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Author Topic: Curious - Bitcoin is still beta - why should I invest?  (Read 2075 times)
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June 22, 2011, 03:52:17 PM
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Hi, I've been reading up on Bitcoin and I think it's a fantastic concept, and would love to invest a bit of money in it, but isn't it still early beta?  Why are people putting money into an early beta version of the coin network?

I have watched btc increase in value from $0.01 to its current level, so it's proof that there's demand for P2P crypto-currency.  However, I typify your average institutional investor - I am having difficulty believing in the integrity of the code, and find the lack of security in the client disturbing (why doesn't the program require the user to encrypt critical files on first start?).  Could someone link me to independent third-party audits by professionals of the source code for the client and the network?


Also, in spite of the talk of 'secure' transactions, I find infinitely more security in holding dollars or stocks. It's easy to invest in dollars held at U.S. depositories because the Federal Government provides a guaranteed $100,000 safety net (I believe in the fed more than some mysterious guy who may or may not have plugged in a backdoor in the source), and if you hold securities at a U.S. brokerage protected by the SIPC you'll recover your stocks in the case of fraud.  Could someone explain to me, the boneheaded noob, what separates the security of Bitcoin from an institutional fraudster like Bernie Madoff?

I really believe in the P2P cryptographic future, but I just want to play devil's advocate and do my homework before sinking capital into it.
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DamienBlack
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June 22, 2011, 04:01:29 PM
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Security in a transaction is different than security in the currency itself. Two different ideas completely. Investing in bitcoin is a speculative investment. You should never invest more in a speculative investment than you can afford to lose completely. There is a good chance bitcoins will never really get off the ground. Some people believe that there is also a good chance that it takes off in a very huge way and investment could make thousand-fold return.

You decide what you believe. No one (sane) on the forum has any interest in convincing you one way or another.

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June 22, 2011, 04:05:03 PM
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Let me try to jump in here before the Libertarian crowd starts pelting you with innuendo about how your precious US dollars and government guarantees mean nothing.

Imagine that in the same week, 1/260th of all the US dollars in the world had been stolen, and just a few days later someone had hacked into the New York Stock Exchange, causing stock prices to plummet. Put yourself in that particular situation for just a second, then think of what the value of one US dollar would be under those circumstances... and how long it would take to recover.

Well, pretty much the same thing has happened with Bitcoin. In one week, if we are to believe what we read (and there's never an absolute certainty that things are as they appear on the internet), 25,000 BTC were stolen, then just a few days later the exchange through which 90% of all transactions take place (and which truthfully is really partly an exchange, and partly a BTC bank), was hacked.

Yes, both of those were hard blows to the Bitcoin economy and concept... and yet, this little currency/commodity has somehow managed to steam on ahead, with prices rising back to values that not only are similar to those before the Mt. Gox collapse (just three days ago!), but that reflect a ridiculous profit margin for anyone who had purchased BTC before June 5th (just two weeks ago!).

If you understand the concept of currency, or a commodity, as never having intrinsic value, but only being valuable inasmuch as its fundamentals are a solid basis for the trust of people to transact with it, you have to be impressed by how bitcoin has recovered.

THAT's why you should invest in it. Is it possible that the original programmer left a backdoor open? Conceivably, yes, but don't forget bitcoin is open source, and there are a lot of spectacularly smart people out there looking at it... and yet, when a few of these smart people decided to do something bad, it wasn't against bitcoin itself, it was against one person's unsecured password and against one exchange which had grown too big, too fast for its own good.

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June 22, 2011, 04:06:57 PM
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Damien put it in a good way... In reality... Bitcoins is like going to Vegas or Atlantic City... There is a good chance you could come out with shit ton of money or a good chance the house takes all your money. If you are a smart gambler you go in to the casino with the mindset that I'm taking 200 to 300 dollars in with me... If i lose it i lose it.. "I'M NOT GOING BACK TO THE ATM FOR MORE". That's how my mind set is with Bitcoins. Also ... with the ongoing hacks and issues this community has gone through... Its impressive how this currency has been able to stay somewhat stable and recovery. Your odds with this currency is better then any other gamble . Why? Cause we the people back the currency...We hold the cards. So if you are looking to invest...I commend you but at the same time..."Don't play with scared money.You feeling lucky ?"
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June 22, 2011, 04:08:35 PM
 #5

I have watched btc increase in value from $0.01 to its current level, so it's proof that there's demand for P2P crypto-currency.  However, I typify your average institutional investor - I am having difficulty believing in the integrity of the code, and find the lack of security in the client disturbing (why doesn't the program require the user to encrypt critical files on first start?).  Could someone link me to independent third-party audits by professionals of the source code for the client and the network?
If you don't trust the integrity of the code, you are free to audit it. They have both been held up to public scrutiny for some time now. As for why the client doesn't require the user to encrypt critical files, it's because that provides a false sense of security. Encryption is not some magic 'special sauce' you can sprinkle onto things and make them secure.

Quote
Also, in spite of the talk of 'secure' transactions, I find infinitely more security in holding dollars or stocks. It's easy to invest in dollars held at U.S. depositories because the Federal Government provides a guaranteed $100,000 safety net (I believe in the fed more than some mysterious guy who may or may not have plugged in a backdoor in the source), and if you hold securities at a U.S. brokerage protected by the SIPC you'll recover your stocks in the case of fraud.  Could someone explain to me, the boneheaded noob, what separates the security of Bitcoin from an institutional fraudster like Bernie Madoff?
The fact that it is computationally infeasible to fake the system. All of the things you mention are just promises made by humans. Which is better -- someone who promises not to steal from you or someone who cannot steal from you?

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I really believe in the P2P cryptographic future, but I just want to play devil's advocate and do my homework before sinking capital into it.
Just to be clear, sinking significant capital into bitcoins is speculation. I would consider it fairly high risk investing at this point. But the possible payoffs are also fairly high.

But to your overall point, every defect is also an opportunity.

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June 22, 2011, 04:10:08 PM
 #6

Hi, I've been reading up on Bitcoin and I think it's a fantastic concept, and would love to invest a bit of money in it, but isn't it still early beta?  Why are people putting money into an early beta version of the coin network?

Yes, bitcoin is still very much experimental. Those people are taking a big risk, and hoping to pick up BTC at bargain prices, before bitcoin is more proven and institutional investors like you start to move in.

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and find the lack of security in the client disturbing (why doesn't the program require the user to encrypt critical files on first start?).

Because that doesn't achieve shit when most users are running bitcoin on leaky, malware-infested Windows machines.  Security in the client isn't the weak link that needs to be fixed. It's security in the OS, and developers have simply lacked the resources so far. Remember they are all volunteers.


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Also, in spite of the talk of 'secure' transactions, I find infinitely more security in holding dollars or stocks. It's easy to invest in dollars held at U.S. depositories because the Federal Government provides a guaranteed $100,000 safety net (I believe in the fed more than some mysterious guy who may or may not have plugged in a backdoor in the source), and if you hold securities at a U.S. brokerage protected by the SIPC you'll recover your stocks in the case of fraud.

They can promise you a lot of things. Will they actually deliver if the shit hits the fan? All you have is their word.  With bitcoin, you don't need to trust a person, because you can trust the mathematics.

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Could someone explain to me, the boneheaded noob, what separates the security of Bitcoin from an institutional fraudster like Bernie Madoff?

Nobody is promising or guaranteeing you anything. Everything is open.

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ixne
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June 22, 2011, 04:11:59 PM
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Hi, I've been reading up on Bitcoin and I think it's a fantastic concept, and would love to invest a bit of money in it, but isn't it still early beta?  Why are people putting money into an early beta version of the coin network?

Risk = reward = risk.  If you want to wait until bitcoin becomes established and widely accepted, then it wouldn't be much of an investment.

Bitcoin is not "early beta."  While minor tweaks are occasionally discussed (e.g., changing the number of decimals down the road, transaction fees, etc), bitcoin is more or less in the form it will stay in until it succeeds or fails.  You might be confusing the official bitcoin client with bitcoin itself.  The two are not the same thing.

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I am having difficulty believing in the integrity of the code, and find the lack of security in the client disturbing (why doesn't the program require the user to encrypt critical files on first start?).

That is an excellent question, and one which I assume people are working on.  Right now the client has basic functionality, it's up to users to manage security.  Of course, the best way to get something done is to do it yourself, so feel free to write your own client if you so choose.

Again, the client and the bitcoin system are completely different.  The former is just one way to interact with the latter.

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Could someone link me to independent third-party audits by professionals of the source code for the client and the network?

Independent from who?  It's certainly been crowd-sourced, the source code is open to anyone who cares to look.

Quote
Also, in spite of the talk of 'secure' transactions, I find infinitely more security in holding dollars or stocks. It's easy to invest in dollars held at U.S. depositories because the Federal Government provides a guaranteed $100,000 safety net (I believe in the fed more than some mysterious guy who may or may not have plugged in a backdoor in the source), and if you hold securities at a U.S. brokerage protected by the SIPC you'll recover your stocks in the case of fraud.  Could someone explain to me, the boneheaded noob, what separates the security of Bitcoin from an institutional fraudster like Bernie Madoff?

Again, risk = reward = risk.  Jesse James is a better example than Madoff - it's the wild west right now, just without all the violence.  You may feel "secure" holding dollars or stocks, but I would argue that if you're technically competent and meticulous you can secure your bitcoins better than any bank.  If you're not so meticulous, you either have to trust a 3rd party or live with the possibility of digital theft.

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I really believe in the P2P cryptographic future, but I just want to play devil's advocate and do my homework before sinking capital into it.

You can research all you want, but no one knows where bitcoin is going (although almost everyone has opinions).  If you're looking for guarantees, it's not the investment for you.
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June 22, 2011, 04:14:22 PM
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OP, I personally am not putting any $ into BTC.

But I am mining them, because it is interesting, and might end up paying off my shiny new graphics card that I would have purchased anyway for gaming.

My speculative cap was $400.  I spent it on hardware, and if it pays itself off, great. If it doesn't, oh well, my computers have never paid themselves off at any point in the past (unless you count my marketable skillsets of course).

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June 22, 2011, 04:19:30 PM
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I have watched btc increase in value from $0.01 to its current level, so it's proof that there's demand for P2P crypto-currency. 

No. That is just proof there is demand on making a quick buck, gambling and speculation.

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June 22, 2011, 04:20:24 PM
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I really believe in the P2P cryptographic future, but I just want to play devil's advocate and do my homework before sinking capital into it.

Bitcoins are not an investment, who told you that bullshit? Bitcoin is a vehicle for digitally transferring value from your pocket to someone else's. No one is promising you any sort of profits for holding Bitcoins.

It's really simple. If you want a simple to use online payment system with unique properties, you'll want to use Bitcoin. No capital needed.

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June 22, 2011, 04:25:24 PM
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investing = knowing or having a reasonable estimate of the true productivity value of what you put your money into.

can you give a reasonable value of bitcoin?   if not, it is not really investing.

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June 22, 2011, 04:26:25 PM
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To answer the original question: the reason to invest in Bitcoin now instead of once it's proven itself, is because by the time it's proven itself that will have been priced in. You can't beat the market by doing what everyone else is doing---you have to invest in companies and technologies with uncertain futures.

I bought bitcoins at $0.85 because I thought they were very, very undervalued, which only meant I thought they had a much better than 1% chance of eventually being valued at $85 or more. In fact I think they have a better than 1% chance of eventually being worth $500 or more, which is more than enough upside to overcome even my level of risk aversion (which is pretty high).

Putting money into Bitcoin is not a safe move, it's an aggressive one. If you have a place for that in your portfolio, great! Buy some bitcoins and hold them. If not, great! Put your money into something else, and only buy bitcoins as you need them for purchases.

Edited to add: Ignore the "Bitcoins are not an investment" responses. Bitcoins aren't designed to be an investment vehicle. Neither is orange juice. And yet the CME is lousy with investors trading orange juice futures. Anything you can buy now and sell later is potentially an investment vehicle.

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June 22, 2011, 04:28:22 PM
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When you say "invest", what do you mean? If you are thinking about buying and holding until the price goes up, you have a better than 50/50 chance of making some money over the long haul. But it is by no means certain. You should never invest more than you could afford to loose. If you are thinking about buying BTC so you can spend them for products and services, that is a better bet. There are some great deals at bidding websites and others right now.

Trading in currencies is a brutal game, especially in an unregulated/uninsured market. One can make money at it, but then again it's true that one could make money buying lotto tickets.  BTC is a excellent money for buying stuff on the Internet. As an investment it should be considered risky.

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June 22, 2011, 04:37:09 PM
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To clarify what the others are saying: if everybody buys and holds, the value will stay about the same. Like any currency, bitcoin derives its value from the goods and services you can purchase with it.

You way want to investigate the Bitcoin stock exchange with stocks funded entirely using Bitcoin.

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June 22, 2011, 04:50:56 PM
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To answer the original question: the reason to invest in Bitcoin now instead of once it's proven itself, is because by the time it's proven itself that will have been priced in. You can't beat the market by doing what everyone else is doing---you have to invest in companies and technologies with uncertain futures.

I bought bitcoins at $0.85 because I thought they were very, very undervalued, which only meant I thought they had a much better than 1% chance of eventually being valued at $85 or more. In fact I think they have a better than 1% chance of eventually being worth $500 or more, which is more than enough upside to overcome even my level of risk aversion (which is pretty high).

Putting money into Bitcoin is not a safe move, it's an aggressive one. If you have a place for that in your portfolio, great! Buy some bitcoins and hold them. If not, great! Put your money into something else, and only buy bitcoins as you need them for purchases.

Edited to add: Ignore the "Bitcoins are not an investment" responses. Bitcoins aren't designed to be an investment vehicle. Neither is orange juice. And yet the CME is lousy with investors trading orange juice futures. Anything you can buy now and sell later is potentially an investment vehicle.

less than 5% of startups and new techs become successful enough to break even on the initial investments.  venture caps and private equities pool resources and spread their bets accordingly after multiple vetting steps, same idea as joining a mining pool.  There is a low probability that you can beat the collective wisdom of the masses, if you do, it is likely due to luck rather than skill.

You might be right about bitcoin gaining value, but what process did you use to calculate that there is a 1% chance that 1btc will worth $85 or more?  If you can put that calculation into a formula, you can patent it and license it wall street and make more money than you ever could with bitcoin.  You would also have a good chance of winning the prestigious nobel prize along with a handsome cash reward.

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June 22, 2011, 06:30:18 PM
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i envisage a time when trading in whole bit coins will be unheard of.. i invested waiting for that time...

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June 22, 2011, 06:33:02 PM
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gMail was in beta until last year...
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June 22, 2011, 06:44:06 PM
 #18

Hi, I've been reading up on Bitcoin and I think it's a fantastic concept, and would love to invest a bit of money in it, but isn't it still early beta?  Why are people putting money into an early beta version of the coin network?
90% of people here are for speculation. They even do not really need to install the bitcoin client. All they need is mtgox exchange and charts.
There is close to no economy behind bitcoin. Maybe 2% of owners of btc are actually buying anything for their bitcoins.

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June 22, 2011, 07:17:53 PM
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Hi, I've been reading up on Bitcoin and I think it's a fantastic concept, and would love to invest a bit of money in it, but isn't it still early beta?  Why are people putting money into an early beta version of the coin network?
90% of people here are for speculation. They even do not really need to install the bitcoin client. All they need is mtgox exchange and charts.
There is close to no economy behind bitcoin. Maybe 2% of owners of btc are actually buying anything for their bitcoins.


I am not here for the speculation, and many others, much more than the 10% you give aren't either.

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I play poker at https://betco.in/ ... Join me.
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