With the rise of popularity of bitcoin, new questions new debates and some of the old debates come to forth light. While those who follow me and read my blog, I am sure you already understand the aspects of bitcoin in the current economy. The purpose of this blog post is targeted to those that question bitcoin and how it can benefit them. There is no one way to answer this question. Bitcoin is a software with so many different aspects that covering what it stands for is hard in one blog. The one thing I however urge everyone to do is watch the Documentary Bitcoin: End of money as we know it. I know many will think that well the title starts with bitcoin so it will be from bitcoins prospective. However what it covers mostly is how money was created what was the vision of money and promissory notes before the rise of what we today know as currency. In addition to this there is tons of information available on creation of paper money, fiat or money if you just google the history of money.
The problem is that most people when they first hear about bitcoin start to question it naturally as I did. The reason for this is very simple we have been bought up in an ecosystem where this is the current norm and we take alot for granted. We dont really understand how things work but put trust in the “system” and just agree that it works.
The history of bitcoin is very close to the history of money. I recently had an interesting session at a company, later he wrote a very informative blog with questions that I believe are necessary to answer, as I believe they dont just belong to him but will be on the mind of everyone in the world. The reason I had to blog about this is because it was just not possible to answer to his queries just in his comments. The original questions will be taken from Mr. Muhammad Faizan blog.
The questions raised:
These are very interesting points and I answered the quite best possible short manner as I could in the comment on his blog. But will post the same answers here:
1. Bitcoin is not anonymous, its decentralized and peer to peer. You can easily trace it with IP and block explorers. How can something be anonymous be tracked on a public ledger?
2. For your particular case and why you would prefer to be paid in bitcoin. You and all the people who currently believe in the current interest based economy is advised to look at this link http://www.nationaldebtclocks.org/ and for Pakistan http://www.nationaldebtclocks.org/debtclock/pakistan so by this standard even your unborn child owes roughly Rs30000 if you consider just the money you owe to international lenders, not to mention you owe roughly 3 times more if you just add the money you owe the local bank.
3. Concept of money which was based on promissory note is no more hence your money does not have value.
4. For a tax abiding law citizen such as yourself and such as myself I am not allowed to spend my money internationally unless its done through expensive means such as credit cards that too at limits placed your current system.
5. Who uses them. I would like to invite you to a freelancer session we plan to do at The Nest I/O which will discus case scenarios where people of Pakistan have had to suffer not having access to international access at the same pay scale as the world. Another case is remittance cheap ones also. Currently banks charge hefty amount for micro transactions, which brings out the beauty of bitcoin. Even eCommerce sites can greatly benefit form this as currently the other options are slow expensive to use in Pakistan and worldwide.
6. Why would you want to get a wallet and why would you need to protect your bitcoins? Well why do you need to protect your cash by depositing in the bank? That is the same reason you would want to protect your bitcoins.
These were later again questioned which I was sure they would be as the common person just dosent understand why bitcoin was created. I will answer them to the best of my knowledge under each question. But first a bit of history:
The crash of an economy presented by the system we trust as honest tax payers. Causing banks to close for months.
Sanctions causing hardships to Pakistanis after nuclear tests. I think we all remember this when dollar accounts were freezed and trade was made impossible.
This is the most recent one where banks closed down because the debit repayment wasent available and people had to lineup everyday to just withdraw 50 euro a day from atm. This was all presented to people who worked an honest living.
#1. I agree that Bitcoin or Bitcoin transaction is certainly not anonymous in its entirety but the owner is! The transaction is only traceable to a private address that the owners can change for every transaction to maintain their privacy. What good it is? No one can tell how much Mr. Satoshi owns but can only guess.
That is exactly the point. If I use my credit card and the servers of the company are hacked (Ashley Madison comes to my mind because it made media headlines ;)) Then everyone can use my credit card and commit frauds putting me under great risk. The transactions are traceable by IP. Infact as I mentioned there are block explorers that let you trace them to the exchange or address they originate from. But it still hides customer data where the anonymity comes in. Each exchange including urdubit does standard KYC so all transactions can be traced. If I ask someone to tell me how much you have in your bank would you want your bank telling me? Satoshi created a peer to peer system he should be rewarded more then he owns. FED created money no one is allowed to even ask how they back it. VISA created virtual money have you ever questioned them how much money they actually own?
To add to that bitcoin network is bigger then Worlds top 500 super computers combined +20% so who would you trust more a company server which has been know to be compromised time and again? or the unbreakable network?
#3. Regarding value, Bitcoin is highly fluctuating currency itself. What value it will have tomorrow? No one can be sure.
Yes you are right. That is why bitcoin is put in line with digital asset and with gold itself and not considered as much as a currency. The price is tied to supply and demand. A current example bitcoin out preformed all assets classes(fiat, physical commodities in 2015). The idea that bitcoin will be worth 0 or alot of money is always there. But it will always be yours no matter what value it has. In case of current financial system you are in debit no matter how much you save up(See above Cyprus, Pakistan and Greece).
#4. The benefits of no-fee or that the payments are cheap right now, I think, is temporary. As per law of diminishing returns, the miners will continue to lose economies of scale and would need to apply fee to offset the cost of verification of the transaction blocks. Who will eventually bear that cost?
Further, the limits currently applied on cards are there to protect interests of all parties. We should not ignore the good side of an established system.
Again right on the money. I love how you answer your points yourself. Bitcoin as we know it is based on supply and demand. If the demand remains and supply diminishes what will happen? If the demand increases and supply still decreases what will happen? Bitcoin is a global phenomenon so its not a company or government supporting it. Its the millions of bitcoinsers no matter if they are enthusiasts or not, If they use it they become custodians of it and hence saying saying that these millions will one day wakeup and say we dont care about bitcoin and its useless is less likely then a bank or a company or government to go bankrupt. Again see trust in exisiting systems brought to life by the above mentioned crises (Crypus, Pakistan, Greece). Eventually if there are less bitcoins to be mined the cost of bitcoin will go up high causing better returns to miners on lesser network fee. Also bitcoin goes upto 8 decimal places for this very reason to allow micro transaction with near free transfers.
#6. There are serious risks with Bitcoins like there are for paper currencies – even some risks are still unknown and will be visible when there will be wider acceptance of the Bitcoins. We should not consider Bitcoins entirely safe and secure alternative. For a common person Bitcoins is relatively difficult to manage as compared to a bank account or a debit card.
Yes there are risks. But the risks as you can check above where I pointed to the crisis in Cyprus, Pakistan, Greece, also Venenzula and Vietnam (The list it quite long but even USA is in a trillion+dollars in debt.) Whereas you dont even own paper money again see debit cloaks. So having negative balance as opposed to some balance? I think the argument answers for itself.
Now talking about the ease of use. First of all credit cards are the worst way you can buy bitcoins. And the common question for a guy is why should I even buy bitcoin to begin with. Well they are cheaper to transact with when doing cross boarder payments(credit cards charge market USD rates plus 3% in Pakistan as we are talking with Pakistans prospective). You dont always have to buy bitcoins. You can render your services and ask for bitcoin payments or a salary based in bitcoin. You can hold it instead of gold, remember its a commodity also. Imagine what you could buy with Rs20000 in 2014 and what you could buy today with bitcoin if you had 1 btc instead of Rs20000 (which was roughly $200 and today is valued over $400). Freelancers and White hat security experts can get paid internationally. The local eCommerce websites can tap international markets by accepting bitcoin as its not prone to charge backs and fraudulent use of credit cards etc. Right now remittance is costing Pakistan around 3% to 5%(if you didnt use bitcoin) extra and the lower the amount sent the more in fees incurred to senders in international banking fees.
As for talking about managing bitcoins as compared to banks or debit cards makes me think you have never actually used bitcoin. A simple app is all thats required to use bitcoin.
A case for micro donations. Imagine anyone sending donation to anyone. This of the current corrupt NGOs(not of all of them are bad) but think of the donor money that is spent in maintaining an NGO to help the poor as opposed to getting the funds directly to poor at ground level.
Lastly I would like to close out this by saying, “Yes” bitcoin is still difficult to use and secure if you are looking to run it as a decentralized setup but isn’t that where yours and our services should make it easier for the user to use? Isn’t that what banking did with fiat system? If there was no Commercial banking and only central banking then you would have to take your funds directly abroad and pay someone right? Fiat has been around for ages and bitcoin is only as old as 2009 and already challenging the age old system currently in place.
Lastly I would just like to add 2 points that I think everyone should understand and question himself.
- If its your money shouldnt you be able to use it like you want? boarderless instant and without barriers?
- Panama papers is a prime example which proves that it wasent bitcoin that was used but our current trusted systems.