This piece was intended for publication on a media website that was never launched called BitCitizen.com. I decided to publish it here while it’s still somewhat fresh:
Bitcoin is maturing. Last fall I was lucky if my Google Alerts contained a single decent Bitcoin-related headline. Today, there are dozens of Bitcoin stories dropping on high profile media websites every day. Unfortunately, this ascent into the mainstream media has ushered in many negative opinion pieces by pundits who haven’t the foggiest idea what they’re talking about.
One culprit is a recent Huffington Post article entitled “Nine Trust-Based Problems With Bitcoin”. Try as he might, columnist Steven Strauss fails to make a lick of sense. Here are some replies to his commentary:
Point #1 from HuffPost: Trust the willingness of counterparties to accept Bitcoin as currency for payment — a huge leap of faith. Purchasing Bitcoins means participation in a 100% trust-based system, without any legal mechanism to compel their acceptance. Conventional currencies rely not just on trust, but also on the force of law. For example, in America the “Legal Tender Statute” (31 USC Sec. 5103) specifies that: “United States coins and currency … are legal tender for all debts, public charges, taxes, and dues.” No country issues Bitcoins, and no government legally compels anyone to accept them as payment.
Counterpoint – Bitcoin is not a replacement for fiat currencies, nor is it intended to be legal tender for the repayment of debts to a government. It’s a currency for the internet with its own economy. This page provides some perspective on the size and legitimacy of the Bitcoin economy: https://en.bitcoin.it/wiki/Trade.
Point #2 from HP: Trust unregulated institutions with your personal bank information just to purchase Bitcoins. As described in Mother Jones:
… if you … have qualms about handing over all of your bank information to an anonymous internet stranger, then you might want to just give up now. The major Bitcoin exchanges don’t accept credit cards …
Counterpoint – Bitcoin can easily be purchased at fair market value by members of the community. Many Bitcoin users are traders, miners, and merchants who trade coins everyday. There are sellers listed in 2065 cities and 244 countries on Localbitcoins.com alone.
Point #3 from HP – Trust a cryptographic, peer-to-peer network computer technology most Bitcoin users don’t understand.
Counterpoint – What about medicine, the Internet, airplanes? Should we cease trusting any technology the end user doesn’t fully understand?! Bitcoin is trusted, open source, and uses the most sophisticated encryption available. It’s more or less as trustworthy as technology gets.
Point #4 from HP – Trust that Bitcoin (really, a beta) won’t be replaced by a superior digital currency system, rendering original Bitcoins obsolete and worthless.
Counterpoint – While other spin-off cryptographic currencies exist, Bitcoin has a big first mover advantage. As new innovations emerge (I engage in debates pertaining to these on bitcointalk.org), they can be added to the Bitcoin protocol via ‘Bitcoin Improvement Proposals‘.
Point #5 from HP – Trust that the Bitcoin Foundation and other participants won’t create additional Bitcoin series, thereby diluting the value of the original Bitcoins.
Counterpoint – Steven, I know sometimes it’s fun to just say stuff, but frankly you have absolutely no idea what you’re talking about here. Anybody can mess with the code and create as many alternative transaction chains as they like, but these will never be accepted by the network. Basically, this sums up what makes Bitcoin such a great innovation in the first place.
Point #6 from HP – Trust that governments won’t intervene to render Bitcoins worthless (e.g., if Bitcoins facilitate too much drug-dealing or money laundering, the U.S. government could make their possession illegal).
Counterpoint – I think now we’re talking about trusting governments, and it’s true, an untrustworthy government will often work to limit the liberties of its citizens. In the case of Bitcoin, the worst the state can do is block the bank accounts of major Bitcoin exchanges. Trying to shut down Bitcoin would be like trying to shut down BitTorrent, it’s pretty well impossible.
Also, the effect of one country’s ban could inadvertently legitimize Bitcoin as a global currency, and entice other countries to start benefiting from its use. In other words, embracing Bitcoin can be beneficial, and shunning it only serves to make you less competitive.
Point #7 from HP – Trust an anonymous creator (Nakamoto) who’s mysteriously “moved on to other projects” and disappeared.
Counterpoint – This is incoherently rambling. Bitcoin is open source and continually reviewed and improved upon by programmers all over the world. Its good functioning assured by a global network of tens of thousands of miners. (More on mining: weusecoins/mining)
Point #8 from HP – Trust that Bitcoin markets will be available to provide prices in real currencies — as recent events demonstrate, also a leap of faith.
Counterpoint – Bitcoin is a trusted store of value to many, just like gold, silver, stocks, bonds, real estate, etc. Price instability does expose Bitcoin holders to risk. However, conversion from fiat currencies to Bitcoin is easy. Users need not keep much of a float in Bitcoin in order to use it effectively as a medium of exchange.
Point #9 from HP – Trust that your Bitcoins are stored in a secure location. Precisely because Bitcoin transactions are anonymous and non-reversible, they’re highly vulnerable to theft. If your Bitcoins are stolen, they’re pretty much untraceable. For a non-exhaustive list of major Bitcoin theft incidents, click here.
Counterpoint – Consumers are used to using credit cards and payment processors with Draconian currency conversion rates who charge high fees and interest. These ‘high fee monopolies’ extract their pound of flesh while distracting users with shiny features like fraud prevention. These services aren’t scams, they’re just extremely over-priced ripoffs.
Bitcoin is like cash. Use it responsibly for convenience and super low fees. There are lots of high-quality resources available to teach users how to store bitcoins securely. The only person you really need to trust, is yourself.