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Do BitCoins have any value?

Updated on April 28, 2013
It's problematic to get the value into focus.
It's problematic to get the value into focus.

What's a BitCoin worth?

It's worth whatever someone will give you for it. The most interesting aspect of this monetary system is the WIld-West aspect of exchange strategies. If you can find another aficionado who will sell you their house for BitCoins and a pizza, order the pie right away.

Perception represents reality in this world. Given that there's no tangible value to be wrought, the exchange rate will fluctuate wildly. There's an old saying: The lottery is a tax on people who are bad at math. We concur and we see BitCoin-ing as a corollary.

How easy is it to lose your BitCoin fortune?

It's absurdly easy. When your hard drive crashes, your digital money goes away. Just like the photos, videos, resumes, emails, and fan fiction that you planned to cherish forever, your BitCoin account exists only as long as your mass storage device persists. If you don't back it up, it's always at risk.

A hard drive is a moving part. Moving parts fail: they physically cannot last forever. From the day you take it out of the box, begin planning for it to break. Committing your virtual riches to a device with a limited life-span tends to be a very bad idea.

Look for supplemental storage options such as cloud backup, tape, and secondary hard drives. Security is always a consideration, but when faced with the option of losing everything on the next power surge or risking a backup into a cloud-based infrastructure, opt for a reliable 3rd party service with an established track record.

It has value if you think it does

Most sentient humans will reach down to grab a $20 laying in the street. They perceive some value in the effort. There's a trade-off between bending over and coming back up with paper money in hand. The $20 will pay for dinner at almost all reputable pizza parlors. On the other hand, a pile of virtual BitCoins represents opportunity to some people and a trip down the rabbit hole to most others.

As long as sufficient numbers of computer geeks and digital entrepreneurs pursue the value of the things, there will be a market for them. Don't expect the system to collapse tomorrow, but don't count on Wal Mart to trade diapers for BitCoins anytime soon. The market is simply too volatile.

Everyone is in charge, so no one is in charge

The system is P2P, or Peer to Peer. There's no central repository or authority. Magic of mathematics almost but not quite ensures that all investors are mostly protected pretty much all of the time. Numerous exchanges spring up, ensuring some level of competition but no level of regulation. Do you truly want to buy and sell through a server in someone's basement? Do you know how reliable the power grid might be when you transfer your life's savings through your broadband connection toward a virtually anonymous IP address?

Expect someone to take charge, or at least attempt to regulate. Governments can smell money from a long way off, even when they don't understand the recipe for making it. It's for our own good: we are not sufficiently smart to grasp the vagaries mathematical fortune-building. A little regulatory intervention can't hurt, especially when tax dollars are thrown off.

They are backed by nothing

Order up a share of General Electric stock: you get 1 scintilla of the company. You earn the right to attend shareholder meetings and demand accountability for excessive paper clip overages. You receive a dividend every three months. You can log on to a heavily regulated brokerage house and visit your purchase as it persists in a database.

Order up a BitCoin and you get, well, nothing. As long as your computer stays alive, you have a number on a screen. You can transfer part or all of that number to another aficionado somewhere in cyberspace and hopefully receive perceived value the transaction, but beyond that you're virtually limited. There's no BitCoin Incorporated maintaining careful accounts of who owns what. There's no gold tucked away in a federal vault, propping up your investment. You're solely responsible for managing your money, such as it is.

I will make my fortune with BitCoins

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    • nicomp profile image

      nicomp really 4 years ago from Ohio, USA

      @drbj: They may not be around in the future. Keep watching!

    • drbj profile image

      drbj and sherry 4 years ago from south Florida

      I think, nicomp, I'll hold off on investing in Bitcoins for the present. Maybe the future, too.