# Last edited on 2014-04-23 01:54:43 by stolfilocal
Dear Rick,
Ever since I learned about the Pirate Party movement, I have been rooting for your success in the fight against the stifling and inhumane copyright legislation.
However, I am now perplexed and worried about your support for Bitcoin. I hope it is a personal position, and not a new orientation of the Pirate Party(ies).
The Bitcoin project seems superficially to be a good "liberal" thing, in the old humanitarian sense of the word -- something that will liberate humans from oppression by tyrants, or whatever. However, I have been looking into it intensively for the last five months (in fact, since you mentioned it on Twitter, during the November crash), and I have developed an extremely negative opinion of it.
Bitcoin is not a fraud, it is a whole galaxy of frauds. Someone started making a list of bitcoin "heists" (just thefts of bitcoins, confirmed or alleged, but not including other forms of scams). But he stopped in Novemeber of 2013 -- surely from exhaustion, because the scams and thefts have continued unabated.
I have yet to know of a single bitcoin-related enterprise (exchange, fund, mining pool, whatever) that can be considered a good and safe investment. Their problems range from fantastic (or, more often, inexistent) business plans to blatant scams. Many of those ventures just die with hardly anyone noticing except their investors; others, like MtGOX and Neo&Bee, go nova and shine in the media -- but only for a short period, because bitcoiners do not like to dwell in such failures.
Like many galaxies, Bitcoin has at its center two massive "black hole" scams that orbit each other and keep all the other little scams together.
The smaller of those two "black holes" is the Bitcoin Investment Scam. It consists in convincing people to buy bitcoins with the bogus claims that (1) it is a way to keep one's money safe from inflation and "confiscation by government", and/or (2) one day a bitcoin will be worth a fortune.
Claim (1) can be dismissed merely by looking at a chart of the Bitcoin price over the last six months (say, per-week averages), and noting that it fell 40% since January. In yearly terms, that is at least 300% inflation. (Bitcoiners define inflation as being exclusively the creation of new money; but that is only one of the possible causes of inflation, which is the general increase in the price of goods ands ervices when expressed in a specific currency.)
Claim (2) is based on the designed limit or 21 million possible bitcoins, and the assumptions that (2a) cryptocurrencies will be widely used for internet payments one day, (2b) the only cryptocurrency protocol in use will be the Bitcoin protocol, and (2c) its blockchain will be the current one, "Satoshi's blockchain". These assumtions were justified by an alleged "network effect" and "first-movers advantage" which would prevent the appearance of alternative cryptocoins. However, the appearance and survival of dozens of cryptocoins patently demolished these arguments, so that there is no reason to believe in (2c) or even (2b). Indeed, it is now quite likely that there will be cryptocoins issued and maintained by banks, and/or by large corporations (Facebook, Google, Amazon, Walmart) and/or by national governments. While these currencies will not have the "libertarian qualities" of Bitcoin, they almost certainly will steal its "market" for being more stable, and operated much more efficiently.
The truth is that a Bitcoin is like a Bearer Stock Certificate for a virtual "company" that pays no dividends, has no backing capital, no products or clients, no management and no employees. Thus it has no intrinsic value; its conjectured value is entirely based on its possible use as an medium of exchange in some unspecified future. Since there is no way to estimate the probability and magnitude of its acceptance, its market price is not tied to anything: traders will value it based on what they guess that other traders will value it. That is the fundamental reason why its price has been wandering at the mercy of hype and news.
Therefore, a person who invested in Bitcoin since late December, counting on Claim (1), can only avoid losing money if he finds another person who is willing to buy his bitcoins for 5-10% higher price. For that reason, bitcoin investors often get transformed into obnoxious salesmen who will try to push bitcoins on everybody else, with one or both of the above claims, even knowing that they are no longer tenable.
The largest of the two "black holes" is the Private Money Scam
Bitcoin presents itself as an alternative to the "fiat" money that goverments print to "steal" wealth from its citizens. But Bitcoin too is "fiat" money -- created out of nothing, without any backing; therefore, if it succeeds, it too will serve to "steal" wealth from everybody who uses it. In both cases, an entity creates a currency and puts aside part of it for itself, while making the rest available to some public. Once the currency gains acceptance among that public, its creators can use the part that they saved to take wealth from that public.