I hate April Fools day. It sounded good, though. Certainly had me fooled.

I agree. It is a pretty infographic but some of the information is wrong, misleading, or outdated.

For example:

Every currency has two things in common: Something of real value and a centralized government to control it.
I don't know if it really matters that both of these statements are incorrect to the average person but they are incorrect, nonetheless. The very word "fiat" means "by decree". The value of a US dollar is backed up simply by the US government's word and nothing else. It is worth money simply because the government says so. Secondly, various currencies have existed for thousands of years without a centralized government to control them. One example would be seashells. The community or village on island all agreed to use seashells as their currency and the value of the currency found its own level. There was no chieftan behind it all "controlling" it. The "backing" of a currency is not necessary for the currency to be accepted and used, nor is control.

The second point you make is that others have worked to create a digital currency of their own. Our entire financial system today is mostly digital, from bank accounts to credit card accounts, they're all just numbers in ledgers. The real problem in the past has been the fact that everyone has tried to use existing currencies on the Internet, something the Internet and the current financial systems were not designed for.



It says that huge computer investment, rather than gold or silver, are what give the bitcoin it's value. In reality, nothing really gives Bitcoin its value. It is the agreement of all of its users to use it as a currency that gives it its value. It is free market dynamics that creates its value. A person only thinks a Bitcoin has worth if everyone else does. If anything, you could say Bitcoin gets its value from its usefulness.



There is a nice little picture that shows "value" of BTC in US Dollars in Sept 2011 vs. Feb 2013. The word "value" is extremely misleading here. I would say the average traded price of BTC but certainly not its value. The value is debateable and is different to different individuals. To some people, Bitcoin has value and they would certainly trade their dollars for them. For my mother-in-law, Bitcoin has no value and she wouldn't give you a nickel for one.



These are just a few of the misleading "facts" of this infographic but the one that bothers me the most is at the bottom where it shows current uses for Bitcoin. This is so misleading that it absolutely needs an overhaul. In reality, this is merely a list of things you can spend BTC on or places to spend BTC, not a list of its uses. Bitcoin is "useful" because it allows someone to send money anywhere in the world in seconds at an extremely small cost. It is useful because it allows near anonymity when making purchases. It is useful because it allows one to send payments without having to give up personal information which could be used against him or used for identity theft. It is useful because it eliminates the high cost of credit card payment processing and the extremely high and rising cost of fraud to the merchants, which can then be passed on as savings to the consumer. There are other mobile payment systems out there and the average person has choices. He needs to understand what makes Bitcoin different and more than just a mobile payment system. He needs to know why he would want to use it over, say, Softcard, Apple Pay, or Google Wallet.

The way I try to explain it to less technically savvy people is like this:

Imagine a gigantic wall made of hollow glass bricks. They're clear on your side and opaque on the reverse side. Each brick has a unique number identifier on it. And each brick has money inside it or perhaps no money at all. Are you imagining this big wall? Good. Now imagine that anyone in the world can walk up to any brick they like and see how much money is inside. Since this is usuable by the whole world, you cannot use ordinary US dollars, or Chinese RenMinBi, or Russian rubles. You would first have to buy special tokens. These tokens all have the same value but each world currency would buy a different amount of tokens. There is even a slot where anyone can put any amount of tokens they like into any brick they like without the knowledge or consent of the owner of that brick. There is no way of knowing who owns which brick(s) and there is no way to get the tokens out from this side of the wall. Attached to each brick is a log that shows each time tokens were put in and taken out and records which bricks the tokens came from and where they went to, but not the owners of those bricks, which, as I said before, no one actually knows.

On the reverse side of the wall, all of the bricks are opaque but there is a keyhole in each which opens with the correct key. If you had the key and knew which brick to open you could remove any amount of tokens from it. It would not matter who rightfully "owns" it. It only matters if you have the key. (Although you could try any random key on as many keyholes as you like, the possibility of it actually working is so minute that it essentially is impossible. You would have better odds of picking the winning lottery numbers on the next 1,000 drawings in a row!) Multiple people, however, could have the key if the "owner" either gave it to them or was careless with his and allowed them to copy it. I say the wall is opaque from the other side because there is no way of seeing who is removing tokens from each brick, you can only see where the tokens move to and from. If you "owned" a brick, you could give your public address to someone and they could deposit tokens into it but they would have no way of getting those tokens back without the private key to open that brick and remove them.

Think of the blockchain this way. It exists "out there" and anyone in the world can see it and can see the balances of each address. But no one knows exactly who owns which address. The public key is the address of that brick. The private key is the key that opens that brick. And "bitcoin" is simply the unit of measurement or the name we give to the numbers of tokens that make up each account. (I know this is not 100% accurate but for sake of simplicity I explain this way.) In the real world you need three things to own and spend Bitcoin: a public key, a private key, and some sort of software connected to the Internet that knows how to interact with the Blockchain. This is what your wallet is. It is the software that "talks" to the Blockchain. You can give it one or any number of public/private pairs you like and it will take care of the rest. It is not necessary to back up a wallet. The only thing you actually have to back up are the keys, which are just a unique series of letters and numbers or, in reality, two unfathomably huge numbers. There is no limit to how many addresses you could own. If I ever sent or received Bitcoin from "you" then I could remember that you owned that address and can now see all of your transaction history if I like. With some effort, I could trace every bitcoin you ever sent and where it was sent to. As a side note, work is currently being done on "mixers" which scramble this information preventing any way of tracing transactions back to their source.

You can always change, remove, or install a new wallet without worrying about transferring balances from one wallet to the other. The only things you would have to transfer are the keys. The balance does not exist on your computer nor in the wallet. It exists only as the sum of all transactions attached to the public address on the Blockchain, this nebulous ledger which exists "out there" and is maintained by the collective agreement of a myriad of computers and math. The Bitcoin protocol and the Blockchain seem to be, at least so far, unbreakable. The real danger in Bitcoin is currently in the wallet. If someone had access to your computer or smart phone, they could potentially have access to your wallet and there would be no recourse and no one to complain to if your account was cleaned out. This is why I go to such great lengths to explain the basics behind the Blockchain. Because ultimately, security is up to the user, not the software. A Bitcoin wallet can be the most secure software ever created but if you keep your public/private pair written on a piece of paper in your leather wallet in your pocket, then you would be at risk.

The show was interesting to see from a lay person's perspective and Morgan is certainly that. He didn't really say anything wrong and did a decent job of simplfying things for the people. He got really excited and giddy when he made his first transaction but the thing is, he didn't really understand why. He made a digital transaction. Woohoo!! Apple Pay, Google Wallet, and dozens of other apps out there will let you do that. He never really touched on, nor understood, what makes Bitcoin different and why it is so cool.

He doesn't seem to understand, or at least talk about, the two biggest selling points that make Bitcoin vastly better for the end user: anonymity and decentralization. He did talk about being able to buy things on Silk Road but that's not what I mean by anonymity. Anonymity gives you the freedom of sending money to someone without fear that your personal identification could be stolen as a result of the transaction and used against you. You can send money to various merchants without some credit card company, or Apple, or Google, or Amazon, tracking every purchase you make and trying to figure out ways to use this personal information. Decentralization also frees you from getting your personal information stolen via a company hack but also prevents the inevitible corruption of centralized control of the currency.

There are, obviously, other benefits to Bitcoin and I think I remember him very quickly mentioning credit card fraud and merchant fees, things that merchants would definitely care about but the end user could not care less about.

I agree, it would be good if he ran the same concept for a show a year or two from now when things have changed some.

May as well be asking, "Who is John Galt?"

There is a sign I have in my cubicle at work to remind me:


     Gold is the money of Kings

     Silver is the money of Gentlemen

     Barter is the money of Peasants

     Debt is the money of Slaves


Of course, this was printed before Bitcoin existed.

Most people, if you were to ask what the difference between the classes is, would throw out some number. One person might say that anyone earning less than $20,000 / yr. is considered among the lower class and anyone over $250,000 / yr. is considered among the upper class and anyone in between is in the middle class. Others might use numbers like $10,000 and $500,000. The numbers really don't matter to me. I have a different way of considering the classes and I think it is a very important distinction people need to make.

To me, the lower class is defined by anyone who depends upon someone else for theirs or their family's survival. That may be living at home with the parents, subsisting off of unemployment or Social Security checks, welfare, food stamps, or any other aid that might help them to surivive. Now it is possible that someone may choose to be collecting Social Security because, heck, he has paid into it for the past 52 years, but he does not depend upon Social Security and it wouldn't majorly disrupt his life if he didn't get it. That is a different story. I mean if someone is dependent on others than he is among the lower class. This person or his whole family would not survive without this aid. He might have a job. He might even drive a decent car and live in a decent home. He could tell himself that he is in the upper-lower class if that makes him feel better but he is still dependent on others to live and that puts him in the lower class.

The upper class are those who make money work for them and, if necessary, could live from this income. They may choose to have a job as additional income but it wouldn't matter. They know how to make money work for them. Someone may have investments that bring in only $100,000 / yr. but this is still far more than the median income for families in the US. I would consider this person in the upper class. He does not have to worry about losing his job. He likely gets many tax advantages for those investments and pays far less tax that someone working to earn $100,000 / yr. You could say this person is in the lower-upper class if you like but the bottom line is, this person is making money from money.

Everyone else is in the middle class. Someone may be a professional like doctor or a dentist making $500,000 / yr. but if he stops working, he stops making money. When people talk about the middle class shrinking, to me this is what they really mean, whether they know it or not. Each day, more and more Americans are becoming dependent upon others to survive. When our leaders and politicians talk about "the rich" they are referring to these people, not the rich as I've described above. The upper class has all kinds of tax breaks that protects them because of the way they make their money. Our nation is becoming more and more dependent upon the middle class rich taking care of the poor and they are being taxed more and more and working harder and harder just to make ends meet. While the ones at the top just keep finding it easier and easier to make even more money.

I believe that very soon, possibly within just a few years, there will be no middle class at all by this definition. Everyone is going to be receiving help just to survive, except for the upper 1% who will be making even more money by that time.

Do you agree with this definition? Would it change things if everyone used this definition? Would we still have people clamoring for "Change you can believe in" during the next election? Would people realize that entitlement programs are hurting us more than they are helping?  What are your thoughts?

Currently 1% of the world's population owns something like 98% of the wealth (maybe it's not 98% but I do know it is an unbelievably high percentage). So is it so hard to believe that these people, the ones who would be concerned about preserving their wealth vs. the ones who live paycheck to paycheck, would be buying up all the gold?

How long have you had a relationship with Bitcoin? This is normal.

So basically, ever since it became legal to once again own physical gold, people who understood a little bit about economics and inflation (in the 1970s we had stagflation, an even worse condition of a stagnating economy combined with inflation) bought gold as a hedge against the decreasing value of the dollar. Looking back through recent history, you will see that when crisis hits, demand for gold goes up. Only today, we have so many "gold like" instruments traded which are convoluting the actual price of gold so we have no idea what physical gold is really worth anymore. But we will find out soon enough when the gold ETF and ishare holders realize that their paper gold is not really gold and want to trade it in for the real thing.

Quick search on Google found this:

http://goldratefortoday.org/explaining-gold-rate/

The problem with the Mintchip and the Black Gold coin are that they are still based on some existing fiat currency. The USD is near death. Adding a digital wrapper to it is not going to solve the problem of the current money problem. There's going to have to be more to the story than that.

I was not aware of such a device and I think you're on to something.

We're getting dangerously close to centralized mining already. Why not run with that concept and try to make it work to your advantage with the full power of the US government behind you?

The reason I bring this up is because I am trying to guess what TPTB might do. One thing I think we can say we know for certain is that The Fed will not willfully give up its power. It is going to do what is best for it but the banksters are going to have to be just as devious about it as was when it was created.

The United States Federal Reserve System was created at a time when people had had enough of the local bank runs and losing their money to them. The system was, of course, self serving in a huge way but sold to the people and Congress as if it was in the peoples' best interests. They all bought it hook, line, and sinker. Hopefully, if you're on this forum, you're smart enough to see how that worked out.

So now we find ourselves, roughly 100 years later, in another time of great turmoil. The world has changed, technology has changed, but the people, if not already, are very close to being sick of the current financial system. There is a need for a new Creature from Jekyll island to come into existence. But what will it look like? Whatever it is, it will be sold to the people as "the fix" for the current system but you know in the end it will have to benefit themselves more than any people or government.

The sheeple of the world do not really care about understanding Bitcoin or what makes it different or better than any other digital currency. They do not understand the evils of inflation and of controlling the currency supply. They will buy whatever bullshit is sold to them through mass media as long as they think it is good for them. So it is very possible, at least to me, that The Fed may try to win this battle this way, rather than trying to abolish virtual currencies altogether.

Could it be possible that the "US government", aka The Fed (notice I put the word government in quotes to denote sarcasm), would create its own digital currency in many ways like Bitcoin with the exception that instead of decentralized miners controlling the block chain, it was controlled centrally by "the government". They could charge a fee for all transactions, aka a tax, and they would own and distribute all newly mined coins into existence. They would have a paper trail of every digital coin in existence and where it went. Would the people accept it? Of course they wouldn't have a choice, though, would they?

Does this give them any kind of advantage? Sort of a "if you can't beat them join them, and then beat them at their own game" kind of a strategy? Would this eliminate the need for local banks and give them ultimate control of the currency? Is there any possibility that they could try to implement something like this over the current system they have created?

There would always be a need for lenders so banks wouldn't go away. But banking, in the traditional sense of storing your money for you, would have to change. The biggest concern would be defaults of those loans but the central bank, with its ability to create more of the digital currency, would be there to save the day.

Then again, how different is this from the current model anyway?

Discuss....

Your title asked for one but here are several problems I see. Many of these will be overcome with time but for now I think they are holding it back.

Acquisition - Too difficult to get (fiat => Bitcoin, Bitcoin => fiat)

Trust - With exchanges being hacked or acting as Ponzis, trust is a very big concern. Someday, perhaps, exchanges will be unneccessary but for now, there are no laws or oversight like there are with banks. If you're going to trade fiat for Bitcoin, you're going to have to trust them, whether it is Mt. Gox, Bitstamp, or the next company that hasn't yet hit the news. You could buy locally. Although a personal exchange is probably safer because you're there, there is always the possibility of being robbed so you're going to have to trust them.

Security - I just read about cold storage being hacked this morning. I worry that my smartphone could be lost or hacked. I worry that there could be a keylogger on my PC. I get an uneasy feeling everytime I login and spend some Bitcoin. I worry if I keep a backup on a piece of paper somewhere that it could get lost, stolen, burnt up in a fire, etc.

Education - I think we are, compared to the timeline of the Internet, in the early days of computing where getting on and using the Internet was easy for a few. But most people didn't know what a modem was, how to install it, how to use it, what a BBS was, how to find a POP, what the Internet was useful for, how to use a BBS or even a browser. The average user just found it all too difficult. Today, I think the biggest challenge the average person faces is understanding best practices such as creating a password they can remember, yet is difficult enough. Or how to keep a backup. Or how to generally be safe and secure and get a warm fuzzy feeling whenever they use Bitcoin and not a very uneasy feeling that they could be doing something wrong and may someday find their life savings has been liberated from them and there is no one (FBI, FDIC, etc.) they can turn to to get it back.

Confirmation times - 10 minutes to an hour is not a problem for many online transactions but there are circumstances when that wait is just too long, especially with in person transactions.

Taxation - Either you shirk your responsibilities to pay taxes on your gains with Bitcoin and hope you never get caught or you somehow have to keep track of it all and try to reconcile your taxes. Either way it sucks.

Stigma - There is a lot of bad stigma when it comes to Bitcoin. People correlate Mt. Gox being hacked to Bitcoin being hacked, obviously not the same thing. Or they think it is only useful for nefarious purposes, i.e. Silk Road. Or they think it is just some Ponzi scheme designed to part suckers from their money. People also used to think the Internet was only useful for watching porn. They'll come around, eventually.

Volatility - Why would someone spend their Bitcoin today when they think it will be worth more tomorrow and more the day after that? Holding Bitcoin for any length of time would be an issue for most people watching the price go up and down. If they only plan to hold it for a short term so that they can spend it then volatility is moot. But, see point #1 above. When it is too difficult to convert one to the other then it becomes too difficult to buy and spend it fast enough to not be affected by the volatility. I think volatility will someday not be so much of an issue once Bitcoin is mainstream but it will be a long and rocky road getting to that point.

Investor mentality - There are plenty of reasons to USE Bitcoin. Here is just one example. A worker in America collects a paycheck every other week and wants to send a portion of each paycheck back home to his family in India. As soon as his money is reconciled in his bank account, he buys some Bitcoin from some provider where his price is guaranteed from the moment he bought it (even though it may take a few days to actually receive the Bitcoin). As soon as he gets the bitcoins he sends them off to his family and sends an email to notify them of the transaction. As soon as they receive it, they sell those bitcoins to a provider who guarantees the price at the time of the transaction (even though it may take a few days for their fiat to get into their bank account). Here is a person who is using Bitcoin for one of the many things it is good for and who is completely unaffected by the current price (whether $1,000 or $100 is completely irrelevant in this case), and is minimally impacted by volatility. He may have gained or lost a few dollars during the whole course but he could gain or he could lose. It would average out vs. sending the money via a moneygram or wire transfer where he is guaranteed to spend a lot of money for each transaction ($50 at my bank to send an international wire transfer). But many people today buy Bitcoin strictly as an investment vehicle (I'll admit I am hodling too but I don't jump on the bandwagon when the price starts going up and panic when it starts going down either). Their speculation WILL and HAS already caused bubbles in Bitcoin. Every time the bubble bursts it is a black eye for Bitcoin as a whole and the idiots say, "I told you so". Hopefully someday Bitcoin will find its value and hold a somewhat stable price causing people to stop wanting to invest in it so much. But people will ALWAYS speculate with Bitcoin, unfortunately.

Threat to current money businesses - I believe Bitcoin is already at war with the central banks and other money businesses, such as credit card companies, payment processors, the IRS, etc. They perceive it as a threat to their business and they pull a ton of power in goverments around the world. They will try to use propaganda and laws to prevent its widestream acceptance.

When someone is optimistic about the trading commodity he is interested in, such as Bitcoin, then he is considered a bull. He will want to buy. Many bulls together will want to buy and this moves the price in an upward direction.

Conversely, when someone is pessimistic, he thinks the prices will go down or perhaps has come close to reaching its potential and should start coming down. This person will want to sell. Or he may even choose to short the commodity. Enough bears will move the price in a downward direction.

A person can change from optimistic to pessimistic or vice versa very quickly. Perhaps at $200 he felt it was a good time to buy but the market has been moving upwards for a while and now at $225 he is starting to think that it's been too long and something is bound to change soon. It's kind of like that feeling you get when approaching an intersection and you've watched the light remain green for the past 10 blocks as you've approached. You start to get this feeling that it's going to turn red before you get there because it's been green too long. Sometimes you're right and you feel all smart in how you "predicted" this and other times you're surprised when you breeze right through the intersection. Anyhow, at any given time there are always bulls and bears present. When the bulls outnumber the bears this is considered a bull market and the price will start to rise, opposite when the bears outnumber the bulls.

There is an old saying: The bull goes up the stairs, the bear goes out the window. People move forward and invest cautiously but they spook very easily and sell out very quickly. This will drive the price down much faster than it went up.

Back to what I was saying in the original post, a person who is either a bull or a bear is interested in the market but feels the time is right now to either buy or sell. This is not the same thing as all the Bitcoin haters who come on here just to tell other people how stupid it is and how it can never succeed and has no intention of ever getting into the market at any point. This person just wants Bitcoin to crash to vindicate his indecision and not getting involved in the first place, AKA a coward.

There is a difference between a bear and an idiot. A bear see reasons why the price should go down and may either short or defer buying until it goes back up.

An idiot says things like:
I told you Bitcoin was a ponzi scheme
Bitcoin servers no purpose and has no more value than a tulip bulb
Bitcoin is not safe and has been hacked too many times
Investing in Bitcoin = suicide
I predict (with absolutely nothing to backup this statement) that Bitcoin will continue to go down until it reaches $0 and I will then remind you all how smart I was back then.

If this is you, you're an idiot. Don't call yourself a bear. Get off of these forums and never come back because obviously you don't get it. If you want attention, create a sign that says "The end is nigh" and stand on a street corner somewhere.

If you are a true bear and have valid reasons to think the market will continue to go down then please enlighten us. If you're an idiot, get the hell out of here.