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    Myths and Realities of Bitcoin
    Myths and Realities of Bitcoin
    Myths and Realities of Bitcoin
    Ebook71 pages36 minutes

    Myths and Realities of Bitcoin

    By Rolando José Olivo

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    The bitcoin is the first decentralized cryptocurrency. Also, it is one of more than 700 electronic currencies, which are ambitious attempts to create digital money that can replace the traditional payment methods.

    Although cryptocurrencies are recognized, accepted and used as money by some agents, these aren ́t money, nor do these satisfactorily fulfill the main functions of money. Obviously, the bitcoin doesn ́t escape this reality, being its great myths the following:

    1. Bitcoin is money.
    2. Bitcoin has a true intrinsic value.
    3. Bitcoin is safe and reliable because it is supported by the market forces.
    4. Bitcoin is indestructible.
    5. Bitcoin is a better investment than the dollar, the gold, the silver, the oil and the stocks.
    6. Bitcoin will displace the traditional currencies and will be the currency of the future.

    On the one hand, the optimism of investors has generated an excess of demand for bitcoins, in opposition with its limited digital offer, giving the impression that the price of this cryptocurrency will continue rising in a speculatively manner, during some periods. And on the other hand, all the evidence points to the fact that the bitcoin will generate a huge financial bubble and come to an end.

    LanguageEnglish
    PublisherRolando José Olivo
    Release dateOct 12, 2018
    ISBN9780463015186
    Myths and Realities of Bitcoin
    Author

    Rolando José Olivo

    RolandoJOlivo@gmail.com Instagram: @rolandojolivo Systems Engineer with 3 postgraduate degrees: Master's Degree in Applied Economics, Diploma in General Management and Specialization in Management of Social Programs (Summa Cum Laude). Work experience in companies in the oil sector, occupying these positions: Planning and Logistics Manager, Project Coordinator, Financial Advisor and Consultant. Consultant in the economic and financial area. Writer of books on economics, management, self-help, novels and Christianity, among others.

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      Book preview

      Myths and Realities of Bitcoin - Rolando José Olivo

      I. INTRODUCTION

      The bitcoin has become a source of enrichment for many investors, and a means of payment that facilitates various financial transactions. Since the year 2013, its price began to rise dramatically (started at US $ 13.50 and ended at US $ 727.70), and in the year 2017, its growth exceeded all forecasts, closing at an incredible price of US $ 13,800. However, this price is speculative, unstable and volatile, because the bitcoin has no true intrinsic value, depends on the supply-demand relation, and is highly vulnerable to adverse events that harm the preferences and expectations of its investors.

      In practice, the bitcoin is a complex financial instrument that can be classified as quasi money or pseudo money, which is neither safe, nor valid, nor reliable, and it is also incapable of replacing real money (whose value is not supported by the forces of market or an unstable relation between supply and demand of the same product, rather it is sustained by the productivity, competitiveness and profitability of a real economy).

      Additionally, the bitcoin works by the methodology and the technology of blockchain, which guarantees from the validation and registration of its transactions (in decentralized databases) to the issuance of new digital units.

      Nonetheless, these processes, led by well-known third parties such as miners, are cumbersome, complex, inefficient and unproductive. This is because these are based on algorithms and encryption methods that require the consumption of many processing resources, in order to avoid the destruction, falsification and theft of the bitcoin digital units.

      Even more, besides the drawbacks of the bitcoin and its associated risks, there are still great myths about this cryptocurrency:

      1. Bitcoin is money.

      2. Bitcoin has a true intrinsic value.

      3. Bitcoin is safe and reliable because it is supported by the market forces.

      4. Bitcoin is indestructible.

      5. Bitcoin is a better investment than the dollar, the gold, the silver, the oil and the stocks.

      6. Bitcoin will displace the traditional currencies and will be the currency of the future.

      In order to evaluate these approaches, taking into account the characteristics of cryptocurrencies and bitcoin, this literary work has been divided into two major chapters: II. The Cryptocurrencies and III. The Bitcoin.

      The Chapter II. The Cryptocurrencies contains these sections: a) II.1 Definition of Cryptocurrencies (What are cryptocurrencies?), b) II.2 Purpose of Cryptocurrencies (For what were these created?), and c) II.3 Brief History of Cryptocurrencies (What was its origin and how these evolved?).

      In general terms, the cryptocurrencies are electronic money (protected by technology). Although these are recognized, accepted and used as money by some agents, in practice, these aren´t money, nor do these satisfactorily fulfill the main functions of money (universal exchange instrument, reliable means of saving, and measure of value of goods and services or price fixer), nor do these possess the essential qualities of money. Obviously, the cryptocurrencies are ambitious attempts to create digital money that can replace the traditional payment methods, which began in the 1980s with the support of

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