Stay away from Bitcoin


I am saying this more to myself than to you; stay away from bitcoin, or cryptocurrency in general. I had no idea what cryptocurrency meant. I thus searched dictionaries to find out a definition

Only one, Wikipedia, defined it as “a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.”

Since crypto means hidden or secret, cryptocurrency may be defined as an invisible currency that uses cryptography, whereas cryptography refers to the use of codes to put information on a website in such a format that only users who have permission can read it.

In plain English, cryptocurrency ― of which bitcoin is the best known ― is money that you have but cannot put in your wallet or see without the use of a computer. There is no physical coin, although the popular image of a bitcoin which looks like an actual coin is everywhere. You can, however, convert bitcoin to legal tender such as the U.S. dollar or Korean won through many bitcoin exchanges.

Cryptocurrency is similar to our online banking except that we do not know who is controlling it, regulating it for safety, or helping owners if something goes wrong. Transactions among users are verified through the use of cryptography and recorded in a publicly distributed ledger called a blockchain.

The blockchain is simply a data file that carries the record of all past transactions. The blockchain is a sequence of blocks in which each new block is built on the preceding blocks and shows all new transactions. The blockchain is a public record of all ownership information.

The blockchains are assembled by so-called miners. Although anyone can be a miner, requirements of highly sophisticated hardware and a large amount of electricity allow only large mining operations to survive. Miners, who are doing record-keeping services to safely verify individual transactions using their computers, may charge small fees on transactions based on the relative storage size.

In his April 17, 2018, article in How-To-Geek titled “Why It’s Nearly Impossible to Make Money Mining Bitcoin,” Chris Hoffman warns that “Anything that promises to mine Bitcoin with your CPU is a scam, as it won’t even be worth the cost of the electricity.”

One key question when we use cryptocurrency relates to how we can be sure that the person who initiates the transaction is the real owner, rather than someone who pretends to be the real owner. The answer is the private key, which is a long set of numbers that is available only to the rightful owner. It is like the password for our online banking except that the number is several times longer, virtually guaranteeing the safety of ownership.

If the private key is lost, the owner may not have any other means to prove his or her ownership of the bitcoin. It is important to have a backup for the private key. It is not like losing a password in online banking in which the bank will help us find the misplaced password.

In his December 7, 2017, article in How-To Geek titled “What Is Bitcoin, and How Does It Work?” Michael Crider states that if someone’s password is stolen, that money is simply gone.

If bitcoins are so secure, why do I want to stay away from it?

Bitcoin is not accepted as a currency approved by the government as its value is determined by other users of bitcoin who own as well as accept it as payments. Further, bitcoin has no protection system if it is lost or stolen. Since there is no central authority for regulation and bitcoin transactions are guaranteed anonymity, the currency is highly attractive for the trade of illegal goods and services.

On April 1, 2018, Chris Hoffman of How-To Geek wrote in his article titled “How to Buy Bitcoin the Easy Way,” that, “In our opinion, speculating on Bitcoin (also known as BTC) is basically the same thing as gambling. It’s not a currency people are using in the real world. It’s an unsafe investment that may go up or down. Even if a cryptocurrency ends up taking over the world in the future, there’s no guarantee that the cryptocurrency of choice will be Bitcoin.”

In her February 16, 2018, article titled “Know the risks before you invest in cryptocurrencies,” Elizabeth Kwok who works in the Division of Financial Practices at the U.S. Federal Trade Commission writes, “It’s not just bitcoin. There are now hundreds of cryptocurrencies, which are a type of digital currency, on the market,” and warns that you do not have the same protection as a bank account.

In her March 16, 2018, article titled “Bitcoin + online chain referral = illegal scheme,” Amy Hebert, who is a consumer education specialist at the U.S. Federal Trade Commission, writes that online referral schemes involving cryptocurrencies like bitcoin are a new version of “chain letters” in which “most people are guaranteed to lose money.”

Read more at:  Korea Times


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