Hi guys/girls,
I'm sorry if my question is a bit stupid, however I'm a newbie when it comes to Bitcoin and there are a few things that just do not makes sense to me.
First Question
I've read somewhere that only 1000 individuals own nearly 50% of all the Bitcoins currently in circulation. This gives me some concern. I really like the whole idea behind Bitcoin, I think it could be revolutionary if my objective intellect has understood things correctly.
However, if Bitcoin were to take off, and one day (probably many years from now) be adopted worldwide, wouldn't these 1000 individuals literally be so rich they could influence the world like we have never seen? This is only the case if Money= Power. And wouldn't this mean that the rest of the 99.99999% of the population would be a lot less well off in the future than they are today due to the MASSIVE rich and poor divide?
Say for e.g there is roughly 10 trillion dollars in circulation worldwide today, would that not mean that people like the Winklevoss Twins (who have nearly 1% of all bitcoins) would be valued at USD 100 Billion. Is this not mad? Is this not what bitcoin was fighting?
Some people could argue too much power causes corruption. There is less equality. I mean with the introduction of Bitcoin and (possibly) the Outernet which is in development at the moment, this inequality could be mitigated, but who knows.
Second Question
How would recessions be controlled? I understand there are many 'specs' to economics, but if we were to delve into a recession, who would be there to help ease things? What about things like quantitive easing. With bitcoin, no central authority is control of money, which is AWESOME don't get me wrong, but I think it is human nature to desire some sort of security, something to look up to sort things out when the shit gets real.
Third Newbie Question (Technological)
Forgive my ignorance for this. I'm interested in buying bitcoin at the moment, but I just do not understand how the payment system works.
Say for e.g I buy a bitcoin off an exchange like coinbase. I want this coin secure, and so want to now remove it from the exchange and have it in my own hands. I have now removed it from the exchange, but what is to stop them from 'copying' the dat. file so even though I have this 'wallet' they could still have the key to take my bitcoin whenever they want? Even though I have this wallet, the bitcoin is actually stored in the blockchain right? So all they need is my private key to take ownership of the coin.
What if I were to take this file and make a copy, transferring this copy to a USB stick? A hacker could still access my computer which is connected to the internet, and have a peek (i.e through a trojan or keylogger) and a take a copy of my address which stores my private key? Even though I have stored the information on my USB, which is not connected to the internet, there is still a copy of the file on my computer, which can still be accessed, am I right? So creating my copies of this file, for backup purposes e.g corruption or lost file, just increases the chances of hackers finding my wallet and therefore increasing the chances of my bitcoin being stolen. I just don't understand.
Please, please, I understand these questions may seem dull to you guys, but maybe to the average IQ person who is new to bitcoin, this could be confusing. I'm really excited about the idea of bitcoin, but before I invest and participate in this chance to change the world, I want to make sure I am at least secure to some extent with regards to fraudulent activities and keeping my investment safe.
What do you guys think? Any advice positive or negative is welcome. Thanks for reading, Kash.
You've hit on some fundamental weaknesses of bitcoin here. This is part of the reason why I've invested in bitcoin despite it being a high risk investment. There's a small chance that it does take off like crazy, and I don't want to miss the huge appreciation in value that would happen if this happens. Granted, I won't have nearly as much as the Wiklevoss twins, but it'd be worth a fair amount if bitcoin truly takes over.
Bitcoin doesn't solve the income inequality problem. In fact, I'd agree with you that over the long run, it makes it worse, especially given your second point. If bitcoin was truly the only currency in the world, quantitative easing would be pretty much impossible. If we ever truly get to that point, those of us with several bitcoins will have the equivalent amount of dollars that are worth so much that we'll essentially be set for life. The same can't be said for the people who are ignoring bitcoin right now, they'll be worse off than we are now.
Arguably, a purely bitcoin based economy makes income equality worse. Income taxes may be impossible with only bitcoins. If that ends up happening, we'd switch to sales taxes, which would be worse off for the poor because income taxes are progressive in most places, but places that only have sales taxes are regressive - they cost the poor a much greater percentage of their income than they do the rich well off.
I'm really glad you ask the third question as it's much better to ask this than have your wallet hacked and lose your hard earned bitcoins. This is the greatest weakness of bitcoins in my opinion, there are a lot of trojans out there that will happily steal your bitcoins if you aren't really careful. But as far as your first part of this question, if you take your bitcoins out of Coinbase, you'll be transferring them to an address controlled only by you. The only way that Coinbase would still have control of your bitcoins would be if you take your bitcoin address in Coinbase and import them into your wallet rather than sending them to yourself.
But yes, the risk of hackers is ever present. It's interesting that you mention Coinbase having control and then hackers right afterwards. Personally, if you don't have rock solid security, which means a cold storage wallet where you keep your bitcoins in a wallet generated on a computer that never accesses the internet and only transfer them using a USB key to connect to your online computer, you're probably better off keeping your bitcoins on Coinbase. So long as you don't turn the API key on with Coinbase, you have a much greater chance having your bitcoins stolen on an online computer than you do of having them stolen on Coinbase.
