The mainstream media hates Bitcoin and must have marching orders to bash the crypto-currency however possible. They call it a Ponzi scheme, which by definition it is not. By definition, a Ponzi scheme must eventually fail since “the scheme requires a continual stream of investments to fund higher returns, once investment slows down, the scheme collapses” (Wikipedia). Bitcoin is a speculation based on a revolutionary protocol, not a Ponzi scheme. Bitcoin buyers are speculating that eventually Bitcoin will catch on as a popular currency used alongside major fiat currencies such as the U.S. dollar. This may or may not happen, but it is NOT a Ponzi scheme.

bitcoin cash

Even some in alternative media, libertarians and many in the liberty movement are missing the point. Mike Adams of Natural News incorrectly correlated the collapse of Mt Gox with the collapse of Bitcoin. In an incoherent article, he calls Bitcoin a Ponzi scheme and claims that he correctly predicted “the crash,” although Bitcoin has since bounced back above $600.

These writers are demonstrating a fundamental misunderstanding about how Bitcoin works and I suspect many of them are just bitter that they did not buy into the currency at lower prices. Gold investors also demonstrate a fierce animosity towards Bitcoin, although I believe the two can peacefully co-exist, are complimentary and more alike than different.

Many are now equating the collapse of a single exchange with the collapse of the entire system, which is entirely divorced from reality.  Bitcoin is a protocol and Mt Gox is just a single incompetently-run exchange.

The creator(s) of Bitcoin actually solved the very difficult Byzantine General’s Problem with their system. It was actually a breakthrough in the computer science world. And despite being around for 4 years now, it has yet to be hacked. The code and distributed system model has held up. Only a few exchanges that did not have the proper safeguards have been compromised.  Considering the amount of wealth that could be stolen and the animosity towards Bitcoin by governments, this is saying quite a lot.

The more you dig into the coding behind Bitcoin, the more you can appreciate the brilliance behind it:

erik-voorhees-coinapultThe failure of Mt Gox was the failure of a single Bitcoin exchange that did not properly safeguard their assets. It was not a problem with the Bitcoin system itself and the remaining exchanges can quickly take up the slack. Erik Voorhees explained it this way:

I should have known better, of course. I take responsibility for leaving those funds with an entity that had proven incompetence repeatedly. I chose to ignore even my own warnings, for nothing more than the sake of convenience.

Gox is still at fault, to be sure, but I have learned the lesson. I hope it is not such an expensive lesson for others. And for all you observers, please take a moment to consider it as well.

Be mindful, however, that the wrong lessons are not learned, for that would be the true tragedy, indeed.

Let me suggest that the lesson is not that Bitcoin is broken. Bitcoin is fine.

Similarly, the lesson is not that security is impossible. Those who know what they are doing, can achieve it and help others to do so.

The lesson is not that nobody can be trusted. There are countless good men and women in this community who are worthy of trust, and some of the very best people I’ve ever met.

And finally, the lesson is not that we ought to seek out “regulation” to save us from the evils and incompetence of man. For the regulators are men too, and wield the very same evil and incompetence, only enshrined in an authority from which it can wreak amplified and far more insidious destruction. Let us not retreat from our rising platform only to cower back underneath the deranged machinations of Leviathan.

The proper lesson, if I may suggest, is this: We are building a new financial order, and those of us building it, investing in it, and growing it, will pay the price of bringing it to the world. This is the harsh truth. We are building the channels, the bridges, and the towers of tomorrow’s finance, and we put ourselves at risk in doing so.

This video pretty much sums up the recent “collapse” of Bitcoin and the media response, as Hitler finds out that Bitcoin survived the Mt Gox crash…