Their are some marked advantages of Bitcoin. They can be transferred directly from person to person online without a bank which drastically reduces any fees associated with withdrawals and transactions. Also, Bitcoin can be used in any country, accounts cannot be frozen and there are no arbitrary limits (Youtube - What is Bitcoin).
Where Bitcoin gets complicated is in the emerging exchange market. Recently Mt Gox, a major hub of buying and selling Bitcoin on the Internet, simply disappeared leaving the users who had invested their Bitcoin unable to get their money out. There is currently no regulation in place ensuring the security of your investments. Depending on the value of a unit of Bitcoin at any given time, when your Bitcoin vanishes so does your real money investment. Some have invested hundreds of thousands in this exchange market (CNBC).
Also, because there are no regulations, there are literally countless scam sites popping up urging Bitcoin investors to buy and trade their Bitcoin with them. They amass high yields of investors' Bitcoin then vanish with their investments stealing a net worth of hundreds of thousands in real world currency. If this occurred involving an investment firm for actual currency, the practice would easily earn the perpetrator a minimum sentence of 30 years in prison anywhere in the world.
There are those that staunchly oppose any regulations being placed on the Bitcoin exchange markets. However, in light of recent events there are those now calling for governments to put regulations in place. Investors have lost thousands, even hundreds of thousands due to the Mt Gox closure. Some would say they should have seen it coming. With no regulation, no penalties for unethical business practices and no accountability, the end result should come as no surprise.
Source:
What is Bitcoin - http://www.youtube.com/watch?v=Um63OQz3bjo
Bitcoin's Mt.Gox disappears, insolvency feared - http://www.cnbc.com/id/101442439
Image:
By Isokivi (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
Post ID: 10197
Excellent summary. I have not been paying much attention to the Bitcoin market, but this is definitely interesting.
ReplyDeleteI am fascinated by the market efficiency of this crypto-currency. It could be great for people who do most of their business on line. But, as your post points out, without some type of regulation, there is little to stop the bad guys from gaming the system.
ReplyDeleteI was always skeptical considering there was no security. I consider some regulation a positive thing. (I think you made an error. The "their" in your second sentence should be there.)
ReplyDeleteI think people will play a wait and watch game for the time being.
ReplyDelete