Latest posts of: pungopete468

I had the opportunity to write a little bit about how I personally view BitCoin and crypto-currency two days ago when asked about it by somebody who knows very little about it. It's a long read but I think it's relevant here because the market price is determined directly by the attitude of the buyers. If you have BitCoin hold onto it.

I'll just copy/paste the email I sent out.

To understand the market I think it's important to understand the circumstances behind its value... I'll separate it by category for you in case you already know.

So from the top starting with some history...

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The foundation.
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To understand BitCoin you first need to understand a little bit about the Dollar and the Gold Standard that precedes it...
Starting with the Dollar; it's surprising how very few of us actually understand how it works despite our attachment to it. Every single US Dollar is owned by a very small group of private international bank owners called "The Federal Reserve Bank." This banking cartel is not a government agency, nor is it subject to the demands of the US Government or the people of the United States barring an Act of Congress. This business is privately owned and operated for profit by several prominent banking families who gained power in 1914 with back-room politics and shady deals. The Dollar has ABSOLUTELY NO VALUE aside from what the people and Nations who accept it as payment are willing to trade it for. The value of the Dollar has been manipulated with international deals like the Petro-Dollar to stave off the imminent collapse of its value. (Every nation in the world must obtain US Dollars by exporting goods to the US. If a Nation were to stop trading USD, that Nation would not be able to purchase oil from any OPEC nation. The US pledges the full force of the military to protect Middle Eastern Oil interests in return for accepting ONLY USD as trade for oil.)

Before the Dollar came around there was the "Gold Standard" where every piece of US currency contained precise amounts of Gold or Silver and each paper note was a certificate verifying that the face value of that note was available on demand from the local treasury. A Gold Standard is based on REAL value and held its value no matter where in the world you would travel because the World's Gold Reserve only contains so much gold. The price of one troy ounce of gold was equivalent to $18.93 from 1833 until 1913. It was only after the ratification of the Federal Reserve Act that the price of gold became unstable.

After the enactment of the Federal Reserve, the new organization immediately flooded the economy with paper money to encourage debt. They set the stage for the Great Depression and then one day silently pulled the trigger.

The Great Depression was manipulated as can be seen by the fact that the Federal Reserve restricted the money supply in 1929 and then remained neutral on monetary policy after the stock market collapse. The Fed simply wouldn't loan money to non-Federal Reserve banks but was quick to buy what remained for pennies on the dollar. During the Presidency of Franklin D. Roosevelt, a deal was struck to end the Great Depression by declaring that the National Debt will no longer be an "unsecured" loan. The Federal Reserve agreed to inject a fixed number of new Dollars which were to be issued for each American citizen alive and each new American citizen to be born. The debt is therefore secured by the life, labor, and property of every American citizen. Nearly every American citizen alive today was born into debt. President Roosevelt had no choice as part of the deal with the Fed but to confiscate and make it illegal to possess gold unless its purpose was solely for use in manufacture or industry. It was illegal to own gold for several decades. The Federal Reserve Bank acquired practically the entire National Gold Reserve of the US. After this a large portion of the world's gold reserve was forever off of the open market and the price of gold skyrocketed.

Here comes the interesting part. It's taken 100 years for the people of this country to catch on to what happened to us. With the invention of the internet and the instant availability of information you can now do research and connect the dots in an instant. You can also spread ideas through social media...

Regardless of the accuracy of this information, the market consists of people who are driven by emotion and speculation. This is the single most important factor in BitCoins' fate as well as the reason that MANY in this country as well as around the world have lost faith in the US Dollar, which we all know is backed by nothing more than the "Good Faith in Credit" of the US Government.

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What is BitCoin?
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1 BitCoin is simply the electronic equivalent of 1 unit of a type of currency, the same way you would look at 1 dollar as 1 unit of currency, or 1 Euro as 1 unit of currency. The differences between BitCoin and other “normal” modern currencies is in the way BitCoin is created and the way in which it's transferred from one person to another; that’s where it sets itself apart. BitCoin isn't “owned” by an organization, rather it’s “mined” or a better word might be “found” the same way somebody might have found a nugget of gold in the past when it was the world reserve currency. There’s a FIXED number of BitCoins available to be found much in the same way that only so much gold is present in the Earth’s crust. To find a BitCoin you must use a computer or device to de-crypt a long and complicated equation and the answer must be verified for accuracy. The difficulty of the equation is directly correlated to the amount of processing power working on identifying the solution and will increase or decrease as the network fluctuates. If the network speed doubles, it becomes twice as hard to find a BitCoin.
BitCoin is born with ZERO intrinsic value just the same as the Dollar. BitCoin is given value by the people who are willing to trade it for goods and services, as well as by those who believe that one day it will be widely accepted for such a purpose.

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Why so much interest in BitCoin?
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BitCoin has a tremendous appeal to a large section of the world’s population because in a sense BitCoin represents freedom. Freedom is the single strongest desire in mankind and people tend to view BitCoin as an opportunity to trade more freely. BitCoin is decentralized so its value cannot be manipulated by the “owners.” It can be traded anywhere in the world without a currency exchange much in the same way you can trade a gold piece straight from one hand to another. You can send currency instantly without fees to anybody in the world. For merchants who accept BitCoin they no longer have to wait two business days for the money to become available in their account and without the middlemen the transaction is direct and painless.

The interest in BitCoin is driven by people who believe that BitCoin offers a better way to trade than in other widely used currencies. Imagine you were an international corporation and needed to transfer the equivalent of $500 million USD from your National HQ in China to your International HQ in the US. Imagine the burden and cost of currency exchange, fees, accounting, not to mention time.

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Is it safe?
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Every transaction that occurs is recorded in a digital record known as the “block chain” which is public record. There are no names linked to BitCoin wallets but anybody can look at the ledger in real time making it impossible to hide BitCoins.

Some have postulated that once the network has been “mined out” that the number of “miners” will decline leaving the network open to attack. However, they fail to understand that the block chain isn't secured by the “miners.” The block chain is reinforced by every BitCoin user or client who has a BitCoin wallet. Even if mining halted and the network hash rate were to cease down to 0 the block chain would be secured by the cumulative records of millions of daily users making it incredibly difficult to trick.

The highest risk of losing BitCoin is completely 100% preventable. Make a backup of your wallet and use the “encrypt” feature of your wallet. You can use Google Drive, a USB stick, a CD, any data storage device. Just don’t forget your passphrase!

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How do I get it?
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The easiest way right now is to buy it on the open market. You can use several different exchanges. I personally use CoinBase.com to buy BitCoin. If you can somehow find a way to make it past the captcha without knocking your monitor off the desk and stomping away in anger then I suppose you've passed the test and are now qualified to become a BitCoin owner. But seriously, CoinBase has an attractive interface that's easy to understand.

If you want to mine BitCoin you'll need to spend some serious cash on hardware with the current network difficulty. I would suggest mining LiteCoin rather than buying personally.

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What is LiteCoin?
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LiteCoin is a product of BitCoins’ success. Coincidentally the most attractive thing about BitCoin will also be the one thing that prevents it from absolute market domination. When industry stepped in it resulted in a sharp increase in the BitCoin network difficulty. It got to the point where the “common” person could no longer mine BitCoin; at least profitably without a large scale effort. This isn't so much of a problem because there was no way to stop the underlying currency revolution that BitCoin had inspired. This revolution is unfolding right before our eyes and resulted in the creation of LiteCoin and later followed by a number of alternate coins.

The proverbial “Pandora’s Box” had been opened and the major attractor behind LiteCoin is that the devices which allow corporations or large scale mining operations to flood the BitCoin network won’t work to mine LiteCoin. LiteCoin offers some small advantages over BitCoin, but the one thing that sets this currency up to flourish at the moment is the ideology in that it's designed for the people and by the people.

Both coins are extremely promising in the current world environment.

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What will happen to LiteCoin and BitCoin?
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It’s been said that “LiteCoin is like silver to BitCoins’ gold.” This is in no way an accurate statement. If somebody were to ask me I would likely reply "LiteCoin would be like Google checkout if BitCoin were Paypal." BitCoin currently holds a much larger market share to LiteCoin but the factors that make BitCoin desirable are equally available in LiteCoin. I expect both coins will find a market share and price balance proportional to the number of coins available. The same market mentality which is currently driving BitCoin will also drive LiteCoin in the same manner. It also helps that every business establishment who accepts BitCoin can also accept LiteCoin without any major modification or learning curve.

I see no price ceiling to either currency because the value of both coins is derived from an underlying desire to escape the bonds of existing currency limitations. Both coins will satisfy the same hunger equally tastefully.

The largest threat to BitCoin poses the same threat to LiteCoin, which also happens to be the most powerful organization in the world; the Federal Reserve. The Federal Reserve holds no direct authority to regulate or control the trade of BitCoin or LiteCoin. But "Whosoever controls a nations currency or system of credit thereby controls the nation." Right now BitCoin and LiteCoin combined are small potatoes but given the market mentality and the numerous benefits offered by these coins its only a matter of time.