cannot be denied - and Bitcoin will succeed. In its current state of adoption, however, it scares off many people, and understandably so, with media outlet after media outlet slamming the currency.

For those mocking Bitcoin, however, take a moment to think about this current state of affairs. Even now, there are millions of people around the world willing to pay $650 for just one of these coins... $650. Buyers are typically smart, white male nerds with a high salary: the elite. Wall Street has invested hundreds of millions into the currency themselves, with firms like SecondMarket and Fortress running funds that gain more and more investors every month. There is truly something special about Bitcoin, even if you do not care to admit it.

And why are they pouring money into Bitcoin? There are many reasons; here are a few.

1. Bitcoin is decentralized. I cannot emphasize this enough. The power to issue and control a nation's currency is unfathomable; central control of money will always be abused because of this. The only real wealth comes from human labor and nothing else; the fact that finance is now 33% of GDP underscores how deep of a sham centralized money is. Simply moving money around does not create wealth, and while the rest of us work our asses off for money, the Fed gets to simply create it! Without audits! Nobody knows how much money they are printing and giving out in interest-free loans; in fact, during the financial crisis of 2008, not only did the banks recieve a taxpayer funded bailout, later *partial* audits found that the Fed secretly gave out $16 trillion in zero-interest loans, much of it to foreign countries! This is more than the US GDP! http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-feds-16-trillion-bailouts-under-reported/

Talk about devaluation of currency. The system that the banks have put over the American people is astounding; the game is so stacked it is unbelievable. And the QE that is going on now is unprecedented: (http://i.imgur.com/BPzYbw4.png, note the spike on the far right). Nobody knows what is going to happen. The Fed is artificially manipulating everything, inflating bubbles, doing things that have never been done before in history, and any bad consequences are and will be dumped onto ordinary Americans.

Bitcoin, on the other hand, is controlled by nobody. The issuance of currency is controlled by miners, of whom there are hundreds of thousands across the globe. It is issued under an indisputably a far more democratic system than the US dollar.

2. Bitcoin cannot be "hacked." The whole system is open-source code for anyone to read. The notion of Bitcoins being "hacked" comes from a misunderstanding of the Bitcoin protocol. All your Bitcoins have a private key; and if you don't know your private key, then you don't own your Bitcoins. So when traders leave Bitcoins on a centralized exchange, they are trusting the exchange not to run away with their coins - unfortunately, the temptation is too much for many exchange owners to not steal the coins. The truth is, securing your Bitcoins is easy; literally all you have to do is download the original (open-source!) Bitcoin-qt client, go to File -> Encrypt Wallet, enter in a long passphrase, and nobody can steal your coins. (SHA-256 encryption is pretty much impossible to break). People are lazy, however, and many leave their coins vulnerable to being stolen.

3. As for its role in fraud, the same can be said about cash money. It was revealed earlier this year that somebody laundered $1million of drug money in Bitcoin, and he may now be facing decades of jail time. However, HSBC laundered $400 BILLION (that's 40000x more money) for the Mexican drug cartels, and nobody goes to jail (that's centralized money for you.) The US dollar is overwhelmingly the preferred choice for money launderers. In fact, each transaction in the Bitcoin protocol is reported on a  ledger available for all to see (blockchain.info); the fact that the money trail is public is something the government obviously does not want with their money printing.

4. Bitcoin was designed for the internet age. The technological protocol behind it is simply amazing - it makes possible a payment system of near-zero fees for merchants; in fact, a couple days ago somebody moved $250 million dollars of Bitcoin for free. If you wanted to move $250 million in US dollars, you can bet that it would take weeks and the banks will get a hefty slice of that pie.

5. Yes, the volatility is a problem if one intends to use Bitcoin as money right now. However, this is to be expected of an infant currency, and the volatility will not go away until the currency matures. And already there are signs of this volatility going away. The Bitcoin crash of 2011 resulted in a decline of 96% as the vast, vast majority of early adopters lost faith and cashed out... The crash in April 2013 was a decline of 65%, and the most recent crash was 43%. Volatility is slowly decreasing, and years from now it will get to a point where holding coins will start to look attractive for merchants.

5. I hear many accusing Bitcoin of being a "pyramid scheme." However, keep in mind that this is true of any disruptive technology; it was true for steel, railroads, oil, hell the entire Industrial Revolution was a pyramid scheme. The truth is that this is not a sinister aspect of Bitcoin - it's simply a property of disruptive technology: that early adopters will benefit more than late adopters.

6. We have no idea what the final incarnation/usage case of Bitcoin will be. It is truly similar to the early stages of the internet and email. Back when email first came around in the 90s, you had to setup your own server, configure it, it was way too much of a hassle to be bothered with and nobody thought it was going to become anything. Nowadays, logging into your "email server" consists of just entering a name and password. The same will be true with Bitcoin - its open-source protocol can be built on top of and expanded. This leads to my next point, and, I believe, the most important factor that will lead to Bitcoin's success...

7. Nearly all of Silicon Valley is excited about Bitcoin. Bitcoin businesses are springing up everywhere... What is going on now is similar to what happened in the 1970s with personal computers. You have a small group of nerds fascinated by a new technology, spending their nights tinkering with it. Bitcoin will succeed mainly for this reason... At this point there are simply too many geeks that are passionate about Bitcoin, and they will build out the ecosystem and smooth out the rough edges.

8. Last but not least: there is ultimately a selfish reason to invest in Bitcoin. If bitcoin takes over even 5% of market cap of gold, each will be worth $30,000. Add in a 1% takeover of various world currencies in circulation, and taking into account the constant future inflation of fiat, and each coin could be worth millions. If you consider Bitcoin as an investment, its potential downside is 100% - you lose all your money. Its upside, however, is 1000%... 10000%...

I just spent way too much time here being pro-Bitcoin. I hope you all realize the favor I'm doing you. The truth is, many who really understand Bitcoin do not have the patience to argue with all the naysayers. We all know it will gain momentum - whether it does so 2 months or 2 decades from now - it is inevitable. This is why nobody takes the time to defend Bitcoin these days... we are content with just the knowing. And besides, we need the late adopters, just like we need the early adopters. Those who are against Bitcoin now have a role to play in the future as well...