Why dollars are better than bitcoins (and always will be)

Why dollars are better than bitcoins (and always will be)

Summary: Say anything negative about Bitcoin and the moles come out of the dark to throw stones. But the truth is that dollars are better than Bitcoins. And here's why.

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Bitcoin fans say it's the best thing ever. Bitcoin haters say it's a lot of geeky hype. I've been described as a Bitcoin hater and I guess, for the most part, I agree. But this isn't unchecked hate just for the sake of hating something, I just don't see the point of it, Bitcoin that is, not hate.

If you think about it, traditional dollars, are just as digital and anonymous as any digital currency. On the anonymous front, if I toss a $10 bill into a Fireman's boot during one of his annual fundraisers while waiting at a traffic light, that's pretty darn anonymous.

When I hand some panhandler a fiver on the street, that's anonymous. A guy rolling up to a crack dealer on the corner and trading a $20 bill for a tiny bag o' crack is anonymous. What more can you ask?

As for digital, most of my payments go directly into my bank account via automated clearing house (ACH) or direct deposit. My wife pays our bills online. I buy apps, music, and Amazon.com goodies online with no apparent money, except digital, exchanging hands. I authorize the payment, they say they get it, I get my stuff and we're all happy. To me, those dollars are virtual. I never saw them go into my bank account and I never saw them go out—except for the changing balances. All digital. Very easy. All legal. Everybody's happy.

Now, let's look at Bitcoin.

You spend dollars to buy Bitcoins so that you can buy stuff with Bitcoins. Can't you just buy stuff with dollars? Or Marks? Or Francs? Or whatever currency it is that you use?

It seems to me that the whole Bitcoin phenomenon is like Stilgherrian* said in his post: Bitcoin: More ideology than trustworthy currency

The ideologies and my responses:

  • Distributed currency - Who cares? What's the real advantage to that?
  • No government or bank controls it - OK. Again, so what?
  • Transactions are anonymous - Not true at all but why should that matter unless you're doing something that requires anonymity**? Use cash instead.

There's just no legitimate reason for using Bitcoins. There's no advantage to it. There are many disadvantages. One is that Interpol, the FBI, and others are watching very closely. Anything done on a peer-to-peer network is suspect. Exchanging Bitcoins, drugs, porn, music, whatever it is—there's a good reason why people desire to keep it "secret" and between like-minded peers.

After all that, here's what I really think of Bitcoin and the whole Bitcoin frenzy:

  • Bitcoin was an experiment—an anonymously created project and that's all.
  • Bitcoin is interesting from a purely esoteric point-of-view not a practical one.
  • People will fall for just about anything that they think is anti-government.
  • People will fall for just about anything.
  • Just about anything can be used as currency.
  • Being distributed is no advantage.
  • Being P2P is no advantage.
  • Not being controlled by a bank or government is no advantage.
  • Bitcoins are susceptible to theft and hacking.
  • Bitcoin transactions are not anonymous.
  • It's mostly hype and ideology.
  • The hype is derived from a clever marketing plan perpetrated to artificially raise the value of something that has no value.
  • Is more akin to cigarettes in prison rather than a real world currency.
  • Just because people are jumping on the bandwagon doesn't make it something you should get involved with***.
  • It's OK with me if people use Bitcoin, however, don't try to pay me with it.
  • I don't care if there are Bitcoin vending machines. Cigarettes used to be sold in vending machines too.
  • The perceived value is too volatile for a real currency.
  • Bitcoin is a bad name. It should have been Bitbucks or Bitbux. Bad call.
  • Just because you like it, doesn't mean anyone else has to. I don't like bubble tea either, so what.
  • In ten years, Bitcoin will be one of the things you laugh about.
  • If you have to purchase a currency in order to buy stuff that you can buy anyway, there's something screwy about that.

I'm willing to discuss Bitcoin with anyone, anytime but know this one thing: You'd better be ready with some better answers than what I've heard so far in its favor.

I'll even tell you my strategy for those discussions.

I'll ask you to explain to me what's so great about Bitcoin. Tell me its advantages and then back that up. The problem with ideology is that it's based on belief, not reality. If you believe that the distributed model is an advantage, you need to tell me why. Being distributed is not a valid argument. You believe that it's an advantage because you buy into the ideology.

Same goes for the P2P aspect, the non-control issue, mining, the 21 million limit. 

If I have one bit (pardon the pun) of advice for you, it's this: Don't fall for schemes like this. Don't get involved in MLM schemes. Don't invest your money in something with no tangible or physical assets. Don't believe all the hype around something like Bitcoin.

Remember that if something sounds to good to be true, it is. If something sounds shady or underhanded, it probably is. If something is sold to you as anarchist, anonymous, distributed, P2P, or subversive, then chances are almost 100 percent solid that there's criminal activity afoot and the police are watching.

Dollars are better than Bitcoins. There's no doubt. I don't have to purchase dollars with other currency to buy things that I'd normally buy anyway. If I can't use dollars, physical or virtual ones, then I probably don't need whatever it is. If I have to buy another currency to get what I want, then I'll do without. Dollars will spend anywhere and I can use them anonymously or not. And without fear of anyone but my wife watching.

Now, to those of you who want to call me names on Twitter because of this post, here's what will happen: I'll block you. I know you want to be anonymous and virtual, but if you can't face me and say those things, then you shouldn't say them online.

I'll entertain any reasonable dialog on the topic, so please feel free to engage me. Use Bitcoin or don't use Bitcoin. I don't really care. But don't tell me that because I don't like it that I'm anything but entitled to my opinion. The fact that we disagree doesn't make you right. 

Oh, and you should consult the Bitcoin FAQ before making outlandish claims. Also check this page before telling me how anti-hack and theft-proof Bitcoin is too.

*Stilgherrian - is that a first name, last name, or one of those mono name things like Cher or Shakira? Either way, I don't get it nor do I know how to pronounce it. I need to get myself one of those cool single names. I'll take ideas for one.

**If you think they're anonymous, you're very wrong. This from the Bitcoin FAQ: "Bitcoin is designed to allow its users to send and receive payments with an acceptable level of privacy as well as any other form of money. However, Bitcoin is not anonymous and cannot offer the same level of privacy as cash. The use of Bitcoin leaves extensive public records."

***Think IPOs of things like Twitter here. Pet rocks. Paying $300+ for a Tickle Me Elmo. How many do I have to name?

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Topics: Tech Industry, Software

About

Kenneth 'Ken' Hess is a full-time Windows and Linux system administrator with 20 years of experience with Mac, Linux, UNIX, and Windows systems in large multi-data center environments.

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52 comments
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  • Time to make some money

    I'm sure this will get lots of responses, some of them very emotional and entertaining and Ken will get called lots of names. And in this case, I really don't blame him for doing it. After all, people don't have to respond.
    John L. Ries
    • government shutdowns won't affect Bitcoins.

      Lol
      Uralbas
  • Bitcoin is a bad name?

    That one had to be a joke!
    Funny blog
    zmudd
    • Better a bad name

      than a bad reputation. The Dollar is sinking fast at the moment.

      To rephrase Ken, he throws a $10 dollar bill in the fireman's boot, which is worth $5 by the time the lights change, because the US Govt. have just printed a whole load more dollars.

      That is the problem with the Dollar (and many other currencies), they are no longer attached to anything "real", Dollars are Dollars. They used to be worth a set amount of Gold (a Gold Standard), but no longer. The Dollar is becoming unstable and is worth less and less.

      Bitcoin, on the other hand, has a finite number of coins that can ever be minted / mined, so you can't have runaway inflation, because you can't just "print" new Bitcoins.

      I'm not a big Bitcoin fan, but Ken seems to be missing this major point when he says the Dollar is better. No, the Dollar is older and it had a good reputation and Ken grew up using the Dollar, so it is familiar to him, that doesn't make it automatically better, especially when the US Government seem to be doing everything they can to undermine the Dollar.
      wright_is
      • I think you miscontrue the "problems" with the dollar.

        "The Dollar is sinking fast at the moment."

        Inflation has been below 5% for the past 5 years. Most recent figures have it currently below 2%. Define "fast."

        http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx?dsInflation_currentPage=0

        "That is the problem with the Dollar (and many other currencies), they are no longer attached to anything "real", Dollars are Dollars. "

        Bitcoins are equally attached to nothing real. They're not backed by gold, silver, or anything else physical.

        If you want a currency backed by something physical - Bitcoin isn't the way to go.

        "Bitcoin, on the other hand, has a finite number of coins that can ever be minted / mined, so you can't have runaway inflation, because you can't just 'print' new Bitcoins."

        You can, however, have deflation, which economists also tend to think is a bad thing. From what I can tell, current economic theory has small amounts of inflation being acceptable, while deflation and hyperinflation are viewed in a generally negative light.

        The idea that ANY type of inflation is unacceptable is something I hear from armchair economists, but not something I heard from my actual economics class.
        CobraA1
        • 10%

          it has dropped around 10% against Sterling since August.
          wright_is
          • A relative measure

            That's a bit of a relative measure, as the price of the Sterling is also variable.
            CobraA1
          • But that is the point

            currencies are always compared to each other, because they are always realtive and always changing. That is how you work out which currencies are doing well and how stable the economy behind it is doing.
            wright_is
      • Other ways

        Plenty of ways to hedge against the dollar than Bitcoin which are much less volatile, and backed by something tangible.
        louishelps
  • I'll try to assume good faith

    Bitcoin has a number of advantages that Ken hasn't mentioned:

    * Much faster transfers compared to ACH or wires. Between seconds and 10 minutes, depending on how paranoid you are.
    * Extremely low transaction costs. Paying someone one dollar or 10 thousand dollars costs about as much - 3 cents currently. This makes micro-payments a possibility, whereas before the fees would make them impractical. The developing world has much to benefit from this, as do transactions for piecemeal services (e.g. live interpretation by the second) or for relatively inexpensive items. For example, small businesses in the US like to require that customers make at least a $10 transaction on a credit or debit card. That’s because some processors charge more for smaller transactions in order to make money on every purchase. More at http://www.coindesk.com/bitcoins-role-future-micropayments/
    * Speaking of transfering $10k - FinCEN will flag you as a potential money launderer for the simple reason that you've reached a "suspicious" threshold
    * Similarly, try coming into the US and going through customs with a lot of physical dollars
    * "No government or bank controls it - OK. Again, so what?" - seriously? Need I point to the many stories on the bank accounts frozen in Cyprus by the government, without the owner having done anything illegal? Here's one: https://bitcointalk.org/index.php?topic=160292

    There are many more arguments for Bitcoin, including a set having to do with its advanced properties that can enable quite interesting applications not ordinarily possible with dollars: smart property, cryptographically-assured autoamted third-party arbitration, multi-party signature etc. (see http://www.youtube.com/watch?v=mD4L7xDNCmA)

    I won't go into more, however, unless the author adopts an open, non-dismissive attitude about the topic.
    Dan Dascalescu
    • If nobody excepts them as payment one day

      how do they have any value?

      That's an impressive list, but in the end it means nothing if people decide it's not worth excepting.
      William.Farrel
      • Why with the value

        It is true that it means nothing if people decide its not worth accepting. But that applies to any kind of medium we use as money. Why ANYTHING has value is because people perceive that it has. The Zimbabwean Dollar had value... until the government decided to go on a printing craze... and then it had lost its value.

        Greenbacks have value because we perceive that we can walk into a store and buy our lunch and also because we have to pay for our taxes (essentially we are forced into this situation of using fiat money).

        Bitcoins can have value if other people value them. Its as simple as that. Can I buy lunch with Bitcoins? I most certainly can. List of restaurants accepting Bitcoin in North America: https://en.bitcoin.it/wiki/Trade#North_America
        jeremyyeo
      • if US$ were printed in trillion denominations

        like Weimar Republic Deutschmarks, would dollars have any value?

        Value in any currency depends on what that currency can buy. At the moment Bitcoin can buy lots of things, just like fake currencies in several online games. They rely on trust, which is harder but not impossible without a goverment backing them up. Someday that trust may disappear, but not today or tomorrow.

        Would I want to keep my retirement account in them? No. If I were tempted to buy nonprescription Vicodin, would I prefer them to US$ for the transaction? Absolutely.

        The problem with Bitcoin is that it's an ideal currency for illegal transactions, but it does rather have value for that, thus undercutting claims it has no value. It just doesn't have the value its detractors would prefer.
        hrlngrv 
    • humm . . .

      "* Much faster transfers compared to ACH or wires. Between seconds and 10 minutes, depending on how paranoid you are."

      My bank seems to do it pretty quickly.

      "* Extremely low transaction costs."

      I don't think I've ever paid a "transaction cost" at my bank. Although you seem to be referring to online payments for businesses? Don't think PayPal has charged me much for accepting payments through them. This may be a "your mileage may vary" thing.

      "small businesses in the US like to require that customers make at least a $10 transaction on a credit or debit card."

      Have yet to see that. Maybe it's specific to your region.

      "* Speaking of transfering $10k - FinCEN will flag you as a potential money launderer for the simple reason that you've reached a 'suspicious' threshold"

      Citation needed.

      Although to be honest - yes, transferring a *lot* of dollars can be rather suspicious, can it not? Should not law enforcement be looking out for suspicious activity? Is it not their job to track down crimes?

      It should be noted that they consider virtual currencies to be subject to the same rules: "Virtual currencies are subject to the same rules as other currencies. … Basic money-services business rules apply here."

      http://en.wikipedia.org/wiki/Financial_Crimes_Enforcement_Network

      So it appears Bitcoin is not exempt simply because it's a virtual currency.

      "Need I point to the many stories on the bank accounts frozen in Cyprus by the government, without the owner having done anything illegal?"

      I say you shouldn't bother, because we're not in Cyprus. No, there's no accounting for the actions of a rogue nation.

      And of course, it can be argued that the converse is also true: You won't be getting any of the benefits of the protections put in place after the great depression, either.
      CobraA1
      • You are embarrassing yourself.

        I own and operate a large online commerce platform, and have a long history with web technologies and protocol development. I believe Bitcoin is valuable as a technology, and the investment aspect that takes the spotlight is secondary to Bitcoins UTILITY. Bitcoin can do things we could never do before as a commerce platform. We are seriously exploring Bitcoin as a technology. I believe you don't know what you're talking about. I am certain that the author of this article is a moron.

        * Your bank only "seems" to do transfers quickly. Within the bank transfers are as fast as they can update balances using their internal services. Between banks, transfers move somewhat slower because trust must be achieved. International transfers between different institutions take days and sometimes a week or more.

        * You pay transaction costs at ATMs. You pay transaction fees to withdraw your money from a different bank. You pay transaction fees on Interac. You pay transaction fees online when you process payments using your credit card. You pay commissions to services like Paypal or eBay or Shopify on top of those commissions. Bitcoin reduces those fees by orders of magnitude. In addition, you pay service fees for your bank account. How do you think the financial services industry keeps itself going? Fees. It is absurd that you are pretending they don't exist.

        *At a corner store, in order to use their debit or credit POS device they may choose to require a minimum purchase. I have OFTEN encountered this in the US, Canada and Europe. Usually something like $5. Walk into a few small convenience stores and try to buy a chocolate bar with a credit card. It won't take long. Any business that DOESN'T have this policy is just choosing to eat those fees, and it is costing them money. Just because you personally don't see something, doesn't mean it isn't there.

        * Fincen, Fintrac, banks and other entities assign a risk profile to all transactions. One of the metrics they track is transaction size. Large transactions receive extra scrutiny to reduce their losses to fraud and identity theft due to chargebacks. This is common sense, and an obvious fact. Many things will flag your transactions. The cost of fraud to large financial institutions is NON-TRIVIAL and they take it more seriously than you do, thankfully.

        Bitcoin does not escape this same suspicion, however because Bitcoin transactions are completed without requiring trust between parties, there is no risk of chargebacks and so there is no LOSS OF PROFIT RISK for these large transactions. Only the legal concerns remain. This is significant to anyone with a business, or at a bank. All I hear you saying is that you don't understand how financial services operate.

        * Cyprus is not a rogue nation. It's financial policy was dictated by the IMF who has given the same policy guidance to all of EU. Every central bank in the world answers to the IMF and FATF for policy direction. Cyprus was a test of the bail-in policy vs the bail-out. It was a shot across the bow to scare riskier EU nations into stopping their bleeding.

        Bitcoin is not 'done'. It is constantly being built on top of to create the technology, policy and practices that will bring it into the mainstream, and into compliance with the legal frameworks of nations like the US. Consider operations like CoinValidation, a Bitcoin consumer protection service being spearheaded by the chairman for the New York Republican Party’s Finance Committee. If you think Bitcoin is only a currency for operating in the shadows, you're just not paying attention and it's annoying to see someone who's maybe spent a few hours thinking about Bitcoin talk like they know what they're saying.

        You are ignorant of many facts and this ignorance will literally cost you.
        kingbitcoin
  • @Dan

    Your examples are extreme and impractical. Developing countries and Bitcoin? LOL. And what, pray tell, will these developing country people use for technology? Get serious, dude. You remind me of someone who's into Amway or some other MLM. Brainwashed by hype. It's still funny.
    khess
    • @Khess

      "And what, pray tell, will these developing country people use for technology? "

      There's a new device out you may not have heard much about yet, it's called a mobile phone. There are nearly 7billion subscriptions globally. Over 5billion in developing nations. You should check it out.
      mike62-49090
    • @Khess

      You said in your article "I'll entertain any reasonable dialog on the topic, so please feel free to engage me".

      Dan just listed you 5 reasons why bitcoin has advantages. Instead of replying with arguments, why you think he is wrong, you just say "LOL" and call him brainwashed and funny. And then you wonder why people call you bad names on Twitter?

      Why is being able to accept a 10 cent payment online "extreme and impractical"? There are thousands of possibilities, for example, to make a micropay wall for the online articles, and let visitors pay 10 cents if you want to read the article. Is that possible using current systems? No, because the transaction fees to just accept/send such a small payment would be higher than the payment itself. Is that possible using bitcoin? Yes.

      Why is being able to send money anywhere on the planet in just 10 minutes "extreme and impractical"? Using current systems that would take several hours or even days.

      Why is being able to protect your money from being frozen by banks "extreme and impractical", considering what happened in Cyprus?

      About developing countries, in case you didn't know, in many of developing countries a significant part of the economy is already conducted through mobile payments. Take Kenya for example. 70% of Kenyans don't have a bank account, and also 70% of Kenyans have a smartphone. 31 percent of Kenya's GDP goes through a mobile payment platform called M-Pesa. There was a problem though - it was only possible to transfer money between Kenyans in M-Pesa before, but recently they have integrated bitcoin into their system, which allows Kenyans to send money to anyone in the world. 1/3 of all Kenyans use M-Pesa, that's over 14 million people. Before bitcoin was integrated, those 14 million people could not take part in the global worldwide economy, now they can. How is that "extreme and impractical"?

      "Think IPOs of things like Twitter here. Pet rocks. Paying $300+ for a Tickle Me Elmo. How many do I have to name?"

      I wanted to clarify: Do you really consider Twitter is in the same category as pet rocks? Could you please elaborate on this?

      Please, keep your promise, and engage in the dialog.
      c460811
      • He doesn't have to engage!

        As we've noticed with previous articles, the way to make a name for oneself in blogging is traffic and comments. Several communities respond with religious zeal when provoked. The Bitcoin community is one of them. All an author has to do is put together a reasonable sounding argument against a zealous community and watch the notoriety surge. Apple fanboys have waned a bit in zeal and there are too many detractors to really create a surge in unique traffic. The bitcoiners have lost no such zeal. The believers have lost faith in fiat; we've seen wealth destruction on such large scales that the volatility of bitcoin doesn't scare us.

        The fact is, bitcoin is an international network that is starting to rival Visa and Mastercard, Western Union, and the like.
        Steve Ramos
  • Too much marketing

    It's funny how the interpretations, for or against, generate about bitcoins.
    The real thing, it's happen now, people was buying bitcoins about 350 us$ per unit. May be, there're insane. Why invest that quantity of money for a digital currency?
    There're lot noise about the anonymous transaction, of course, all digital, have a record, even that. It's not a solution for illegal stuff.
    For example, is traditional when yuen is overstated, the Chinese government acts to prevent this happening. But what happen with the bitcoins, who controller. Mean, if I invest one hundred dollars, a year ago at bitcoins, how many I have now? How many can I have in two months?
    On the other hand, you can hide the bitcoins in the mattress? You can go to a winery or pay to which prepares hotdogs? likely to do better with dollars.
    Few weeks ago, when Silk Road site was close, many gurus wrote about the end of bitcoins, but now still grow.
    Try this, get 300 bucks, put 100 into the mattress, others 100 convert at bitcoins, and the last put at saving account into the bank. Wait, four months, and compare.
    May be, is fashion, or could be the excitement pass, but since 2009, bitcoins are here, and possibly a little beyond January 2014.
    Why will I care, if government of USA, or central banks of any country if watch me, will I? if at December of 2012, I bought 5 btc for fifteen bucks each (75$ plus commissions) and now are people that want pay me about 1750 us$ now, who is the fool? Could be If I using this money for invest at google or facebook get better return.
    Gilberto Galea