1. I dare say few of the Bitcoin enthusiasts have understood much of it either, but as long as the value was soaring they would of course invest in it anyway.

    For the last two weeks or so, the price of Bitcoin has recovered somewhat. Only time will tell where this will lead us. Time to crack open that penny jar, Arlo?


  2. Bitcoin have value because (a) there’s a limited supply, (b) you can invest resources to find more of them, and (c) people will accept them in trade for goods or services. It’s just like gold, except it’s not a physical object.

  3. @Powers,

    Except that people won’t accept them, for the most part, in trade for goods and services, because they do not have a stable value. As currency, they’re useless.

  4. “Except that people won’t accept them, for the most part, in trade for goods and services, because they do not have a stable value. As currency, they’re useless.”

    Canadian dollars don’t have a stable value, either, and a lot of (Americans) won’t accept them.

    From this, you can conclude that they’re useless, or you can do a tiny bit more analysis, and try to decide if the people you might want to exchange value with might want them, despite the extra time and effort required to turn them into American dollars (assuming that’s your end goal.)

    Bitcoin has value for some transactions. If the transactions you will be making are those kinds of transactions, then Bitcoin may be a good choice for your transactional currency. If your transactions are more oriented along the line of Big Gulps and Doritos at the local convenience store, then Bitcoin is probably not a good choice for you.

    “Explaining Bitcoin” confuses some (probably most) people because people who are asked to explain Bitcoin often try to explain how blockchain cryptography works, which is difficult, involving types of mathematics that are rather complex and above the level of mathematics most people have at their command. This is a mistake, because people who want to USE Bitcoin do not need to understand any of the mathematics. As an analogy, consider a cool, new, LED flashlight. Can you explain the physics of how an LED emits light? Can you explain the chemistry of a storage-cell battery? Can you explain to a 3-year-old how to use a flashlight. I can… push this button here, and then hold it so the light goes where you need it. Notice how the explanation of how to use a flashlight doesn’t require any of the chemistry or physics I was asking about? You don’t have to understand global finance markets to be able to use cash, or even a debit card. You don’t have to understand the mathematics of cryptocurrency to use Bitcoin, either.

    The main dangers of Bitcoin are related to economics, not the math. The danger of investing in Bitcoin is a lot like the danger of investing in Beanie Babies… (most people old enough to remember Beanie Babies understand this one) but the same effects can (and have) affected investing in real estate, stocks, and financial derivatives. If you don’t understand the market, and thoroughly, you can get caught by bad luck and unscrupulous people eager to take your money.

  5. Okay, the mystery still isn’t solved for me. Is Arlo going to try to convince everyone else in the country that pennies are worth $20? I sort of get it if that’s the case. But it seems like quite a daunting task.

  6. Except with Beanie Babies, of course, you at least owned Beanie Babies: here, you have virtual possession of something backed by absolutely no entity and created by somebody who remains anonymous.

  7. Mark M, I still don’t understand the point of the whole storyline: the only mystery that got solved was whether Arlo had indeed been making a Bitcoin reference.

  8. On Arlo’s scheme — At one point he (mostly jokingly) contemplates using washers instead of pennies. That might make the tulip bubble nature of the situation more plausible, because they don’t have the issue of an official assigned monetary value.

    On “Explaining bitcoin” — Thanks, James. I have felt many such explanations mis-aimed. In my case, I do roughly understand the cryptography in a very general way, but as you say that’s pretty much not what anyone wants, whether or not we follow some of the math. for me, the burning questions that never seem to get answered have to do with the part about “Then the block chain is sent around, with the new transaction stuck on the end, for people to verify”. So, (1) what do you mean, “sent”? Over HTTP, FTP, something like that? Or its own protocol, but still that sort of thing, and like those others travels over TCP/IP? To the coin recipient or to “everybody”? (2) Is the whole dam blockchain sent out every time there is a transaction? Does it contain really the entire history ?? How big is it, in file terms ??? Isn’t that going to grow so unwieldy it will sink the whole thing long before any of the other issues?

  9. ” Is Arlo going to try to convince everyone else in the country that pennies are worth $20?”

    He doesn’t have to convince everyone, just at least one person who has $20.

    “Except with Beanie Babies, of course, you at least owned Beanie Babies”

    Right. If Bitcoin becomes worthless, your disposal cost is nil. Not the case if you invested heavily in Beanie Babies.

  10. ” at least you’d have a ton of toys to give your kids or grandchildren.”

    Which would be great, if any of them wanted one. Why not give them a copy of Atari 2600 E.T., as well?

  11. James, how are cute little stuffed animals not a good gift for young kids?

    And I do, in fact, have my Atari 2600 stored in the basement for my grandchildren’s eventual amusement.

  12. “James, how are cute little stuffed animals not a good gift for young kids?”

    You can stand there telling them that they SHOULD want these wonderful toys. It won’t change the fact that they don’t want them. They were a huge fad because adults were buying them. When adults stopped buying them, there was no market for them.

    As for inflicting E.T. on your grandchildren, that’s grounds for revoking visitation. E.T. is always nominated for, and frequently wins, the title of “worst videogame ever”. Objectively, Atari was left with so many unsold units that they had to take them out to a landfill in the desert, and bury them to get rid of them.
    (There ARE a few Atari 2600 games that are still adequate to provide entertainment to a small child. Space Invaders comes to mind, and some of the games on the “Combat” cartridge might be, if there are two kids of roughly equivalent skills. And, um… I can’t think of any others, off the top of my head. I once had a fairly substantial collection of 2600 carts, and I don’t miss any of them.

  13. The 2600 game “Reactor” still has some play value. There are a handful of others that can be engaging for a time. But small children used to games with actual user interfaces will probably have some trouble figuring them.

  14. As a (mostly) recovered Missile Command addict, I have to say that I have never played a computer version on any platform that was anywhere near as good (meaning playable) as the original console machine. Some of the versions had simply ridiculous limitations, such as only being able to explode a finite number of missles at the same time. If there were too many (useless) explosions still dying off in the air, nothing more would launch. Ooops.

  15. Not to mention the difference in switching from an analog trackball to an Atari 2600 switched joystick as controller.

    Oddly, I don’t remember anything about Berzerk on the 2600. I keep cross-connecting from Berzerk to Robotron 2084. One of them had a control scheme where one stick controlled which way you ran, and the other stick controlled which way you shot, and I can’t remember which one was which. The only 100% clear memory of Berzerk I can draw is Evil Otto.

  16. Agreed, Kilby. Back in the day I threw a lot of quarters into that machine, the only game I was ever similarly addicted to.

    If I remember correctly, Missile Command was the reason I bought my first Atari 2600.

  17. For “money” to work people have to know that it will have a value when they go to use it.

    (Colonial lesson coming) – Britain did not want the colonies trading with other countries, so they did not send coins to the colonies. Coins were worth their weight in whatever metal they were made of – a pound sterling was worth the same as the same weight of sterling and so on. So much of the coinage (real money) in the colonies were from other countries – such as French Louis, Dutch Thalers, Spanish Dollars as the value was the weight of metal in it. (Coins were weighed when used for payment to make sure nothing had been shaved off – hence the start of milled edge coins which made such more obvious. Change was made by cutting coins in to halves,quarters, bits (8 bits to a whole coin – so 2 bits were a quarter of a coin.) There were charts of the comparisons between pounds and other countries coins.

    Each colony issued its own paper money for use within the colony. At the start of the year the taxes due to be due at the end of the year were estimated (taxes charged per working member of the household – white men, black men (including slaves), black women (ditto) ) . Money would be issued in the amount that would be needed for the year. The money would then be given for items or services needed by the colony itself. The money was accepted as one know that at the end of the year one could pay their taxes with it. Money was not generally accepted in colonies other than it was issued in – especially North Carolina money. (We “pay” the kids at the end of having them doing a musket drill with pieces of wood in the shape of muskets and they always ask if the (NY) money can be used to buy something – I tell them “Not in New Jersey”) At the end of the year the taxes would be due,the paper money would be turned in to pay same and the money would be burned (well,there was this one time..) and then new money issued for the next year.

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