Bitcoin - Scam, Sham or maybe the next Hamiltonian invention?

Wayne Spivak's Profile

Bit Coin ScamMost of our monetary policies we have today can be traced back to actions taken by Alexander Hamilton, our first Secretary of the Treasury (and father of the US Coast Guard). Bitcoin supplants, from my understanding, central banks, FX exchanges and such. What do you think, and would you join in personally and/or for your business?

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Member's Profile

Not really an answer - but an interesting take on ways to make money helping people mine bitcoins ...

https://www.semiwiki.com/forum/content/2932-asics-bitcoin-mining.html#!

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Member's Profile

Rather libertarian, don't you think?

No central bank. Distributed controls & trust.

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Member's Profile

Perhaps I am the most confused about what bitcoin really is. I read what Bob posted, it thoroughly confused me. Is it basically a new form of currency? If a bitcoin isn't widely accepted for products/services why would someone want to join?

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Member's Profile

Wayne et al

Wall Street Journal has some recent bits of information about this new coin :)

http://blogs.wsj.com/economics/2013/11/07/what-does-bitcoin-have-to-do-to-achieve-broad-acceptance/

http://online.wsj.com/news/articles/SB10001424052702303789604579195773841529160

My question: how will ERP systems and Treasury Workstations manage this?

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Member's Profile

Hi Len,

At this point I believe it is like being paid with any other non-currency commodity. You would need to record the cash equivalent transaction to clear the receivable / payable - and then record the asset as an investment or something other than currency.

Years ago I worked with a company doing substantial business with Russia - in a period where hard cash was hard to come by in Russia. For a couple of years payment was received in cases of dynamite - a commodity the US company needed to resell on the open market. The transaction flow we used was similar - the dynamite investment added an extra challenge but was eventually profitable.

The articles you list are interesting ... and have the same general conclusion about bitcoin actually replacing mainstream currency. Stranger things have happened - my bet is this remains a commodity type of value repository at best.

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Member's Profile

Hi Chris,

You can learn about bitcoin with a bit of googling and patience. It is a separate 'value' repository - hard to think of it as an actual currency. You could think of it as a new gold or other precious item - but something created by imagination and technology instead of mining it from the ground. As a new value repository it has whatever value people give it - to date it has increased substantially in value. People add philosophical and political wrappers around it ... you can treat those as you like.

There are two ways you can get bitcoins. One way is to buy them from someone else (using dollars) - like buying gold or anything else. The other way is to 'mine' them. The creator of bitcoin allows you to create more bitcoins by solving mathematical challenges. The mathematical challenges get harder as the number of bitcoins previously mined increases - and there is an upper limit to the total number of bitcoins possible.

So ... there are two ways to think about bitcoins. One way is to see if they fit your political / philosophical view of the world and expound as you see fit. The other is to view them as an investment opportunity - either through buying and selling them, or by mining more of them to sell.

The article I posted views them from the investment perspective - and from the view of mining / creating more bitcoins to sell. The mathematical challenges are getting hard enough that most people need technology to solve them - customized semiconductor (ASIC) and/or software. His theory is the more dependable money may be in selling the tools (semiconductor, software) rather than investing in the bitcoin market - sort of like selling picks and shovels to miners during a gold rush.

Bob

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Member's Profile

Thanks, Bob! That helped. I wonder how viable these actually are, and whether companies should be concerned with recognizing them as a non-currency commodity. There again, I wouldn't have imagined using dynamite as a non-currency commodity while doing business either. It is almost like going back to the ancient days when food was given for currency.

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I recall reading an article that hackers got into this bitcoin system. The use for illicit transactions, tendency to prefer to hoard the units, large fluctuations in value, etc. make it hard for me to see how it can be seriously used in business (though I understand it's been adopted as a way to facilitate transactions between two parties by legitimate businesses).

I like the fact that there is a limited number of bitcoins that will ever exists (21 million according to wikipedia). Sure beats the greenback in that respect.

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A couple of articles in the new Economist on Bitcoin

One suggesting a bubble - and that it is time to sell
http://econ.st/1ca8xmM

And one covering the mechanics, administration, issues, and potential of electronic currency in general
http://econ.st/18BiBtP

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Proformative Advisor
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It will be a fad that dies like beanie babies.

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