BITCOIN...........What Christians should know about Cryptocurrency

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BITCOIN - What Christians need to know


Should a Christian invest in Bitcoin?  Should a Christian trade on Bitcoin or buy it for speculation?  These are ethical questions which can only be answered when one understands what cryptocurrency is all about, its nature and purpose.

Bitcoin is a coin synonymous with cryptocurrency, it is the name many people heard and became interested in cryptocurrencies.  People saw a 'gold' coin with B inscribed inside, and thought, what is this Bitcoin all about. It's a gold coin you cannot see physically, yet you will transact whatever business you have with it using codes, codes and codes.

When your interest is determined about bitcoin, then you will discover that bitcoin is one of the 4,887 different cryptocurrencies in existence and being traded in about 72 Cryptocurrency Exchanges worldwide.  Bitcoin is the flagship digital currency which accounts for 66.5% cryptocurrency transactions globally.

In  2012 the price was $15 per “coin,” and it was primarily for ideological and technological transactions. The price rose steadily to peak at $20,000 per bitcoin between December 17 and January 2018, before crashing to a stable level of $3600 - $5,000  per bitcoin.  Just imagine the margin fall from $20,000 to $5,000 within a month. Fluctuation has been the dominant feature of bitcoin, over the years.

Please note that these transactions are real, the cryptocurrency exchange floors are real and every party verifiable. The question is 'Are Christians who buy bitcoins gambling with God’s money'? I will leave you to make that judgement after reading this write up.

What is Cryptocurrency?

In cryptocurrency, we have a Coin and a Token.  A coin is a cryptocurrency that can operate independently.  A  token is a cryptocurrency that relies on another cryptocurrency as a platform to operate Ethereum has ERC-20 tokens, for example. ERC-20 is a token protocol standard. Someone can create ERC-20 tokens on the Ethereum platform, then use those tokens as part of their Ethereum decentralized app (DApp). This is different from a coin, which can be built on its own platform.

Cryptocurrency is a digital currency that has 4,887 different coins and tokens trading in about 72 different cryptocurrency currency exchanges worldwide.  It is a 24/7 currency trading business with a market capitalization of $200 billion and $220 billion, as at 7.00am Tuesday 3rd December 2019, it has a market value of 198,156,158,954.  The cryptocurrency market rose to an all-time high of nearly $830 billion between December 2017 and January 2018. 

Attached here is the top 10 cryptocurrencies as at this morning.

# Name              Market Cap              Price (24h)         Circulating Supply
1 Bitcoin            $131,933,090,131 $7,297.09           $16,138,124,098
2 Ethereum        $16,141,886,252     $148.39              $6,452,184,299
3 XRP                $9,497,278,000 $0.219337           $1,124,317,702
4 Tether            $4,101,664,197 $0.998447           $18,047,082,029
5 Bitcoin Cash    $3,899,353,376 $214.89              $1,089,056,021
6 Litecoin          $2,914,589,930 $45.71                $2,547,542,744
7 EOS                  $2,531,492,988 $2.69                  $1,517,848,617
8 Binance Coin   $2,365,566,964 $15.21               $191,267,528
9 Bitcoin SV        $1,792,917,806 $99.23               $381,299,841
10 Stellar           $1,118,484,414 $0.055771          $203,776,424

The cryptocurrency market is a huge one, trading digital currency to buyers who are interested.  The market is bitcoin dominated and controlled.  Bitcoins controls 66.5% of the market as at today and whenever the bitcoin price falls, every other cryptocurrency falls in the same direction with bitcoin. 

Cryptocurrency is more than just a bunch of digital numbers that people have decided to use as money. The technology that was brought forth by Bitcoin is essentially a decentralized public ledger system, known as the Blockchain. This cryptographic Blockchain technology is what makes Bitcoin, Litecoin, Darkcoin, and other Bitcoin-alternatives a “cryptocurrency.”

Bitcoin is the measuring stick for the cryptocurrency as a whole, explaining why big investors limit their stake with bitcoin and a few others in the top 10 list of Cryptocurrencies.

What is bitcoin? 
Bitcoin is a network-based digital currency that is created and exchanged electronically. Although the currency exists entirely online, it can be used to purchase non-virtual goods and services. Because it is a purely peer-to-peer version of electronic cash, bitcoin allows online payments to be sent directly from one party to another without going through a financial institution.

The founder of the world’s most successful cryptocurrency has a name but no identity. In 2009, a computer programmer using the pseudonym Satoshi Nakamoto (Satoshi means “reason” in Japanese) self-published a nine-page paper explaining how a digital currency could be created that would eliminate the need for centralized third-party financial institutions.

Bitcoin is the world’s largest cryptocurrency, essentially money for the Internet. It is an open-source Internet protocol, like HTTP.  It was hypothesized and first developed by an anonymous author or group under the name “Satoshi Nakamoto”.  It allows e-commerce transaction to be concluded without a third party acting as a mediator.  

Who Developed Bitcoin?

Almost nothing is known about Satoshi Nakamoto, the man (or woman) who devised both the concept and the original bitcoin program. The name is Japanese, but there is no Japanese version of the bitcoin program. Nakamoto has also not written a single line of Japanese either in his code or in his sparse online writings. After starting the bitcoin project in 2007, his involvement in the development waned in late 2010. He has not been heard since then.

As to his political motivations, the only clue is a message he left on a cryptography mailing list. In response to a claim that the bitcoin system would be “socially useful and valuable,” Nakamoto wrote: “It’s very attractive to the libertarian viewpoint if we can explain it properly. I’m better with code than with words though.”

Today, people are wondering who Nakamoto really is, that with the popularity of his development, he refused to be known and no bitcoin is known to be credited to his personal account, except that after creating the coin, he made a payment with it.   In the first transaction of the system, Nakamoto’s computer program (which is open source and distributed across a peer-to-peer network) created 50 bitcoins. When Nakamoto spent some of the coins, it created a new transaction that subtracted the amount from his account and credited it to the recipients.

That's all the information about this strange man, which raises speculation as to whether he is indeed a human being, and why the people he transacted the business with cannot be identified till date.  Who are the people that developed bitcoin with Nakamoto?  To whom did he make the payment to and how much of the bitcoins was paid him?  These questions are yet to be resolved.  They could still trace his signature in the bitcoin development up until 2010, yet there is no address, company or personality attributed to Nakamoto.

Why are bitcoins considered valuable?

Most global currencies are fiat money—money that has value only because of government regulation or the law. Fiat money is not convertible by law into anything other than itself, such as gold or silver, and has no fixed value in terms of an objective standard—its value can fluctuate based on numerous economic factors.

In contrast, commodity money is a medium of exchange that may be transformed into a commodity, useful in production or consumption. Commodity money can be based on minerals (e.g., gold or silver).  Although it was the dominant medium for exchange for more than 2,000 years, commodity money has fallen out of favour because of it limits the scope for monetary policy and other actions that alter the value of money.

Bitcoins are a form of commodity money. Technically, bitcoins have no intrinsic value, since they are nothing more than digitized “bits” created by a laborious process on a decentralized network of computers. But because the supply is limited (they are rare commodity not easily produced) and their use is recognized as a medium of exchange, they are assigned a value by their users. What bitcoins are worth is solely determined by what people believe they are worth.

Unlike gold, for instance, Bitcoin has become a convenient medium of payment around the globe.  The supply of bitcoin is expected to be limited to 21 million. By contrast the supply of gold, on the other hand, tends to increase anytime its price rises, as that provides an incentive for gold miners to mine for gold.

What are the advantages of bitcoin?

The advantages of using bitcoin are mostly ideological. There are four main groups of people who are attracted to the bitcoin system:

1. People who are obsessed with privacy.

2. People interested in online experiments and/or peer-based innovations.

3. People interested in economic speculation.

What are the disadvantages of bitcoin?
There are numerous reasons to stay away from Bitcoin and the cryptocurrency market.  Some of them include:

1. Convertibility – Whereas other currencies are convertible into other financial instruments (dollars to checks to certificates of deposit, and so on) and through numerous third-party services (e.g., Visa, PayPal, Citibank), commodity currencies like bitcoin can only be exchanged for fiat currencies—and then only through an online exchange. Indeed, unless your computer is working overtime on bitcoin mining, the only way to acquire the currency is to buy it from one of the online exchanges.

These exchanges are completely unregulated and are subject to problems that do not affect other financial markets. For instance, in 2011 the largest bitcoin exchange, MTGox, had a security breach that resulted in the theft of nearly 500,000 bitcoins (worth about $9 million at the time and $8 billion today). The theft caused the value of bitcoins to crash from $17.50 to one cent before the market was able to recover.

2. Instability – The MTGox breach—and the subsequent market crash—taught bitcoin owners a harsh lesson about commodity currencies: they can be wildly unstable. Over the eight-month span from October 1, 2010, to June 9, 2011, the market value of bitcoins skyrocketed 9,667-fold from a value of $0.06 to $29.

Indeed, the only way to ensure that you make a profit (or at least not lose money) is to have bought bitcoins in 2009: Three million bitcoins—13 per cent of the total number of bitcoins that will ever be created—were minted that year. Few people, mainly readers of cryptography mailing lists, were even aware of bitcoins then and so we're able to acquire a disproportionate share of the currency.

3. Limited protection against fraud – Satoshi Nakamoto made it a point to make bitcoin transactions non-reversible. But this is one of the primary features that encourage people to trust e-commerce systems. If you know that your money is lost and can’t be returned if you are scammed, you are less likely to trust buyers online. This has the effect of dampening trust in all merchants, not just the fraudulent ones, and reducing the desire to exchange money in a virtual setting.

4. Limited sources for goods and services – Once you acquire bitcoins, what can you spend them on? Mostly online services, such as software, tech support, and Webhosting.  You can pay for flight tickets, school fees, books and other similar services with bitcoin from businesses that accept bitcoin. Few offline merchants today currently accept the virtual currency. Although it may change in the future, the lack of places to buy goods and services limits the usefulness of the currency as a medium of exchange.

5. Continous cases of theft - 
On a daily basis, cryptocurrencies are lost to smart computer Technicians who are able to break into crypto wallets of the exchanges or individuals.  Whenever there is such a loss, the culprit is hardly arrested and prosecuted.  Also, the digital currency is lost permanently.  Because it is mere codes, stored in a wallet which can be on the phone or computer, it is prone to theft.

Dangers of investing in Bitcoin

For a Christian, bitcoin can be likened to a Ponzi scheme. The price of bitcoin is currently rising based solely on the idea that the price will rise even further. And as long as there are people who want to buy it to store or use it to make an online payment, the price will keep rising.  By 2030, Bitcoin would have mined the total number of 21 million coins, which is its maximum.  By then, the price will either skyrocket or crash.

People like secrecy - The cryptocurrency market has shown that people like privacy, cheaper and less bureaucratic methods, and less control.  This is shown by a large number of cryptocurrencies in issue  4,887 cryptos and a list of others yet to be registered to start trading.

Currency issued by individuals, not backup at all - Cryptocurrency is a digital currency that knowledgeable computer technicians can easily create as at today and get them registered for trading on the exchange.  In other words, the issuer and buyers are all taking chances.  If there is a risk with the flagship crypto - Bitcoin, then imagine the level of risk a buyer of other less popular currencies will face.  

Millions are lost to crypto Newcomers every year, mainly from their inability to get registered on an Exchange on time, and low demand for their coins.  Without demand, the initial price will crash and it could take years to climb again.

Risky - Bitcoin and cryptocurrencies are highly risky, very speculative and almost completely depending on demand.  90% of the currencies are not known and not widely accepted for settlement purposes.

Highly Speculative - It is a speculative bubble - Yes, almost assuredly. Financial bubbles involve outsized growth in the price of an asset beyond its true value. Bitcoin has no intrinsic value, so why do people hold it as an asset? Because they think it can be sold at an even higher price in the future.  This does not mean the bubble will soon burst.

You need a Wallet - In order to use the bitcoin system, a user installs a “wallet” on their computer or mobile phone. Once installed the wallet generates a bitcoin address (similar to an email address) that allows the user to send and receive payments. Bitcoins are divisible to 8 decimal places yielding a total of approx. 21×1014 currency units. This allows a person to spend a fraction of a bitcoin. Unlike standard e-commerce and money transfer system, bitcoin transactions are irreversible.

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