What Is Bitcoin And Why Should I Care?

bitcoin-gold

First, some things you never heard of before bitcoin.

The internet, the democratization of communication. No longer do you need a printing press, trucks, or paper boys in order to make your voice heard. Now all you need is a computer and a good story someone in the world is willing to read. Matt Drudge, editor of the Drudge Report, has revolutionized political reporting. His influence is at times stronger than the New York Times. And it’s just him and an assistant and a very simple website.

3D printing, or “additive manufacturing”. It is the democratization of manufacturing and its in full swing today. You no longer need a factory to make a product. You can manufacture your product in plastic from your desk.

Bitcoin is the democratization of money. Right now, the money you worked for, saved, and earn gets bank fees charged for holding it in a safe place. Governments control the currency and have the ability to confiscate it wants (remember Cyprus?). If you want to move it, there are restrictions as to how much and when. If you want to deposit or spend large amounts of money, you must report it. Enters Bitcoin.

Bitcoin is a currency based on complex encryption problems. It is distributed in a “trusted distributed public transaction ledger”.  Another words, it is public and widespread. Here is an example that might help understand it.

Imagine a hotel register. Guests sign in.  A entry on a transaction ledger has just been created. The register is distributed by machines that process that ledger, and are spread throughout the world threw many different ownership hands so that it is very difficult to change the registration. Data is logged by computers all over the world. To change the information, a person must own more than fifty percent of registration computers around the world in order to corrupt it. No government, person, or machine has control of the currency.  Without control, it is the Wild West once again.

All transactions are anonymous and controlled by two encryption keys, one public and one private. Fees are very small to non existence (that has the banks spooked I’m sure). With Bitcoin there are no borders, regulations, or police. Once the shot is fired, there is no getting it back. Truly the Wild West of currency.

Recently, the Internal Revenue Service has ruled bitcoin is NOT a currency but property. Hence, gain or loss is recognized based on holding periods as apposed to currency which is translated at receipt.

There is evidence Wall Street has taken noticed. Historically, gold has been used as a hedge against currencies for years. Lately there has been evidence that Wall Street is moving from gold to Bitcoin as a hedge.

Should you care, probably not. Warren Buffet doesn’t care. I care because I believe Bitcoin is here to stay. Just like Paypal (Buffett didn’t understand that one either), I believe this is big and bitcoin is here to stay. I own Bitcoin mining rigs (that is a story for a later date), and to “coin” a Vegas term,  I am letting my mining profits ride.