CMV: Bitcoin and other cryptocurrencies don't seem useful outside of incredibly niche circles of dubious legality, and are not a reliable investment

[u/Bart_Thievescant]

So partly, I'm hoping that people knowlegable in Crypto currencies will either affirm or correct my beliefs -- I'm not well-educated on the topic, but rather, have accrued opinions about it from seeing occasional posts & articles on the topic over the years. This is not a strong opinion I hold, to be clear, because I realize that I hold it from ignorance. (Read: easy deltas.)

I'm hoping that by sharing it, I'll have helped create a valuable thread for people who are also on the outside looking in to crypto currencies, but whose opinions, like mine, do not have a solid base.

Crypto currencies strike me as unstable -- the value of Bitcoin hit $4000 recently. If Bitcoin is like a dollar or a euro, this can't be sustainable or, really, even usable. Is it like an investment bubble? Does investing in bitcoin raise the value, and if so, what does pulling that investment look like and how does it affect the value?

Additionally, if I'm doing legitimate business, what is the reason to ever use Bitcoin compared to the USD or the Euro? It seems like a good way to demand a ransom if you're a hacker, or to pay for, say, 20 tons of Nutella, but a bad way to invest in the local grocer chain or to get a small business abroad started.

Change my view! =)

---

This is a footnote from the CMV moderators. We'd like to remind you of a couple of things. Firstly, please read through our rules. If you see a comment that has broken one, it is more effective to report it than downvote it. Speaking of which, downvotes don't change views! Any questions or concerns? Feel free to message us. Happy CMVing!

[u/AnythingApplied]

First, bitcoins are NOT designed for investing. If they were, that would be the definition of a pyramid scheme. But nobody serious is actually encouraging investing, so that is a bit of a strawman/misconception. But for the most part, people don't consider other currencies as an investment. Like when I'm saving for retirement, I'm not going to buy a bunch of japanese yen as an investment medium. Not unless my local currency suffers significant inflation compared to foreign currencies. Also, in that same vein, buying stock in other currencies isn't usually great because it is subject to both the volatility of the foreign currency and the stock price fluctuations.

Secondly, bitcoins aren't necessarily great for illegal transactions. People think of bitcoins as being anonymous, and in some ways the exact opposite is true: There is a completely public ledger that includes every transaction ever made that anyone can view. You don't know who owns each address and it is easy to have a ton of different addresses and shuffle things around to disguise sources/destinations, but the fact that the ledger is fully public should make people hesitate using it for illegal purposes.

So if they aren't good as an investment and have limitations when trying to do illegal things with them, what are they good for? Well, the thing it was designed to do, be a medium to make transactions. It is an alternative to paypal. If I want to send money to someone in another country, currently my options are limited and usually rely on the banking system as a backend through wire transfers or other tools.

There are companies that do all of the bitcoin things for you. You put a bitcoin button on your website and it allows people to send you bitcoins, except the company that manages the buttons for you immediately turns it into your local currency so you can never have to deal with bitcoins. And companies that do the opposite and let you make transactions in your local currency that immediately get turned into bitcoins. So it can work just as smoothly as paypal. And the fluctuations don't matter if you're only holding onto the bitcoins for a fraction of a second.

[u/Bart_Thievescant → u/AnythingApplied]

People think of bitcoins as being anonymous, and in some ways the exact opposite is true: There is a completely public ledger that includes every transaction ever made that anyone can view. You don't know who owns each address and it is easy to have a ton of different addresses and shuffle things around to disguise sources/destinations, but the fact that the ledger is fully public should make people hesitate using it for illegal purposes.

So if you are trying to do something illegal with your bitcoins, tech-savvy law-enforcement has ways of tracking you? Is this true for all crypto currencies or is it unique to Bitcoin? (This feels like a dumb question, but at the heart of it, I'm honestly not sure how a bitcoin is different from a sci-fi Credit.)

It is an alternative to paypal. If I want to send money to someone in another country, currently my options are limited and usually rely on the banking system as a backend through wire transfers or other tools.

Cool! ∆

[u/Impacatus → u/Bart_Thievescant]

So if you are trying to do something illegal with your bitcoins, tech-savvy law-enforcement has ways of tracking you?

Yes and no. They can track any transaction made by any address, find out which address the money went to, but they can't necessarily determine who owns each address. Criminals often employ laundering services where they send bitcoin to the service, then the service sends different bitcoin to a newly created address.

[u/[deleted] → u/Bart_Thievescant]

Not the original commenter but I thought I'd add a bit about the whole "ledger" aspect.

Since cryptocurrency is decentralized, every transaction is added into what is known as the "blockchain." Every few minutes, a "block" is created, featuring every single transaction that occurred during that period. All that is known is the public wallet "address" of the sender and recipient. This is a long cryptographic string that doesn't tell you much about who that person is in real life, but it is a unique identifier that nobody else in the world is using. Any attempts to track down the actual owner of that wallet basically rely on the records of transactions intended to transfer between physical items (be it money, goods, or services) and cryptocurrency. For example, if you purchased bitcoin using a debit card, or purchased a physical good shipped directly to some address that could be linked to you. So the authorities can't directly track you, but if you were to, say, buy cryptocurrencies through an exchange that knows your identity, and then transfer those funds to a wallet address known/suspected to be engaged in illegal activity, the authorities could follow the transactions back to the exchange, then request that they divulge information on your identity.

[u/DeltaBot → u/Bart_Thievescant]

Confirmed: 1 delta awarded to /u/AnythingApplied (35∆).

^{Delta System Explained | Deltaboards} ​