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Does Bitcoin really live up to its hype?

Graphic+by+Amanda+Huang
Graphic by Amanda Huang

Graphic by Amanda Huang

Graphic by Amanda Huang

Sanchita Teeka, Staff Writer

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Electronic currency? Well, that’s the future of all things money. At least according to the millions of investors of Bitcoin. Bitcoin is a cryptocurrency, so an online money. You’ve probably heard about Bitcoin recently whether it was in the news, in a tweet or maybe even in a discussion. Bitcoin has become famous, especially now. This, however, doesn’t mean Bitcoin is entirely good.

Bitcoin is a cryptocurrency, which is very similar to having a debit card, or a PayPal account. The difference is that instead of it being made up of dollars, it’s made of online currencies transferred directly back and forth between users without the use of a middle man or a banker.

What makes cryptocurrencies so appealing to users is that they’re not controlled by a central power, but by users and an algorithm. The algorithm will dictate how new coins will be created and how the transactions are made. This all sounds great, however Bitcoin has some unnoticed flaws.

Before we get into those flaws, it is important to understand how people are obtaining Bitcoin. Users who directly obtain Bitcoin are called miners. Miners are people who use high powered computers to solve puzzles relating to computer science. In reward for solving these puzzles they gain some bitcoin. The more difficult a puzzle, the more Bitcoin is rewarded. That’s why the dollar price of Bitcoin is constantly fluctuating. Then these miners sell off Bitcoin to others for paper money.

These miners who are constantly mining for Bitcoin, using these high powered computers, use up unnecessary energy. But they ‘mine’ for bitcoin and create transaction with other non-miners for usable money. These miners use so much energy that they could power one and a half million households. But instead of that energy going there, it goes into bitcoin mining. However, for some people the fact that Bitcoin is backed by electricity is a plus. As reassuring as that sounds, Bitcoin also has some security issues.

There are some known weaknesses of the internet that allow attackers to redirect Bitcoin traffic to wherever they choose. Adding to that, hackers can drop transactions, isolate Bitcoin nodes (computers that connect to Bitcoin), and just mess with miners in general. But, this is a threat that comes with any cryptocurrency. At the moment, Bitcoin is pretty safe, but be warned, all the risks listed above still remain.

The biggest, most concerning problem with Bitcoin is the uncertainty. One never knows how valuable it’s going to be. The value of the money depends on the miners entirely. Some people claim that the price will eventually stabilize with mass adoption, but there is no evidence to back this claim.

To invest? Or not to invest? It really is up to you. Bitcoin has way too many security and financial risks, and it causes environmental issues. As much as risk taking is important in investing, there’s too many flaws with Bitcoin to invest right now.

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Does Bitcoin really live up to its hype?