I want to extend my appreciation to IrishBoy for inviting me to this debate. I intend to show why Bitcoin is bad as a currency, bad as an investment, bad for those who are involved in using it and just plain bad in general. I work hard for my money, and I would never put money into a digital currency that is backed by nothing, and bitcoin is backed by nothing.
At the time of this debate Bitcoin is being traded on coinbase.com for the amount of $14,000 for one Bitcoin. This is an enormous amount of money. Gold is currently being traded for the amount of about $1,200 an ounce. Thus bitcoin is selling for more than gold. One may look at that and come to the false conclusion that bitcoin has value. It does not. It has value only because of speculation, not because it is worth anything. Gold has to actually be dug up and mined for by a physical person's labor, Bitcoin does not. It is true that Bitcoin is mined, but it is not the same type of mining that is done by a real miner.
Opening Statements and Introduction by IrishBoy
I would like to thank Lisa for taking the challenge to debate the merits of the cryptocurrency Bitcoin. I believe a good debate is key for people to learn, grow, and understand the world around them.
I was first exposed to bitcoin back in 2013. I originally bought 10 Bitcoins for about $100.00 apiece. If I still had those Bitcoins today, they would be worth somewhere in the neighborhood of about $140,000. That is a return on investment of about 13900%. Show me anyone who had a stock that performed better than that over a period of 4 years. Bitcoin is a great investment for those who would like to find a way to not only preserve their wealth but to also grow it.
I recommend bitcoin at any chance a get. Buy Bitcoin because in a few years you won't regret it.
Round 1 by lisa
Bitcoin is only valued so much right now because of speculation and greed. Most people who are buying bitcoins are not buying them because they believe that they are going to replace cash, they are buying them because they are hoping to be able to turn around and someday sell them for more dollars. Bitcoin was not created because Satoshi wanted to create an investment option, it was created with the hope that they would become a new worldwide currency. But with everyone keeping and hoarding their bitcoins, it is not being used as a money system at all. This kind of hoarding is a representation of the worst of human nature and greed, and this kind of mentality is not something that makes the world a better place.
Bitcoins are easy to lose. It has been estimated that nearly 4 million of the bitcoins that have been created have already been lost. The total number of bitcoins that were ever intended to be created is 21 million. However, with the number of bitcoins lost, that it now 17 million available in total. This means that about 25 percent of mined bitcoins have been lost. How can an investment be good when you have a 25% chance of just plain losing it.
Bitcoin is also prone to theft. In 2014 Mt Gox was hijacked and 7% of the markets worth of bitcoin was stolen. Mt Gox was not just some small trading platform, Mt Gox was THE trading platform for bitcoins at the time. When the Bitcoins were stolen, they were lost completely. With spending dollars, especially charges made with credit cards, there are mechanisms in place to help protect you from theft and fraudulent purchase. With a credit card, you can dispute a charge and have the charge reversed. With Bitcoin, once a transfer from your wallet has been made, it is done. If someone steals your wallet and transfers the bitcoins out of it, there is nothing that any government or agency can do to reverse that charge and return your stolen funds.
Another reason why bitcoin is not that great is that there aren't that many places that accept bitcoins. If you need to buy groceries at Walmart, you aren't going to be able to walk in with a wallet full of bitcoins and pay for the groceries. This inconvenience is a huge deal. A monetary system is supposed to make the transfer of goods and services something that is easier to do, not harder. If you wanted to buy something with bitcoins, you would first need to move your coins to an exchange and convert them to dollars. Next, you need to then make a transfer of your bitcoins to your bank account so that they can be available in your checking account so that you can buy your groceries with a debit card. That seems like a lot of work just to buy a gallon of milk, not to mention the fees involved that make it even more expensive.
Let's say that the price of bitcoin keeps increasing in price. Sounds great right? Wrong. A monetary system is better if it is stable, neither increasing nor decreasing in value.The price of bitcoin is not stable enough to be used the medium of exchange in an economy. In a single day, bitcoin can cost rise or fall 10% or more. How could a store that is selling bread or gas possibly keep updating their prices when they change by the hour, and in some cases the very minute? When I go to the store and buy a loaf a bread, I know it is going to cost me two dollars. If I had to buy them in bitcoin, I could go to the store and then find out that it costs less than yesterday. Sounds good to me, but the store selling the bread is going to have to eat that difference.
Round 1 by IrishBoy
I have asked myself this question, is my interest in bitcoin based upon greed and speculation? I have come to the conclusion that I can honestly answer no. I admit I am excited to hear about bitcoin picking up price because it means the currency is becoming more popular. Bitcoin offers the average person a means of saving their hard earned money in a deflationary currency. Because of the nature of bitcoin, the value of it will continue to rise so long as people are using it.
The prices of homes continually are on the rise in every market, and though there are bubbles and busts, the overall trend is that they rise in price at a relatively rapid pace. I remember when I was about 28 and I was setting aside money to buy a home for my family, it was very depressing. It was depressing because as soon as I would put aside a $1,000 for the purchase of a home, the price of a house would rise $3,000. It is becoming an increasing more difficult task for young people to be able to save and buy a home which is why so many of them simply aren't. Though demand plays a role in the prices of homes, an even bigger culprit in the high prices is inflation. The dollar, for example, looses value each and every year. Because the dollar looses value every year it discourages people from being able to save money by putting it aside. It makes no sense to save money when the value of the money you are saving is going to drop the longer it sits.
How sad that? The dollar actually punishes you from having the good old virtues of thrift and savings? Bitcoin on the other hand rewards those who are thrifty and put aside their money so that they can make purchases in the future. In the United States the rate of inflation isn't too bad, but in other countries the inflation completely out of control. In Venezuela, people are mining bitcoin because they can not afford to use their local currency because it looses so much value so fast. To people in Venezuela bitcoin is a godsend.
I believe in bitcoin. I believe in a deflationary currency that does not answer to a government but that serves the needs of the people. With bitcoin the day may come when people are able to buy homes not by taking out huge loans with interest, but by setting aside money in bitcoin.
Bitcoins are only easy too loose or have stolen if a person is not being careful. Putting all of your bitcoins on a site that is owned by someone else is not using wisdom. If you had millions of dollars in gold would you just trust it with somebody who bought a domain? No, you would want it in a locked up vault guarded by men with machine guns. If people had made paper wallets and kept them at home, they would not have lost their bitcoin. People do need to understand bitcoin and how to keep it safe before they try to invest in it.
Also, just because bitcoins can be lost does not mean they are inferior to currencies such as the dollar. Dollars can be lost and stolen just as easily as bitcoin. If a person uses wisdom with bitcoin I would say that they are actually harder to be stolen.
Though it is true that not many places accept bitcoin, the number of places that accept it are getting bigger each and every day. Overstock, Subway, and even Microsoft accept bitcoin. These are not small companies. Bitcoin is a new concept, and new concepts always take time to become accepted by the mainstream population. But that doesn't mean it isn't sound.
It is true that the price of bitcoin is more volatile than the dollar, but as more people accept it as a currency and it becomes mainstream the more stable it will become. If it ever becomes a currency that is accepted across the world, then it will become very stable because it will no longer be in the growing stage. As more people accept bitcoin the more valuable it will become, but once everyone accepts bitcoin, it will stop growing in value at the rate is is growing now. If everyone one accepted bitcoin then it would still grow in value because people die, bitcoins will be lost, and generally the population is increasing. But it will slow down to were it will be more like the dollar, but in reverse. Where the dollar has an inflation rate of about 5% each year, bitcoin will have slight deflation rate each year. And for reasons mentioned above, I believe a slightly deflating currency is better for the people than one that is slightly inflating.
So, I fully support bitcoin because it gives people the power to change their lives by having a currency they can trust. We are very lucky to be living in a time when the money system is being transformed for the better. Someday people will see digital currencies like bitcoin as having as large an impact as the internet.
Round 2 by lisa
You make the statement that bitcoin is a deflationary currency, and you base that upon the that there is a hard limit upon the number of bitcoin that can be created. However, saying it is deflationary upon the criteria alone is flawed. Though it is true that the creation of money can cause inflation inside of a monetary system, it isn't the only thing that determines whether it is in an inflationary or deflationary state. Another criteria that could affect the value of bitcoin is the competition of other cryptocurrencies. As new cryptocurrencies come on the market and get a following then people could lose interest in bitcoin and move towards the other currency. You see inflation is dependent not upon the hard limit of coins created but also upon the userbase. If the user base shrinks, then the value of the coins go down. If everyone stopped using bitcoin and you alone held all the bitcoins in the world, then you would experience huge inflation because your coins would now be worthless because no one will take them even with the hard limit.
So bitcoin will be a deflationary currency so long as the ratio of the number of people using bitcoin and the number of bitcoins continues to grow.
(Inflation or Deflation) = (difference in number of users)/(number of bitcoins in circulation)
But once again, this is also dependant upon the size of the userbase.
One of the major flaws of bitcoin, which I admit is also a flaw held by fiat currency, is that it has no intrinsic value. If for some reason, everyone decided to stop using bitcoin, then the bitcoin which you have would immediately become completely and totally worthless. However, if you at least bought gold or silver coins instead of bitcoin, then at least you would be left with a coin of intrinsic value which could be melted down to make jewelry or sold to be used in the electronics industry.
Another problem with bitcoin is that you are underestimating the federal government. Do you honestly think if bitcoin takes off and begins to threaten the US dollar that the federal government is going to sit back and just allow that to happen? I promise you that they will not. They will eventually pass a law that trading in bitcoin is now illegal. Governments have always been very protective of the money supply, and that is why money supplies are issued by Governments. Governments want to maintain a monopoly on the money supply and the US government has flexed its muscles in the past and they will flex them in the future again if decides it needs to. The dollar used to be backed by gold and silver, and then during the great depression under FDR gold currency was declared to be illegal, and people had given their gold to the federal government or suffer the consequences if they don't.
You see, a nongovernment issued currency has been tried before, but it has usually been tried by the gold and silver crowd. A perfect example is the Liberty dollar. A person decided they wanted to start issuing their own currency, so he started creating gold and silver coins which he called liberty dollars. But guess what happened? The FBI raided his operation and confiscated his coins and equipment, they also prosecuted him in the court. He was sentenced to 6 months house arrest and 3 years probation.
Bitcoin is not going to last because the government is not going to allow it to last. So, if you are going to use bitcoin for the money you have to ask yourself this question. Are you going to be willing to break the law when bitcoin becomes illegal by a decree? Are you willing to become a fugitive? When gold became illegal in the united states at least you could take it to the federal reserve in exchange for a certificate, however, this will not be the case with bitcoin. When bitcoin is declared to be illegal to hold, there will be no place to take the currency to exchange it for US dollars. You are going to have to eat the loss.
Also, bitcoin is a currency that is stored completely online. In the cloud.
So once again, I recommend that people do not use bitcoin because it is not guaranteed to be a deflationary currency and one day the government will probably make it illegal.
Round 2 by IrishBoy
You say that whether it is inflationary or deflationary is not only based upon the number of bitcoins but also upon the size of the userbase. This is true, and the evidence is showing the userbase of bitcoin is growing, and growing fast. A few years ago people had never heard of bitcoin, but now even stock exchanges such as the NASDAQ are going to be allowing bitcoin futures. This is of no small significance. This means that even those are Wallstreet are beginning to accept it as becoming more mainstream. So yes, deflation does depend upon some degree upon the size of the userbase, and the userbase is increasing.
It has been said that the best indication of how someone will behave in the future is how a person has behaved in the past. The same could be said about investments because the past is the only thing a person has to go on. With bitcoin, the history shows a pattern, and that pattern is that the value of each coin has gone up every year. I am confident that this trend will hold because it is going to continue to have an expanding user base and for other reasons that have been mentioned in my previous round.
Also, you say that other cryptocurrencies could take over bitcoin? Not likely, bitcoin has a huge head start on all other cryptocurrencies because they were the first. Some cryptocurrencies are hard to by in cash, and the only feasible way of purchasing them is in bitcoin. Bitcoin is already becoming the reserve currency of all other cryptocurrencies. Also, if for some reason another cryptocurrency did start to overtake bitcoin and become the new number one, it would not happen overnight. You would have time to watch it happen and make adjustments as needed.
You say that the government is going to make bitcoin illegal. Neither one of us can say that is going to happen, but we do know one thing, they haven't outlawed bitcoin yet. Instead, the IRS has even issued instructions on how to report gains on digital currencies. You see, the federal government doesn't see bitcoin as a threat. They don't even see it as a currency. They see it as an asset like a stock. As long as they get their money from the gains you make on your bitcoin investments they will be just fine.
But for argument's sake, let's say that the federal government did ban bitcoin? So what? If they did pass a law it would take a while for the law to take effect. You would have plenty of time to take your bitcoins and sell them to people in a foreign market. Your money supply would not be lost, you might take some hit in value, but you would retain most of the value. Why? Because bitcoin is not a US phenomenon, it is a worldwide phenomenon. The US only represents 300 million people in a world of over 7 billion. The US only represents around 5% of the world's population. A loss of 5% of the people in the userbase is not that significant of a number. The United States is not going to be able to destroy bitcoin, even if the wanted to. Also, the United States would be making a huge mistake if they did. Digital currencies are the future, and the US has stayed ahead of the world by always being on the bleeding edge of technology. This would be a case of not embracing the future, and it would only damn the progress of any country who refused to get with modern times.
Once again bitcoin is the future, and I recommend everyone get with the times. The sooner you accept the future the further ahead you will be in it.
Closing Statements by lisa
I conclusion, I stand by my reasoning for not using bitcoin. You should not use it because it is volatile, not based upon anything of value, and competes with the currency of the state. If you are going to invest in bitcoin, I recommend that you use caution. Don't put any more money into bitcoin than what you can afford to lose.
I also recommend that you stick with tried and true means of building wealth. Invest in your 401K if that is available at your place of employment. If you don't have a 401k option, they invest in mutual funds. Real Estate has also proven to be an excellent long-term investment over time. Even though gold has had a lousy track record for investments, it at least will hold some of it's valued.
Remember wealth is not meant to earned overnight. It's not so much that I hate the idea of digital currency, but bitcoin has become the new get rich quick scheme. I have met people throughout my life who always jump on the latest get rich quick bandwagon, but they never have anything in the end.
You can become wealthy, but hard work and time will be what gets you there. Not bitcoin.
Closing Statements by IrishBoy
I appreciate Lisa for debating me on this topic. I believe in bitcoin not only as an investment but as a future currency. Bitcoin has had it's ups and downs, and it has been said it has died a hundred times. This is said because there have been many times events have occurred that everyone felt would be the end of bitcoin. The hacking of Mt Gox, for example, lead many people to think that bitcoin was over. It is true that bitcoin took a hit for a couple of years after the Mt Gox incident, but it has come back stronger than ever.
Bitcoin isn't going away because it is the currency of the future. I believe when humankind is ready for its next technological step that it is inevitable. People may fight it, people may hate it, but eventually, they will accept it.
I recommend anyone reading this article to get involved in bitcoin. That doesn't mean you need to mortgage your house, but you can slowly start investing $100.00 a month. And even more importantly, begin accepting it as payment.
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