07-08 Bitcoin

Does anyone remember when, some years back, at the peak of his career, earning two million dollars an episode, Charlie Sheen had a personal, professional and public meltdown? Captivating, like watching a massive car crash.
How about the recent explosion in the value of bitcoin? From modest beginnings its value soared to $20,000 per coin before it collapsed. Captivating, like watching an asteroid explode.
What did we learn from those two events? Absolutely nothing. We are used to watching our Hollywood heroes crash and burn as well as watching investors crash and burn. Fortunately both Charlie Sheen and bitcoin have real value and will do just fine.
One thing I found interesting was how many Millennials invested in the bitcoin bubble, presumably using their credit cards since they are not known to be a cash rich group. Millennials are an interesting demographic under siege from student loans, the cost of housing and the challenge of where they fit in tomorrow’s economy. They watch as the baby boomers suck the wealth out of the system leaving them and their governments with debts beyond imagination.
While older investors were largely indifferent about the bitcoin craze, the millennials got it immediately. To invest in bitcoin was like “sticking it to the man” since bitcoin exists in a world outside the grasp of governments, banks and the mega corporations.
But that is bitcoin’s weakness.
Describing bitcoin is like describing artificial intelligence. Tricky. And it has a very intriguing history, having been developed by Satoshi Nakamoto who may or may not even exist! People have been trying to find this person forever with no success. All we know for certain is that bitcoin was most likely not developed by Charlie Sheen.
It is also intriguing how this stuff is created. It is “mined” by skillions of specialized computers that use the fancy, high powered chips that gamers use. You’ll find their “farms” in China and wherever else electricity is cheap. Each computer is programmed to try and solve a puzzle and if successful, creates a new “block” which is inserted with your ID into the blockchain. I’m a tech head and I don’t really understand this or want to. All I know is that the price of bitcoin must exceed about $5,000 in order to be profitable. Right now the value and prospects for miners is iffy.
It also has a bit of a bad rep, considering it is the currency of choice for bad actors in the Dark Web that buy and sell some seriously nasty stuff. To come out of the dark and be taken seriously, bitcoin must be regulated in some way. Further, to establish itself as a currency of real value, versus the flakey fiat currency our government prints, its value should be tied to something of accepted value like gold.
Bitcoin is just one type of cryptocurrency. Personally I invested in another called Ethereum, which is defined as “a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference”. Had I read that description before I invested, I might have taken a pass; sounds too good to be true.
All in all, the future for cryptocurrency and the blockchain looks very promising. Most banks, government and huge firms are working diligently to embrace them in their future deliverables. The millennials might have gotten burned during the last bubble but they are right to embrace this disruptor.