Before I tell you about my experience with Bitcoin, I’d like to share a secret. My father is at a casino right now.
Dad isn’t a big-time gambler, but he enjoys himself. And like all occasional gamblers, or lottery players, he has a certain faith that he is perhaps slightly luckier or smarter than most other gamblers – most of whom leave the casino poorer than they enter. I have no such ideas about myself.
Gambling, for me, is about as enjoyable as folding $20 bills into paper airplanes and setting them on fire. This might be an apt metaphor for my brief dalliance with Bitcoin as well.
Why do Bitcoin?
My interest in the cryptocurrency evolved out of an interest and a concern with ransomware pirates who have had a few high-profile scores. They use bitcoin as a means of payment because bitcoin can flow in and out of wallets without necessarily revealing who received the payment, which is really handy for pirates.
My business or personal data could easily fall victim to an attack like this and I had no way of knowing whether I could even come up with a payment in the allotted time before my files disappeared. Even if I could do so, I didn’t have any experience buying or selling it and really wasn’t sure how it worked from the consumer’s point of view.
How?
I am not going into all the details here, but there are a few things to learn when trying to acquire a little bit of Bitcoin. All you really need is a wallet and a human who is willing to sell you Bitcoin for dollars. I don’t know anyone willing to do that, so I had to create an account on an exchange. I used Coinbase.
Side note, setting up an account on Coinbase is about the least anonymous thing a guy can do.
I purchased about $100 worth of bitcoin through various mechanisms on Coinbase. The privilege involves a minimum 1.5% transaction fee. If you use a credit card, it is closer to 5%. If I want to leave it in my Coinbase account, then I’m done. However, transferring bitcoin from the exchange to my own wallet revealed a bit of a surprise. What the miners charge to move bitcoin around depends on the demand on the network. At the time I started the process of transferring to my wallet, the fee was $4.80!
This wasn’t Coinbase’s fault. They don’t mark up the fees here, but this was a sudden realization to me that Bitcoin, at least at the moment, is completely unusable for microtransactions, like buying a cup of coffee or paying a friend back for a movie ticket.
The Slide
From the moment I purchased my small amount of Bitcoin, the price began to drop. I started hearing news about it. First, China is making Bitcoin exchanges illegal. This isn’t a big surprise, but it did seem to have an apparent effect on the price of Bitcoin. Then came Jamie Dimon’s statement that Bitcoin was fraud and that he would fire any trader speculating in it for stupidity.
Now, I think whether or not he believes it to be a fraud is not really the point for me. It is potentially useful to the extent that it may be required to use it to pay a hacker to get my files back at some point. Furthermore, if it is in fact sound technology, (that is, it can’t be hacked and transactions are faithfully executed) I’d say that it isn’t a fraud per se.
But, I have some serious misgivings about Bitcoin. It seems to be founded on some arbitrary units of computer problem solving power that can’t be held, looked at, tasted, smelled or heard. There is a finite amount of Bitcoin that there will ever be (21 million coins) which is, I suppose, an interesting factoid. Each coin can be divided into one hundred millionth of a Bitcoin called a Satoshi.
A little back of the napkin math reveals the total number of satoshi’s there will ever be which is 2,100,000,000,000,000. This equals about 300,000 satoshis for each of the 7 billion people on the planet. That’s it. My $100 investment represents about 2 million satoshis more or less depending on the conversion rate.
At any rate, I am not sure what the future of Bitcoin will be, but the fact that there are already several other competing cryptocurrencies and even Bitcoin itself has fractured itself into Bitcoin and Bitcoin Cash makes me wonder if it is sustainable.