Yes, I'm a Bitcoin skeptic.
But as the facts change, the open-minded reconsider their positions.
Yes, it's still true that it's just a bunch of BS made up by some guy, and that some other guy, or thousands of guys, can costlessly invent multiple other alternative currencies. (Not that Janet Yellen can't costlessly will hundreds of billions of new dollars into existence.)
Bitcoin is gaining wide enough acceptance as a currency that it merits a second look. Overstock and other merchants now accept it as payment for all kinds of goods and services.
This past weekend, I spoke with fellow SLOB Charles Fettinger of Doo Doo Economics, who is also a Bitcoin expert. Fettinger gave me the basics of how to get started.
I went to coinbase.com and set up an account. I had to link a bank account, which took a couple of days to verify by micro-transaction. The security seemed pretty serious, including personal identification through credit records and phone verification through an authentication app. Coinbase seems to be a very legit Silicon Valley startup with serious venture capital behind it. Fettinger recommends starting with very small transactions and using the Instant Buy feature so that you don't have a trade fail due to a price move while your large payment is being verified. To protect themselves, Coinbase allows only $100 worth of Instant Buys per week for new traders.
Bitcoin prices have been down a lot recently due to the collapse of Mt. Gox, the largest Bitcoin exchange. That event has shaken the faith in the security of crypto-currencies, but seems to be an exchange-specific issue and not necessarily damning of Bitcoin. So I was able to pick up a little Bitcoin just over $500, down from recent highs around $1200.
It still could all disappear in the blink of an eye, but then again, it could also be a lasting, appreciating currency. Worth a very small bet, at least as an educational experience.
This Congressional Research Service backgrounder is a good resource to understand the basics -- and it's funny how much time they spend on Bitcoin as a threat to the Dirty Fed's ability to centrally plan the economy by controlling the money supply.
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