Bitcoin has been in the news a lot lately, and it is described in many ways: as a form of payment, as an investment, and as the flagship example of a recently adopted name: CRYPTOCURRENCY. One word often missing from these descriptions? Money.

Developed in 2009, Bitcoin is a form of digital currency wherein units of value, Bitcoins, are exchanged via a peer-to-peer network (a peer-to-peer network involves users sharing and exchanging information without a centralized body). The name cryptocurrency comes from cryptography, which is the secure measure used to protect Bitcoin transactions online.

So what is keeping people from calling Bitcoin money?

Well, volatility for one thing; the value of Bitcoins has fluctuated from mere cents all the way up to over $1,000. It’s also still rather rare in the marketplace, there are currently just over 13 million Bitcoins in existence. But Bitcoin is growing, and fast. In August, one of the largest Bitcoin providers, Blockchain, announced that they had over 2 million users. How popular will Bitcoin have to be before we start recognizing it as real money? To help make sense of this fairly new technology, let’s look at Bitcoin from both sides. Here are some pros and cons to this increasingly popular cryptocurrency.

Who has control?

Con: It isn’t controlled by a centralized entity.

Ordinarily, it is the role of a government to control, regulate, and maintain a nationwide currency. In the United States, the US Treasury and Federal Reserve take on the responsibility of our dollar. Bitcoin, however, has no such centralized agency or ownership. By definition it is decentralized, and operates as a peer-to-peer network that is open and transparent to all users. The decentralized nature of Bitcoin transactions is described on Bitcoin.org, “Behind the scenes, the Bitcoin network is sharing a public ledger called the “block chain”. This ledger contains every transaction ever processed … allowing all users to have full control over sending Bitcoins from their own Bitcoin addresses. In addition, anyone can process transactions using the computing power of specialized hardware and earn a reward in Bitcoins for this service.”

Nobody can guarantee a set return, say, double your money. Much less in a short time. Scammers promise free money. They’ll promise it in cash or cryptocurrency, but free money promises are always fake. Scammers make big claims without details or explanations. If the same amount of wealth stored in gold today is stored in bitcoin in the future, each bitcoin would be worth $500,000. If bitcoin significantly penetrates parts of the offshore wealth, escrow.

Pro: That’s right, it isn’t controlled by a centralized entity!

While detractors may use its decentralization as a negative, Bitcoin enthusiasts actually see it as a positive. In their view, interference by governments and self-interested investment banks lead to the problems in our current economic system. Enthusiasts would also argue that we are trusting our monetary regulation to people who cannot be trusted. In the words of The New Yorker, “Hence the sudden appeal of bitcoins, which appear, for the moment, at least, to be immune to the machinations of inept or crooked bankers and politicians.”

Can I spend it?

Con: You can’t buy most things with Bitcoin.

Unlike most money, you can’t spend Bitcoin at your corner store. Because Bitcoin is currently unregulated, many merchants are hesitant to accept them as a form of payment. It isn’t yet insured by the FDIC, or Federal Deposit Insurance Corporation, so should any fraudulent activity occur involving Bitcoins, it is nearly impossible to have that “money” recovered. Can you call it money if you can’t spend it?

Pro: You can buy some things with Bitcoin.

Although somewhat rare at the moment, the places willing to accept Bitcoins are increasing…and rapidly. You can now spend your digital dollars at places like Overstock.com, Etsy, and Expedia . Any basketball fans out there? You can now even use your Bitcoins to buy merchandise with the Sacramento Kings! So, why would a merchant actually accept this wildly fluctuating form of digital code as a form of money? Well, they have a built in incentive; when they accept payments via credit card, they have to pay out processing fees to that credit card company, amounting from 2-4%. With Bitcoin, those fees don’t exist.

What are Bitcoins worth?

Con: Its value is extremely volatile.

Part of what stops many economists from declaring Bitcoin “money” is its volatility. As of yet, it has not demonstrated sustained value. Take a look at the extreme peaks and values of the Bitcoin in the chart below (2009-2014). Sure, some people struck gold if they cashed in their Bitcoins at the $1,100 mark.. but with swings like those, who knows what it will be worth tomorrow?

Some, like the Winklevoss twins, of Facebook fame, say big bucks (they are heavy investors who are looking to start a Bitcoin based ETF). Doubters, on the other hand, say Bitcoins are worth a much lower $0, and expect that crash to happen soon. To that end, it is true that confidence in Bitcoin has suffered some serious blows as of late, most notably with the FBI shut down of the Silk Road last year. The Silk Road was an online community where users trafficked drugs and other illicit materials using Bitcoin for transactions. The take down exposed how, at that time, a huge percentage of Bitcoins were being used specifically for illegal activity. On top of that, more bad news struck when the Mt. Gox Bitcoin exchange, which was once the largest of the exchanges, went bankrupt in February.

Pro: It has real value.

Volatile or not, you can still exchange your Bitcoins for real money. As of this writing each Bitcoin is worth $450, but you can check the latest value at coindesk.com. If you wanted to trade in your Bitcoins for cold hard cash, you would have to use a Bitcoin Exchange and there are several on the market to choose from: Coinfloor, Coinbase, Cryptsy, itBit, BitStamp, as well as a whole host of others.

How can I get Bitcoins?

Con: My paycheck doesn’t come in Bitcoin.

Most of us think of money as that valuable thing we earn at work every day. Can I consider it money if I don’t have a way to earn it for myself?

Pro: Like money, you earn Bitcoin through hard work.

The truth is that Bitcoins can be earned, and there are people out there who make a living doing so. Bitcoins are earned via solving complex mathematical equations; new equations are created at set intervals, and the first computer to solve them “wins” 25 Bitcoins. The process is often called “mining,” and is often likened to the process of “mining for gold.” In the early days, this could be done by people like you and me using personal computers, but now the speed and computing power needed to solve the equations first is so intense that only massive computers can get the job done.

*In fact, if you want to start “mining” tomorrow, you would need dedicated hardware that Bitcoin pros call “ASIC” (application specific integrated circuits). ASICs are incredibly fast and powerful circuits that are customized specifically to mine Bitcoins. They are also pretty expensive, ranging from hundreds to thousands of dollars, based on their amount of computational power.

The bottom line is, Bitcoin provides real income, both to “miners” who create Bitcoins, and investors who have seen their Bitcoins appreciate. And herein lies perhaps the chief argument that Bitcoin is money- you’ll be taxed on it! Although the US government hasn’t yet fully regulated Bitcoin, it will certainly be taxing you on your Bitcoin gains. As of March 2013, Bitcoin earnings are considered capital gains, and must be included on your tax return.

How do Bitcoins compare to cash and credit?

Con: Unlike credit transactions, Bitcoin transactions are anonymous and cannot be reversed.

Despite their outlandish interest rates, most of us enjoy using credit cards as a means of spending because of the security they afford. Want to return a pair of shoes you bought? That balance can be returned to your card almost instantly. Victim of identity theft? Your credit card provider quick ensures that you won’t be charged for those transactions. It’s nice to have that security, and we have become accustomed to our “money” leaving a traceable, and correctable, path behind us. Bitcoin, however, is exchanged completely anonymously. Once your bitcoins are gone, they are GONE, even if taken from you fraudulently.

Pro: You know what else is anonymous and can’t be reversed? Cash.

In fact, many of the arguments against Bitcoin can also be applied to good old fashioned “cold hard cash.” They are both spent anonymously. They are both impossible to recover if stolen. And they are both used by criminals for illicit activity. While these aspects might make Bitcoin slightly less desirable, they certainly don’t make it “not money.”

But are Bitcoins…real?

Con: But … it’s just… not real money!

Let’s be real. Of course the idea of Bitcoins feels a little weird. Bitcoin is, at its core, simply software code and not directly tied to anything of value. You don’t get to touch it, lots of merchants don’t accept it, and your boss is certainly a long way from paying you with it. Bitcoin may be growing, but it is a long way from replacing dollars and cents.

Pro: our “real” money isn’t really “real” either.

What Can Bitcoin Be Worth

In all fairness, commonly accepted currency hasn’t been tied to a source of actual value (i.e. GOLD) for ages. In fact, gold was officially removed from connection to the American dollar in 1971. But although it’s simply sheets of fancy paper, the use of money persists, because we all share a commonly accepted faith in its value. Bitcoin believers would argue: in today’s digital age, why shouldn’t that faith be shifted from a physical form of currency to a digital one? Although you can argue over whether or not Bitcoins are “money,” you cannot argue about how fast they are growing. Will they ever truly be a universally accepted currency? It depends on how quickly people like us start adopting them. So let us know in the comments, are you a Bitcoin believer?

January 2, 2021 Update: We have just announced our BEST STOCK NEWSLETTER of 2020 AWARD!

CLICK HERE to find out which stock newsletter was up 78% in 2020 (and whose 2019 picks are now up 113%).

*** Our Award for BEST STOCK NEWSLETTER of 2020 ALERT ***

Updated January 2, 2021

Bitcoin Money Free

At WallStreetSurvivor, we subscribe to dozens stock recommendation and advisory newsletters. There is ONE newsletter that is constantly outperforming all of the others--The Motley Fool Stock Advisor.

Five of their 2020 stock picks have doubled and the average return of all 24 of their stock picks for 2020 is up 78%!

We have been tracking ALL of the Motley Fool stock picks since January 2016. That's 5 years and 120 stock picks. As of Friday, January 1, 2021 the Motley Fool's January stock pick (TSLA) is up 720%, their March pick (ZM) is up 172%, their April pick of SHOP is up 226% and their June pick CRWD is up 120%; and another two have more than doubled. In addition, 10 of their 2019, 12 of their 2018, 11 of their 2017, 15 of their 2016. Most impressively, over the last 5 years that we have been tracking every recommendation, their average stock pick is up 209%--tht means over the last 5 years their stock picks, on average, have TRIPLED!

Now no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super-profitable. The important thing about the Fool stock picks is you have to buy them the day they are recommended because they usually pop 5-10% in the first 72 hours after the release their recommendation. You sure don’t want to risk missing out on their next pick.

Normally the Fool service is priced at $199 per year but they are currently offering a NEW SUBSCRIBER DISCOUNT that allows you to get theiir next 24 stock picks for just $99/year. HERE is the LINK to visit their New Subscriber Discount page.

CLICK HERE to get access to all The Motley Fool’s Stock Picks and their next 12 months of picks for just $99 per Year!

GET UP TO $1,000 IN FREE STOCK

WHEN YOU OPEN A ROBINHOOD BROKERAGE ACCOUNT

Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.

Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.

Claim your free stock NOW(before it’s too late)

A Bitcoin ETF Exists - Wall Street Survivor Blog

What Will Bitcoin Be Worth

says:

Where Can Bitcoin Be Used

June 9, 2015 at 4:23 pm

How Much Is A Real Bitcoin Worth

[…] Bitcoin has captured the attention of news outlets, governments, hackers, entrepreneurs and regulators. It has the potential to transform the world of international payments forever; but given that nearly two-thirds of Americans don’t know what Bitcoin is, a good question to ask is: What is Bitcoin? […]