Bitcoins: A rebuttal to Tim Fernholz

Tim Fernholz:

This is one of the worst-written articles about Bitcoin I’ve read so far. Certainly not worthy of your publication’s name. If you don’t understand something, don’t write about it. :-p

Your description of mining is so broken I’m not even going to try to fix it. Just do some more reading of low-level descriptions until you understand how very wrong your description of miners as “decoders” is.

“…it’s a massive experiment in group trust.”
Bitcoin is far from an experiment in group trust. It’s guiding principle is *distrust* of everything but the copy of the block chain residing on your own hard drive. Your statement seems to find its roots in your ignorance of the network’s mechanics.

“That’s a crazy amount of money to have stolen…”
Yep, that’s a lot of money to have stolen. The moral of the story is that if you have over a quarter of a million dollars worth of bitcoins sitting on your hard drive, *take some steps to secure them!* This is new ground for most people, but honestly it’s nothing that can’t be learned. To help the everyman, wallets will likely be encrypted and password protected in future versions of the Bitcoin client.

“Bitcoin is a libertarian’s dream come true…”
Not just a dream come true for libertarians. Also a dream come true for anyone who has ever pined for a convenient, politically neutral international currency, or an easy, cheap way of engaging in micro-transactions.

“So far, you can’t buy anything with bitcoins that you couldn’t purchase more easily with cash or a credit card.”
Aside from anything your government or credit card processor (assuming the vendor isn’t close enough for a physical cash transaction) doesn’t want you buying, that is. Most American citizens probably won’t care much about this one, save for all the folks who’ve had their PayPal accounts frozen at one point or another, or all those folks who support privately embargoed organizations like Wikileaks.

“…major exchanges like MtGox have fallen to hackers.”
The theft of $1,000 USD due to a *financial auditor’s* gaffe is hardly grounds for declaring Mt. Gox “fallen to hackers.” Also, can you point out to me one other exchange that has been similarly compromised? Because you’re using the plural, which implies there was more than one. Oh, there wasn’t? You mean you got your facts wrong *again?* Oh snap! :-p

“…the system presents a huge opportunity for big fish to take advantage of the Internet everyman.”
You’re right, the central banking system is WAY better. Those bankers are so honest and adept at managing our money! They would NEVER take bonuses using taxpayer money right after tanking the global economy. SO much fairer.

Should I beat you over the head with that one some more, or do you get it? :-p

“…Bitcoin won’t work because it accrues such a huge advantage to people who can bring the most computing power to bear on clearing transactions.”
You mean kinda like credit card companies? Herp derp.

” If any single person or group controlled a majority of computing power in the network…”
…they could have hacked your bank account a long time ago.

“It’s hard to trust a monetary system concocted and managed by anonymous hackers…”
Not really managed by them. If anyone deviates from the network’s protocol, they isolate themselves from the network. The official client gets pretty features added to it every once in a while by a guy named Gavin Andresen and five other developers, of whom only Satoshi is anonymous, to help out herp derps like yourself, but the essential elements never change. Although there *is* a continuous stream of essentially anonymous code auditors who spend their spare time reading the client’s source code on the project’s Github page. Perhaps those were the “anonymous hackers” you’re talking about?

Or maybe it’s the guys running Mt. Gox. You know, the same ones whose security was compromised because they were trying to comply with government regulations and the freaking financial auditor ended up having a freaking virus on his system. Those guys are ano– oh wait, it’s run by K.K. Tibanne Co, a totally legitimate Japanese company.

To be fair, there are a lot of tiny garage startups that make up a good portion of the rest of the Bitcoin economy. I’d say that’s a good thing, though: I’ve never heard anyone complain about an economy having too many startups, or too much innovation, or too many opportunities. It’s ultimately an indication of the innovation and further democratization of the global economy that Bitcoin encourages.

“Bitcoin still offers a glimpse of a future in which the dollar is digitized…”
Oh, cool. So right after complaining about the pitfalls of a digital currency (“that’s a crazy amount of money to have stolen by someone essentially copying a file from your hard drive,” remember?) you’re then going to advocate a system that not only has THOSE pitfalls, but also the pitfalls of our current centralized banking system. Awesome. Well done. Herp to the friggin’ derp.