This piece was written August 30th, 2011 . Today, people don’t point to a single exchange to say that Bitcoin has “failed” or has problems; they use the price across the many exchanges to make this absurd and bogus claim. They were wrong to conflate Bitcoin with MTGox in 2011 and they are wrong to conflate Bitcoin with groups of exchanges today. Because Bitcoin is so new to most people it is hard to think about it correctly. The vast majority experience great discomfort when exposed to the idea that money doesn't need to come from the State, and become even more disturbed when they’re told that no one controls Bitcoin. These are ideas that the “normies” are going to get used to, just as they are used to chatting on WhatsApp; a very novel and 21st Century activity. An essential feature of the standard attack against Bitcoin is to point to the price charts generated by a single Bitcoin exchange and then use that as definitive proof of Bitcoin’s unsuitability for any purpose. The attack uses these single source charts to ‘prove’ that Bitcoin is a mania, like the Dutch Tulip mania or of 1637, or that Bitcoin is ‘insecure’ or any other fundamental flaw, technical, financial, philosophical or psychological you care to mention. Bollengekte Let us be perfectly clear; these Bitcoin detractors are of what Bitcoin is. They are near horizon thinkers, dullards, luddites, and the sweetest irony of it all is they are peddling their flawed ideas on a medium that directly disproves their theories. ignorant I have already debunked and quashed many of the fallacies that are routinely trotted out whenever Bitcoin is discussed by the ignorant on our blog; now I want to clear up a different fundamental mistake that all the current detractors of Bitcoin are routinely making, which is perfectly exemplified by the recent video item, which unintelligently parrots all the anti-Bitcoin nonsense as if it were being read from a centrally provided script or press release. MarketWatch The fundamental mistake these ignorant people are making is this; Bitcoin is not an investment, . it is a container and payment method When you think about Bitcoin in these terms, it becomes instantly clear that Bitcoin should not be treated like stocks or commodities. If you think of Bitcoin as only a container you use to shuttle payments to people for things on and off-line, you immediately understand that looking at stock market style charts of its value from a single exchange as a way of gauging its future potential is completely ridiculous. itself Bitcoin’s potential lies in its power to facilitate peer to peer purchases; it is not a commodity or a stock or a company, it is a , a , a that people use to make purchases between themselves. method container protocol Think about it this way; if, in 1997 you were told about a thing called ‘the Internet’, that would replace sending letters, utility bills and postcards through the mail to people all over the world at no cost, via a system that would not be run by any central authority and which was sure to utterly change the world and make people millions of dollars, you would be interested in it as an investment. Someone could (having fundamentally misunderstood what the Internet actually is) buy many domain names and then issue certificates against them, put these certificates into an exchange, and then start to sell them to investors. Charts would have been generated, and as a land rush began as the potential of the Internet became apparent to everybody, you would have seen a massive spike in the quoted prices of domain name certificates. Unique names like ‘sex.com’ could have been bought into by syndicates, who issued shares in it so that the cost of investing in ‘rare’ domain names could be spread out. You could buy shares in that domain name syndicate, and see their value rocket up. Are you beginning to get the picture? Domain names are nothing more than a method to instruct client programmes on computers to connect to a numeric address that refers to a server computer on the internet. They have no value in and of themselves; the value in a domain name rests solely in the work that programmers put into expressing the ideas of entrepreneurs who run the websites the domain points to. A three letter domain name like ‘sex.com’ is no guarantee of success on the web in and of itself; the same is true of Bitcoin. No one would have paid a billion dollars for the domain name ‘google.com’ before Google put millions of man hours and genius into their software, for example. If you want to ‘invest in the Internet’, you need to invest in a . You cannot invest directly in the Internet, which is nothing more than a series of protocols defining containers for information that have been agreed upon by individuals. When you think about Bitcoin in these terms, you start to understand why all these foolish pundits sound so ridiculous. They literally have no idea what they are talking about. company that uses the internet to provide value to people Bitcoin is a way to convey value from one person to another without a third party. Email is to postal services as Bitcoin is to money. It has no monetary value in and of itself; it has . This is why looking at a single chart from MTGox and inferring anything about Bitcoin in general, or its future, or its utility and true nature is completely absurd. This is why attempting to apply Austrian monetary theory to Bitcoin is a fool’s errand. Bitcoin is not money, any more than a leather wallet is money or an email is a letter written on your personal stationary; you would not define a wallet as money, or a domain name as money or a piece of paper with ink on it simply because someone buys and sells them as goods. a very high utility, not intrinsic value The real issue is not whether Bitcoin will ever be so widely adopted that it, “acts like a real, stable currency”. The only issue is wether or not it is widely adopted, and when the disruptive effects it will have on the current crop of online payment systems that are in thrall to the State, begin to emerge. And Bitcoin is a very disruptive technology. very Think about Bitcoin in comparison to PayPal. PayPal is essentially a centralized brick-less bank, that keeps a ledger of user’s accounts and transfers, and which charges per transaction fees. It strictly controls how much of your own money you can withdraw from them to your own bank account, how much of your own money you can spend at any one time, and PayPal are notorious for their freezing of user’s accounts, service problems and lust for compliance with the regulations of the State. For example, users of PayPal unfortunate enough to live under the yoke of the government of India have recently been informed that they will not be allowed to receive payments that exceed $500 per transaction and that they will not be able to keep any of their money in their PayPal accounts longer than one week; all money received into PayPal must be transferred to their Indian bank account within 7 days. I will take for granted your outrage at these anti-human and arbitrary restrictions. Now consider Bitcoin. Bitcoin turns every user into an operator of their own fully functional, trans continental, free of State control PayPal service. They can accept money and then transfer Bitcoins from their computer to anywhere in the world instantly, without interference from anyone. They can accept Bitcoins on their computer in exchange for goods or services in a similar manner. The key insight that mainstream thinking people are missing is that Bitcoin . Its accounts are essentially disposable and not tied to you permanently. You do not have to identify yourself to any third party in order to use it. If you adopt Bitcoin you are at liberty to use it in any way you like, with as much of your money as you like. can be exchanged for anything, not just money When you think about Bitcoin correctly, you can begin to see that its potential is as big as the advent of the internet itself, since money is half of all transactions. In the same way that email disrupted the postal service, Bitcoin will disrupt the making and receiving of payments. If you want to send a post card, you do not have to use a postman or government mail. You simply send an email. From your mobile phone. This is taken for granted, now, but it represents a tectonic shift in the way people communicate. Think about how the internet and Fraunhofer-Gesellshaft’s Perceptual Audio Coding software (that powers the MP3 file format) has changed the way music is distributed and consumed. No more buying Cassettes, Vinyl records and CDs in stores; no more middle men between the musicians and the music lovers. This is what Bitcoin is going to do in the realm of money transfer. And of course, the circle will be completed when music lovers pay tributes to their favourite musicians with Bitcoins. Very small payments will now become possible and plentiful…anyone can develop their own money transfer and content monetizing service on top of Bitcoin without having to interface with one of the main payment processing companies. This represents a massive shift and unprecedented opportunity on a global scale. There are so many possible uses of Bitcoin you could spend all day imagining its potential uses, and you might still completely miss its killer application. None of the people trying to pour cold water on Bitcoin ever mention Namecoin, which is a DNS alternative based on Bitcoin. This is probably because they are ignorant of what Bitcoin actually is, and are simply regurgitating what others have written and said about Bitcoin, rather than doing their own thinking about it. DNS, as I say above, is the system of marrying words with the numeric addresses of computers on the internet. It is how people connect to sites on the net with their browsers, allowing them to type in a name instead of a number. The DNS system is being attacked by the State as a way of taking publishers off-line. Google “ICE domain seizures” to find out what I am talking about. Namecoin has the potential to decentralise the DNS system, making it impossible for the State to seize domain names and attack publishers. This is only one possible future use of Bitcoin, and as we have seen with the appalling totalitarian police state scandals surrounding government sabotage and poisoning of the centralised DNS system, Namecoin could remove the power of the State to control this critical part of the Internet infrastructure. The potential of Bitcoin is obvious to those that are intelligent, that understand computers and software, who have some knowledge of the present state of and recent history of the internet and the problems of money transfer online. Anyone who knows what this really means is awestruck, at how everything is about to fundamentally change. gobsmacked To conclude, whenever you hear anyone attack Bitcoin, your first response should be to be skeptical of the intelligence and depth of understanding of the attacker. They will cite any or all of the following to try and dissuade you from adopting Bitcoin: Bitcoin has no backing The exchange rate is volatile (with obligatory MTGox chart) Bitcoin is a Speculative Bubble Bitcoin is used for buying drugs Bitcoin is run by amateurs ‘The MyBitcoin Fiasco’ Bitcoin is only for techies, not for the average person All of these reasons for avoiding Bitcoin are , trotted out by the unintelligent who cannot think for themselves, have weak powers of insight, are very probably computer illiterate, or who are philosophically predisposed to disliking Bitcoin because they have mistaken it for money due to other people having claimed that it is money. straw men The first and last straw men are particularly galling. The dollar is backed by nothing, and these same people insist that it is money simply because other people accept it as money, but by magic, this logic cannot simultaneously apply to Bitcoin. The Internet was once ‘only for techies’ and now everyone uses it, and the people who do not are the exception, the ‘disadvantaged’ who must be helped to get onto it. If it were not so tragic, you would think these pretexts for rejecting Bitcoin were funny. I predict that the same will be true of the mass adoption of Bitcoin as it was for the mass adoption of the Internet. In the very near future, the people who do not use Bitcoin for sending and receiving payments will be the exceptions, and the disadvantaged. I will leave it to you to extrapolate from , what the true value of Bitcoin is. that Roasted Ginan Nuts, Grilled Mackerel, Rice, Tskune, Sake, Shisomaki, 2 taxis ↴

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