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March 23 2011

Bitcoin may be illegal.

Bitcoin is an attempt to create an alternative system of money. The system works like this:

  • The first users of Bitcoin software were able to reasonably easy have their computers generate bitcoin "money". So, the early adopters now have a large number of bitcoin credits.
  • Ever since then, it has become harder and harder for new bitcoin users to get any bitcoin "money".
  • Bitcoin advocates--perhaps people who got in early and were able to get a lot of bitcoin credits--are trying to give these credits real-world value.
This stinks of a ponzi scheme: The late adopters do not have the same chance to get "money for nothing" that the early adopters had.

The US government does not like these kinds of alternative money schemes very much. There was someone who tried to get people to use "liberty dollars" as a kind of alternative currency who recently got arrested. This is not the first time alternative currency brokers have been busted.

Yes, there are a lot of real-world issues with how the mismanagement of real money by banks have put us in the economic crisis we are in right now. America's income inequality--which has been getting worse for the last 30 or 40 years--is a real problem which needs a real solution. Cooking up an alternative currency is not the solution.

At the time I posted this blog, Bitcoins were worth about one dollar. Two years later, Bitcoins had a value of approximately $140 each. If I were not so cynical, and bought $1,000 in Bitcoins instead of posting this, I would have been $140,000 richer.

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