Have you heard of the Bitcoin? It’s money that some cyborgs invented in 2009 and is as real as your popularity on Twitter. It’s also stupid valuable, at least for now, with one bitcoin coming in at around a bajillion dollars American. Maybe not that much, it keeps hovering between $10,000 – $20,000 as of the past month or so. Man, why don’t we all use those and be rich? Well, it’s a little trickier than all that and, even if you get your mitts on some BTC, as the kids call it, you may be in for more than you bargained for.
1. It’s Killing the Environment
Easing you into the problem with bitcoin is its environmental impact. You’d figure a virtual currency made of ones and zeroes and mousefarts and the other sorts of things that power the internet wouldn’t leave much of a footprint, but you’d be wrong.
Bitcoins exist, so to speak, thanks to bitcoin mining. Because bitcoin is a libertarian dream currency, it’s decentralized. No government owns it or influences it. It’s out there in the open, a public system, that is maintained by miners. Miners basically run programs all the time that verify what the hell bitcoins are doing all over the world and, in turn, they earn new bitcoins for their work. They get paid because maintaining this massive network takes a lot of computer power, already surpassing the power used by 159 countries. All of these transactions need to be checked and verified all the time so no one scams the system since it’s virtual. You can’t track the physical bitcoin and see who spent it where, so instead we trust that by putting it out where everyone can see it, everyone can verify who has it now and how many savory hams they just bought with it.
The computer processing required to verify the bitcoin world is massively boring if you’re not a tech-minded person, and probably still if you are, but all you need to know is that it requires a ton of power. You can’t even do it on a regular computer anymore, it’s just not powerful enough. And there are thousands of people doing it, 24/7. Each transaction, however, uses the same amount of power that a typical US household will use in about a week. That’s shithouse rat crazy.
The bigger bitcoin gets, the more transactions processed, the bigger the calculations that miners have to do will get, the longer they’ll take to solve and the more power they’ll need. Bitcoin will continue to require more and more power to use, which means more fossil fuel use, which means more pollution. In your effort to save up to buy a yacht you’ll kill the ocean so you can never sail the thing. Don’t think it’s that bad? At the current rate of power consumption, Bitcoin mining will use the amount of power the entire world currently uses by February 2020.
2. It Costs a Ton of Money Just To Use It
One thing that people universally hate when it comes to banking is talking to a human. Ugh. But also the damn transaction fees. A bank tells you it costs you money to take your money out of the bank and you just take it. We all take it. And it’s aggravating as hell but whatever, it’s maybe a buck or so. We deal with it. It’s way harder to deal with when you’re talking bitcoin though, thanks to the growth of the currency actively screwing those who use it.
Transaction fees with bitcoin have escalated to the point of being bewildering and unbelievable. One user on reddit made a post about wanting to sell 0.3 bitcoin and being charged a transaction fee of 0.08 BTC. Looks small when you read it like that, but that worked out to $1300 worth of BTC at the time. That’s crazier than grandpa on a mescaline bender.
When bitcoin first showed up, part of the appeal was the ability to engage in fast, simple transactions all over the world. Fees were typically miniscule, far less than fees associated with using your bank or a credit card. But the number of transactions – purchases with bitcoin that by definition have to be relatively tiny since one bitcoin is worth so much and maybe you just want to buy a ham sandwich for $3 – has worked against them. The entire bitcoin infrastructure can’t handle the number of transactions. The demand is greater than the network’s ability to cope and this means you pay for the privilege of using bitcoin with transaction fees exploding to $20 or more for a single, simple transactions and more if you’re willing to pay to have a transaction processed more quickly.
Businesses like Steam are no longer even accepting BTC because it’s so volatile when it comes to these fees, it’s just impossible to manage when you have to pay out the nose like that for simple transactions. High end fees for single transactions right now can be around $70 and they’re likely to keep increasing. This has lead some to speculate that a crash is in the future for the currency, that it won’t be able to sustain itself in the face of skyhigh fees and the rug will be pulled out, dropping the value down to something closer to what a US dollar is worth in most of the rest of the world, so like $1000 or so.
3. Everything About It Is Shady and Weird
Because of bitcoin being a non-centralized, regulation-free, anonymous super currency, it’s also prime grounds for all kinds of unsavory activity. Anonymous, highly valuable currency is perfect for anyone who wants to buy anonymous, highly valuable illegal stuff. Like drugs, or child pornography, or robot sex dogs.
The black market of the internet, which is like a regular flea market but with more nightmares and people saying “first!” under posts, has thrived on bitcoin which was frequently used in places like Silk Road when it existed and other unseemly locations where you could pick up some ecstasy or opium at a discount, and maybe some fake IDs, explosives or really thorough genome-sequence analysis. That last one’s not even a joke, they do that.
Now that bitcoin is more mainstream, it followed the evolution of slang from something only the cool kids used to something your parents say, it’s being used in more mundane ways, but its origins are mired in that black market, seedy, illicit reputation. This is a currency that, as a major selling point, let’s you commit illegal acts. It’s free from the restraints of things like a governing body, serial numbers, security measures, all the things that typical currency can use to help combat black market activity. That’s a hard reputation to get past, and it will always be a part of the bitcoin economy because, even if you can buy all that stuff with Swiss Francs or a Canadian Loonie, bitcoin makes it easier.
4. It Has Massive Security Flaws
In August, 2017, the New York Times ran an article about identity thieves who had hacked the phones of a very specific group of people. Their victims were all people who owned cryptocurrencies like bitcoin. The hackers got control of their phone numbers, used it to change accounts, and drained their bitcoin wallets of hundreds of thousands of dollars, if not millions in some cases.
Bitcoin, on some level, seems like it should be a super secure currency – you can’t be mugged for it like you can for your kickass new Jordans, but clearly that’s not entirely true. Way back in the day, what your parents called 2009 or so, the big bitcoin exchange in the world was MTGOX. Some called it Mt. Gox, which sounds like a nice, European mountain town. The MtG part actually stood for Magic: The Gathering, however. The tradeable, fantasy-themed card game. Because that’s what the site was created for initially. So bitcoin’s history is a bit like a lawyer who’s really good at knitting and just kind of quits lawyering one day to knit dog coats for a living.
By 2013, Mtgox was doing pretty well for itself as a bitcoin exchange with hundreds of millions worth of the currency being processed. Turns out the behind the scenes part of the business wasn’t going super smooth, though and, amidst a bevy of baffling technical and coding issues, it turned out someone had been skimming off the top. About $460 million off the top. 850,000 bitcoins just gone, and it wasn’t even the first time mtgox.com was hacked, just the biggest one.
200,000 of those coins were found but the other 650,000 remained at large. Word is the location of that money, three years later when it’s worth nearly $2 billion, is known, at least according to some Congressional testimony on the matter, but it was never clarified how or why or when or anything and none of that really gives the money back to whoever owned it to begin with.
Just at the end of 2017, NiceHash, a mining service, was robbed for nearly $70 million in bitcoins. BitFinex was robbed of $65 million in 2016. There are a string of smaller robberies dating back years and there are likely to be plenty more in the future.
5. It May Not Be Worth It
If one bitcoin is worth nearly $14,000, it’s good to have bitcoins, right? Makes sense on some level. But here’s a question for you – how do you get that $14,000? Like real dollar bills in your hand, if that’s what you want?
Users on various forums have been pointing out some serious flaws in how you use bitcoins if actually using them instead of just having them is your end goal, which it probably should be. One user on Twitter who goes by TedOnPrivacy recently chronicled the hassle of actually trying to exchange bitcoin for money because of all the red tape involved. The hoops he had to go through were staggering, from sending photos of his driver’s license and passport to a random website, endure those excessive transaction fees for even attempting to get his money, sit around and wait for transactions to process because this isn’t your bank and money isn’t going to pop out instantly, and then pick the most reasonable currency he could find because he couldn’t pick the kind of currency he actually wanted to convert the bitcoin into.
There were so many steps in the process – verifying his actual bank account for the transfer which takes 2-3 business days and dealing with exchange limitations that don’t let you cash out more than a single bitcoin per week, it almost sounds like maybe no one wants bitcoins to exist as anything but bitcoins.
Elsewhere in the virtual world, a user on the SomethingAwful forums presented a curious math issue to people. It delved into current transaction fees, the current value of bitcoin and the average value of any transaction and concluded, overall, you pay $99 for every bitcoin transaction. So if you want to buy a $5 meal at McDonalds with bitcoin, you’ll spend $105 to do so. That seems inefficient, yet delicious.
Regardless of who you are, to cash out bitcoin means using a cryptocurrency exchange, which is a cool name for the virtual version of that mall kiosk which will turn your Canadian quarters into American nothing. A site like Coinbase, which is probably the most well known, will allow you to convert your bitcoin into cold, hard cash. But also probably with a transaction limit, some ID verification, the set up of your bank account, associated fees, a several day waiting period to process and maybe they make you do a few cool dance moves or punch yourself in the face to prove your sincerity.
If a currency exchange isn’t your cup of tea there are also P2P service where you can basically just sell your bitcoin to some other person, the money can get put in escrow or you decide how to exchange funds – will it go to your bank account, paypal, shoebox full of cash in a dark alley, whatever works.
A lot of people are expecting bitcoin to keep rising, some predicting the value to hit $50,000 by 2019. And that could very well happen. It does have value now, but a lot of people are also waiting for the other shoe to drop. With everything working against it, the current move to basically validate bitcoin as a far-reaching currency anyone can use may be too much too quickly. Or maybe everyone in the world will become a millionaire and it’ll just cost us all the power in the world times ten to do it. We’ll have to wait and see.