Home > bitcoin > Bypassing The Riskiest Link

Bypassing The Riskiest Link


On the left, we have the traditional method of investment. An investor buys stock in a company that makes a product or service. The investor trusts that both the company’s executives and the company’s product offerings will generate increasing wealth over time.

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As the right hand side of the diagram shows, a Bitcoin investor can bypass the riskiest link in the investment chain – a Bitcoin company’s management. Rather than being concerned about executive incompetence (like Mt. Gox and all the other Bitcoin companies that have gone bust), a Bitcoin investor can buy and hold bitcoins directly – just like he/she can buy gold. Indeed, I have been slowly buying up some Bitcoins over the last 6 months as a speculative investment – just in case we have another 2008-like financial meltdown in the future.

Even if Bitcoin doesn’t succeed as a widespread currency of exchange or unit of account, it can succeed as a store of “perceived value” – just like gold. Like gold and unlike fiat currency, Bitcoin is guaranteed to be scarce. But unlike gold, Bitcoin is easily and quickly transportable, cheap to store, and highly divisible.

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