Don't buy Bitcoins (video)

To understand why you are wrong, you need to understand the genesis behind the idea of Bitcoin.

Interestingly enough, it started with the goal of stopping bulk spam. The reason why there aren’t dump trucks backing up to your mailbox each morning to unload massive amounts of spam is because there is a larger cost associated with sending postal mail versus email. There’s the cost of the ink, paper, envelope and stamp. This means that any spam that can’t recoup those costs simply doesn’t get sent. Contrast that with email which is orders of magnitudes cheaper, the price being whatever it costs to send a few bytes over an Internet connection.

So, the idea was to attach a higher cost to emails in much the same way that postal mail has a higher cost. There are several schemes. One of these is run by a company called “GoodMail”. They convinced a bunch of email providers to give certain emails a special icon in your inbox. These icons only display if you pay an extra fee to send the email. This prevents spammers from having such a huge economic incentive for sending spam, if they want the special icon. The service still exists but it really hasn’t caught on.

However, a precursor to this idea was called “HashCash”. Instead of charging money outright, it is based on a proof-of-work system. Under this system, you run a program and it starts generating tokens by using CPU resources. You attach a token to each email you send and the recipient can verify your token for relatively no cost. This makes it easy for the typical user to send and receive emails while making bulk spam prohibitively expensive.

After this system was proposed, someone came to the natural conclusion that there would be individuals that wouldn’t want to run the program but instead would rather buy the tokens outright. This gave rise to the idea of an entire market based on buying and selling tokens. Fast forward over a decade later and the creator of Bitcoin says, “Hey, who cares about email? Let’s use this stuff for money!” The rest is history.

So, what’s my point? My point is that Bitcoin is a proof-of-work system which has value as a good because people, even if not used as money, would still want to use Bitcoins to prevent bulk spam. I imagine that if/when Bitcoin becomes widespread, we will see an actual implementation of this where sending an email costs a tiny fraction of a BTC.

I really hope this will put to rest the myth that Bitcoin has no possible use aside from being a medium of exchange.