Bitcoin is a contentious topic, and if you wanted to buy some now would be the time as its taken a bit of a beating today. Other people have articulated similar points but I thought I'd give my own "2 cents" on the subject. One of the main appeals of Bitcoin is that it's supply is disciplined. Only 21,000,000 bitcoins can and will ever exist and the "proof of work" required to create them increases over time. The argument goes something like this: -
“Fiat currency” is any national currency decreed legal by the national government, but is intrinsically valueless money. Fiat currencies no longer represent gold deposits or other things of known market value. They are just the accepted pieces of national paper, printed by a private central bank and loaned to the national government, with interest. All fiat currencies are debt instruments. This is BAD because the government can, and regularly does, "print" vast sums - there's probably not much printing done these days but you know what I mean!
The problem with this is that the money in your pocket becomes worth less and less over time as the supply increases with no corresponding increase in the goods and services in the economy. Effectively, if we're being honest, it's a creeping insidious wealth grab. The bank of England is the anti-robin hood. They are a bunch of well heeled gangsters and kleptocrats with posh accents who steal from the poor and give to the rich.
Bitcoin does not resolve the money printing problem.
So Bitcoin is the answer, right? That's the appeal, there's no centralization and there is supply discipline? Well that's true, but whilst I am bullish on crypto-currency in general, I am going to make an argument that BITCOIN - and specifically Bitcoin - can not and will not replace national fiat as a means of exchange.
Let's imagine that $100,000,000 dollars were printed, and this was all the money that would ever exist. There would never be any new supply. What would the consequences of that be? Well for one, if you lost $10 down the back of the sofa, you would effectively be removing $10 of value from the economy and the remaining dollars in the economy would have to increase in value. This is deflation. That means that $10 today will inevitably be worth more tomorrow. As time passes, more and more $10 bills get lost behind the sofa. So what do you do? You hoard your dollars, anticipating that they will be worth more tomorrow than they are today (or "hodl" as they say in the alt-coin community!)
Let's take this further, let's imagine that every time you wanted to use your dollars to buy a loaf of bread, or 100 loafs of bread, it would cost you 1 cent for the transaction. Your eroding your money supply by 1 cent every time you use it for a purchase. That means that if something costs 5 cents, like a stick of bubblegum, you wouldn't just buy 1, you'd wait until you needed 100 and buy them all at once to save on the transaction cost.
Erosion mechanisms in Bitcoin
There are unfortunately many mechanisms by which Bitcoin is eroded.
Losing your wallet key. This is self-explanatory and I'm not going to go into it too much. It's analogous to losing cash when you're on a night out and get drunk. You lose the computer or whatever that had your wallet and you have no backup. boohoo.
Transaction fees
0.001 is a typical fee when transferring bitcoin, which is obviously way too much. It's a bit out of date now, but even so the transaction fees are expensive and bitcoin has no mechanism like "gas" with Ethereum and Neo. Chances are you're not going to move it unless you really need to or it's a large sum. this erosion happens every time you move it, like sea water gently splashing up to your sand castle, taking a chunk of it away with every surge. If enough transactions take place, eventually the exchanges will have ll of the coin - or a lot anyway.
- The "Superman III" problem
Aside from the pop culture desert wanderers amongst us, most of a certain age will have seen the movie Superman III, in which the hapless antagonist "Gus Gorman" manages to steal a fortune by collecting all the "half cents" on everyone's pay cheques. This is a problem which may be familiar to bitcoin users.
Did you know that 1 bitcoin consists of 100,000,000 "satoshis". Yes, you can transact 1/100,000,000th of a bitcoin! Regular bitcoin users go through a lot of wallets, and people are lazy, rather than type in 0.299374657 people will just type in 0.299, that's human nature. I've done it. So where do the remaining satoshis go, the 0.000374657 BTC. Well, they're floating around out there. The computers know where. You may wish you'd taken the time to type in all those numbers in the future.
Conclusions.
Buy as much Bitcoin as you can now while you still can. BUY BUY BUY! Eventually the supply will dwindle and the people holding it won't be willing to sell it, and the supply is being eroded all the time by the mechanisms explained above. If no one is selling, you know what that does to the price. It goes to the moon. This is happening NOW. Everyone laughed at James Mcafee saying it could go to $500,000. I'd say that and more is inevitable just by the math, assuming outside events don't prevent it. I'd still sell it eventually, as I dont see a lot of bids happening from $500k to $400k on the way down
Bitcoin should be considered as an asset, not a replacement for regular money.
Look for the currency which has discipline of supply but can replace eroded value (Ethereum?)
If anyone can make a bitcoin wallet that pays the fees using something like Dogecoin, I think they'll do well. There's a free business idea.
Microtransactions are something you're going to be hearing more about. Look for the coin that wins the battles for microtransactions. It's not going to be Bitcoin. Iota?
Peace out!