Bitcoins are lame; oh all right in my opinion Bitcoins are lame.
For those of you who don’t know what a bitcoin is, here is a summary;
Bitcoins are a cryptocurrency that is not reliant on traditional banking systems.Bitcoins are created by a process called mining, in which participants verify and record payments in exchange for transaction fees and newly minted bitcoins.
Users send and receive bitcoins using wallet software on a PC, mobile device, or a web application.Bitcoins can be obtained by mining or in exchange for products, services, or other currencies. For more information you can check out the Wiki Page on Bitcoins
Most of the arguments against bitcoins are about how volatile it is or about how easy it is to use for illegal activities, these arguments are all over the internet and have been discussed in detail by experts in the payment industry and they are not going to be the focus of this article.
Bitcoins are lame because you can’t complete an end to end transaction using only bitcoins.
Let’s say you want to buy something using bitcoins, the first thing you need to do is get some and there are currently two ways to get bitcoins; you can either buy some (which would mean that bitcoins fail at the first hurdle) or you could mine some.
To mine a bitcoin you need to get a PC with a decent graphics card and run a bitcoin client on it – it can take a month to mine 1 bitcoin so you’d better not be in a hurry to use your bitcoins.
Okay so now you’ve got your bitcoin; what can you do with? Well you can buy something with it, if you can find a Merchant who accepts it . I buy a lot online and the only reputable Merchant I’ve ever come across is Humble Bundle a digital distributor of games.
There are more Merchants of course, the Top 10 list is here but it’s not as widely available as VISA, MasterCard and PayPal so you’ll have to hunt for someone to accept it.
I’m going to pause for a second for a quick plug for Humble Bundle, they are a digital distributor of games; who you can pay whatever you want to buy a bundle of these games and some of the money gets donated to a charity. These games tend to be older or indie games but they can be AAA games too, check out the site to get a good deal on games and support a charity.
Now back to why bitcoins are lame.
Right so let’s buy something from Humble Bundle, to do that I click on the link that brings me to their Bitcoin Wallet, were I get the address I need to send the coins and then I go into the Bitcoin coin client and enter the address to send the payment OR I could login to my own Bitcoin Wallet to send the payment but it has to be the same wallet that Humble Bundle are using.
So far it hasn’t been too bad, sure I might find it hard to buy anything with my bitcoin but once I do the process of sending the payment is fairly straight forward.
Now Humble Bundle has some bitcoins from several payments they’ve received and with them they need to pay the game developer, the charity and keep some for themselves, but the charity and the developer probably don’t accept bitcoins so to pay them Humble Bundle has to go to a Bitcoin Exchange and sell their bitcoins so they can get the money they need to pay the game developer and the charity.
Even if the Humble Bundle could send bitcoins to the charity, the charity would then have to sell the coins themselves to get the money in their bank account so they could run the charity.
Basically what’s just happened is that you’ve taken money, converted it to bitcoin, bought an item with it and then the Merchant takes the bitcoin and converts it to money, so essentially you’ve just inconvenienced the Merchant and yourself.
It’s not even like Humble Bundle will get the bitcoins you sent them instantly, it can take hours for bitcoins to arrive in a wallet and then when Humble Bundle sells the bitcoin for money on an exchange it could take anywhere from a week to a month depending on the amount and the exchange you are using for them to get the money.
MtGox, one of the more popular exchange, currently only allows people with withdraw funds once every 20 days. So basically from sale to cash in hand (or bank account) it could take 20 days for them to get the money that you sent them.
For an ordinary transactions were you are not trying to hide who you are, for a transaction were you just want to go online and buy something from a Merchant, bitcoins take longer to transact with then other payments methods like VISA MasterCard or PayPal and they have more security issues associated with them (I’m sure you’ve heard of at least one bitcoin exchange being hacked and emptied).
And they are not free to transact with and while the fee to sell and withdraw them might be less than other payment methods, combine the fee with the huge delay and bitcoins are not cost effective.
- Bitcoins are not convenient
- Bitcoins are not fast
- Bitcoins can’t complete an end to end transaction
- Bitcoins are lame
For those of you who can’t be bothered to read my post – I made an awesome video