Ever since I told people I have started dabbling into bitcoin I get asked about it all the time. People are curious about this thing that is more and more frequently showing up in headlines. For simplicity, I’m going to reference bitcoin throughout but it’s largely shorthand for altcoins (excluding ICOs which is a whole thing unto itself that I won’t currently touch with someone else’s free money).
Questions generally come in a few flavors:
- What do you mean you’ve bought some bitcoin? I think I’ve heard of it but it seems out there.
- Ha! You mean you’re one of those suckers that have gotten conned into that bitcoin thing?
- Bitcoin, I’ve heard of that. Isn’t it an investment?
I have yet to have anyone ask out of jealousy of missing out on the spike through this year. I have also yet to meet many others who have bitcoin that want to talk about it. Most of the conversations turn theoretical fast for one good reason: you can’t really do much with bitcoin yet.
But for the rest, here are my answers to the common questions I get. This may help you decide if it’s right for you or maybe just give a few more people a comfort level with this new-fangled technology.
I think I’ve heard of it but it seems out there. It’s perfectly fine for most to have not heard of bitcoin but it still feels surprising. Buying bitcoin the first time is a bit daunting. You have to sign up for an account to purchase it through, you have to make it through big disclaimers about private keys, you have to worry about accidentally losing everything. But never fear to ask for help, there are more and more people that have gotten into it over the past twelve months. You must definitely do your research if you are going to jump in though.
Sucker that got conned. I get this a lot. Many, many people (possibly a majority?) think that bitcoin is like the tulip craze: here today, gone tomorrow. I get a lot of joy out of answering this particular question because most people don’t understand the current US (or global) financial system. The US Dollar is based on trust, central control (opaque), and a couple centuries of track record. Bitcoin is based on trust, decentralized control (open source), and a 9-year track record. Look back at the first few decades of US currency and see how it behaved. This leads to:
Isn’t it an investment? Bitcoin is NOT an investment because it is based on something different than a typical investment instrument. For the most part, there is nothing you can go out and spend your bitcoin on that you can’t more easily buy with your Visa card. And with the current growth path of bitcoin, few are clamoring to spend bitcoin when they can buy things some other way. The price of bitcoin (as far as I can figure) is based on a combination of (in order of impact on pricing):
- Speculation that bitcoin will be worth more in a month than it is today.
- Speculation that bitcoin use cases will begin to be deployed at scale over the next 12 to 24 months.
- Investors that don’t understand what bitcoin is but want to be part of it.
- Technology companies building companies around altcoins.
- People that want to put their money in a place uncontrolled by the traditional finance industry.
- People in countries facing currency crises and needing a safe place to put it.
(For what it’s worth, I fall into the first two buckets and sometimes the third.)
Bitcoin still doesn’t have the technical maturity to make it something I’d recommend to someone that isn’t jumping to get it. It’s hard, easy to screw up, difficult to understand, and definitely not a typical investment. But while not for everyone, it’s not going anywhere anytime soon.