4 Huge Reasons Bitcoin is Worthless

Bitcoin, the first digital cryptocurrency introduced in early 2009 by the by pseudonymous developer Satoshi Nakamoto, was designed to circumvent institutional influence by offering a more direct person to person exchange of currency. It is, in more ways than it's supporters would like to admit, analogous to cash. Additionally, and the reason why I was interested in writing about it, is that it seems to possess a similar anatomy to that of a penny stock pump and dump.

At the time of this writing, a single bitcoin is worth around $121 USD. Back in April it was valued around $260. Some people have even been so ridiculous as to speculate that it will be worth $100,000. That's certainly impressive but also brings to light the unsettling issue of volatility considering it's worth plummeted by more than half in about a month's time.

Don't fix it if it ain't broke

It's a mantra we hear a lot, and for good reason. It's a waste of time and resources to replace things that are still working without serious issues. Cash already provides us with a deregulated method of trade. If you don't trust institutions, no one is forcing you to keep your money in a bank. The fact is, more often than not, institutions aid us in the safekeeping of our money and governments work to ensure they do it properly.

While the European dept crisis certainly demonstrates the disturbing possibility of what can happen when those plans go south, it's not difficult to point out why bitcoin doesn't offer much in the way of a solution.

Bitcoin is overly technical and nonintuitive

Even the most basic explanations of how Bitcoin is structured and expanded will make the heads of the average reader begin to spin. There is in fact a reason why things like gold and silver have high values; they're tangible, easy to understand, and pleasurable to look upon. Bitcoin, by contrast, is none of those things, barring the way to wide adoption. And of course wide adoption is absolutely necessary for a currency to work because if people don't accept it, they consider it worthless.

This problem is compounded by the currency's dependance on a network. While traditional currencies can be minted and printed to facilitate quick and painless trading, Bitcoin only offers the bulky series of numbers and letters called an address which look like this: 16yXE5cEbKTRbm4U8LFydp1Q9egWHcpcQ9

Bitcoin still relies on institutions

If Bitcoin hopes to survive in the world of traditional currency, it needs some way to be converted between them so as to establish its relative worth. For this it must rely on several loosely regulated groups such as Mt. Gox and Dwolla with essentially no safeguards as to their stability or longevity.

Bitcoin owners are also vulnerable to the same vulnerabilities as people who decide to keep all of their money under a mattress. Computer failures, fires and theft can all result in the loss of your digital wallet and thus your money. While there are workarounds for these problems, a similar level of effort and care can be used to protect your traditional forms of currency which again begs the question, "why switch?"

An internet based currency is plagued by internet users

You don't need a degree in social psychology to notice that anonymity brings out the worst in us. Reading a handful of YouTube comments will prove that point to anyone. In this regard, Bitcoin at an even bigger disadvantage than traditional currencies.

Honest Bitcoin users must traverse a minefield of scams and thieves while using their money in any transaction. Without the sort of regulation that traditional currencies are subject to, Bitcoin users have little recourse to fall back on when they're cheated. Take, for example, an interaction in which two people agree to trade a laptop for a number of bitcoins. Person A sends 5 bitcoins to Person B who then decides not to send that laptop after all. Person A has no one to seek justice from as their government likely doesn't acknowledge Bitcoin as a true currency, thus making it legally unclear if a theft actually occurred at all.

Furthermore, Bitcoins are no longer the sole digital currency which exposes another problem with unregulated currencies. Anyone can make one. The new cyptocurrencies, known as altcoins in the Bitcoin community, serve to make the value of the original more arbitrary and diluted. There are also many rumors that some of these altcoins are controlled by organized crime networks, which makes sense given the lack of concrete legislation overlooking these digital creations.

Personally, I'd rather work on improving the currencies we already have before I start investing in a new one that seems to have a dismal future and no clear hope of overcoming the problems we currently face.