Street bitcoin

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No one knows who created it, although some writers have made very educated guesses about the identity of the pseudonymous creator. Bitcoin enables fraud and other criminal activities. This is absolutely the single most salient feature of Bitcoin’s anonymity. Conventional currencies are indeed subject to laundering and counterfeit. There is probably no way to eliminate those risks completely.

Bitcoin magnifies those risks because it can only be exchanged anonymously. It dominates dark networks that have been known to traffic in narcotics. Digital QR codes make it vulnerable to theft. One Bloomberg TV anchor learned this the hard way.

Transmuting digital Bitcoins into a paper medium means the QR code reveals their underlying location. Scanning that QR code means anyone can anonymously steal Bitcoins. Mining Bitcoins is a health hazard and energy sink. People run obsolete hardware just because the video cards can process random digits into raw Bitcoins. I’ve studied for years, because it transforms nothing into an encrypted version of nothing. Nerds who run multiple machines overnight to mine Bitcoin risk heat stroke from the machines.

There is no central bank for Bitcoin. Indeed, there never will be one, because Bitcoin’s evasion of central control appeals to its users. The Federal Reserve, for all of its flaws, has enabled the US to withstand financial panics because it could manage a unified national currency. A central bank manages fractional reserve lending that allows a national economy to expand. Run through the gamut of crypto-currencies like Litecoin, Dogecoin, Namecoin, Peercoin, and others to see how unserious most crypto-currency enthusiasts are about money. Dogecoin in particular is obviously a joke based on an Internet meme. Using a currency named after memes doesn’t impress me.

Imagine someone in the early 20th Century printing a dollar with Mickey Mouse’s smiling visage and convincing others to take it seriously. I am totally convinced that Bitcoin is at best a joke and at worst a fraud. Hi-tech startups should be be radical, disruptive, transformational, chaotic, revolutionary, and all that but those are not the characteristics of a currency. People who use currencies as a medium of exchange and store of value need them to have conservative characteristics, so that one unit today has pretty much the same value next year.

I’m waiting for some jokester to create Baloneycoin that will evaporate when minted and play some funny animation. The parody site that features Cosbycoin is hilarious but the real joke is on anyone who takes Bitcoin seriously as an investment. I do not use Bitcoin, nor will I do business with anyone who wants to transact in Bitcoin. Anthony Alfidi is the Founder and CEO of Alfidi Capital. His firm publishes free investment research with honesty and humor.