Tags: bitcoin | blockchain | technology

The Promise and Peril of Bitcoin

The Promise and Peril of Bitcoin
(Mikhail Primakov/Dreamstime.com)

By Monday, 26 February 2018 05:01 PM Current | Bio | Archive

It’s break time. Time to take a breather from Russia, FISA, the NRA, DACA, and taxes and look at the lighter side of life: Bitcoin.

Everyone has heard about Bitcoin. We’ve seen the wild price swings. We’ve read about fortunes made, lost, and made again in relatively short time periods. We harken back to the dot com mania and see Bitcoin as an opportunity to make the money now that we should have made then. If only it were that easy.

So here goes. My own excursion into the world of crypto-currencies began about two years ago. A friend asked what I knew about Bitcoin and I honestly answered: “Nothing.” So I bought a book. And two hundred pages later I went back to my friend and said: “I read a book and I still don’t understand a thing about Bitcoin.” I tell you this not so you can feel intellectually superior to me but so you can respect the difficulty of the Bitcoin dynamic and proceed with utmost caution. As the Bitcoin noise got louder I paid more attention. Eventually I gained a small understanding and a unique perspective. And that’s what I’m about to share with you.

First, the small understanding: crypto-currencies, of which Bitcoin is just one of many, fall into a technology called blockchain. All crypto-currencies fall into the blockchain technology but not all blockchain technologies involve crypto-currencies.

Blockchain technology involves decentralized ledgers. Our lives revolve around centralized ledgers. I wish I could easily explain the difference. I can’t. The centralized ledgers we live with mean that our information, like medical records or credit card transactions, are kept in somebody’s really large computer. A decentralized ledger is dynamic. It means that as more data or transactions are gained the ledger expands at the location of the new data. I told you I couldn’t explain this easily. This expansion is in the form of blockchains, hence a new technology.

That is why you hear that the Bitcoin universe is both growing and capped. Of course, as a non-government issued currency, Bitcoin is very different from our greenbacks. Bitcoin is private in ways that we are not used to. They’re not only private but they’re effectively secret. You can only access your own Bitcoin account through your own personal “key” (or password). Forget the key, lose your Bitcoin account. Scared yet?

So why does the world need crypto-currencies? Aren’t dollars, euros, and yuans enough?

Here’s my answer. The world GDP is $77 trillion. And I would guess that the national (fiat) currencies are good enough (if you don’t live in Venezuela). But that’s because you’re good guys. But what if you were a bad guy? I have no idea of the world Fraudulent GDP. But I guess it’s in the fourteen digit range, upwards of $10,000,000,000,000. What’s in it? How about drugs, human trafficking, illegal anti-sanction sales or tax avoidance. Also, how about your neighbors’ use of cash-only illegal immigrants to cut his lawn or cash-only citizens to do odd jobs or housekeeping tasks? It adds up. All of these people might consider a “private” currency that no other person, financial institution, or government could access or audit? I can see the wheels churning from here. Remember the old numbered Swiss bank accounts. Eventually the governments opened them up. Bitcoin? Not so easy.

So what to do? In or out? If you’re in, is it off the high board or just dipping a toe in the kiddie pool? I bought a Bitcoin/Blockchain related security. I read. I Googled. I thought. And then I said “buy.” Now I’m somewhat underwater. It’s your turn. But I’m not an investment adviser. If you want to get in you must do your own research, make your own trades and assume your own risk. Just don’t bet the ranch.

So what’s the moral of this story? The moral is that you have a choice. You can enable global fraudsters by supporting the crypto-currency prices with your trades. Or you can invest in new technology with the hope that it plays a positive role in raising the global standard of living, and makes you a few bucks along the way. Your move.

Sid Dinerstein is a former chairman of the Palm Beach County Republican Party. He founded JBS Associates, a 600-person financial service company, and currently combines politics and business with Niger Innis in Inclusive Elections LLC, a firm that brings urban electorate voters to the GOP. He is the author of "Adults Only: For Those Who Love Their Country More Than Their Party." For more of his reports, Go Here Now.

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SidDinerstein
It’s break time. Time to take a breather from Russia, FISA, the NRA, DACA, and taxes and look at the lighter side of life: Bitcoin.
bitcoin, blockchain, technology
768
2018-01-26
Monday, 26 February 2018 05:01 PM
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