A Whale of a Bitcoin Tale

Learn more about your ad-choices at https://www.iheartpodcastnetwork.com

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:03):
Got a whale of a tale to tell you, lad,
a whale of a tale about bitcoin. I'm Jonathan Strickland,
and this is tech stuff Daily Seen. Has been a
pretty phenomenal year for the cryptocurrency bitcoin. For those unfamiliar
with the concept, bitcoin was created to be a decentralized

(00:23):
digital currency that doesn't depend upon any governmental authority to
regulate it. Bitcoin are released in chunks through a process
called mining, which involves computers working on what amounts to
complicated math problems. There's a finite number of bitcoins twenty
one million in fact, that will ever be released to
the world. Once that last fraction of a bitcoin pops

(00:45):
out in a chunk, the supply stops. At the beginning
of twenty seventeen, the value of a bitcoin in US
currency was just shy of one thousand dollars. In November,
the currency's value shot up to ten thousand dollars per bitcoin,
and it didn't stop there. The value continue to rise
above seventeen thousand dollars before experiencing a dip in December.

(01:08):
Bloomberg Business Week reported in December that of all the
bitcoins in circulation belong to just one thousand people. Bitcoin
communities call these people whales. Whales have the potential to
really upset the bitcoin apple cart. If a whale starts
to sell off bitcoin, others might take this as an

(01:29):
indication that the value of the currency will decline, and
it could lead to a digital equivalent of a run
on the banks. To make matters more complicated, bitcoin is
considered a currency, not a security or commodity. Because of that,
there are few rules in place to prevent these whales
from colluding with one another. Nothing is stopping them from
agreeing to buy up bitcoins to drive up the value

(01:51):
before dumping a ton of them on the market to
make a profit. The value of the currency could plummet
as a result, but that would happen after the whales
had cashed in. This so far hypothetical scenario is another
argument against calling bitcoin a currency in the first place.
For a currency to really be useful, it needs to
have a steady value. It's impossible to have a practical

(02:12):
currency if the value fluctuates frequently and in large amounts.
Imagine this situation. You walk into a candy shop. You
want to buy a candy bar. The price is one dollar,
so you pull out a crisp dollar bill, PLoP it
on the counter, take your candy bar, and wish the
proprietor a jolly good day. The next day, you find
out the value of a dollar has increased tenfold. The

(02:34):
dollar you spent yesterday on one candy bar could buy
you ten candy bars today. Worse yet, you find out
the following day the value has increased again. Now you
could have bought one hundred candy bars with that one dollar.
You'd be terrified to spend any money. Your dollars wouldn't
really be currency. They'd be a security or a commodity,

(02:56):
something you'd hold onto as the value increases before you
got rid of it for something else. That's how bitcoin behaves,
and while in the early days people would use bitcoins
to buy stuff like pizza, today such an idea seems insane.
You might pay the equivalent of twenty u s dollars
and fractions of bitcoin today and find out the next
day the amount of bitcoin you paid meant that Saint

(03:18):
Pizza would have cost you two thousand dollars. This volatility
has led some vendors to stop supporting bitcoin transactions entirely.
One of those vendors is Steam the online computer game
store and community Steam is run by a company called Valve.
Valve recently pulled support for bitcoin transactions off of the
Steam platform. Valve representatives said that the currencies value changes

(03:41):
so quickly that you couldn't even complete an online transaction
without the values changing first. Even if you have a
dynamic system that matches price to currency value as it changes.
That's an enormous headache, and it doesn't do anything for
buyer's remorse once you've spent it. If whale illusion and
value fluctuations aren't worrisome enough, there have also been some

(04:03):
recent examples of mismanagement and criminal activity around bitcoin. On
December seven, two thousand seventeen, Digital Trends reported that a
website called nice hash was the virtual site of a
digital bank heist. The company posted a statement acknowledging that
it had been the target of an attack. That attack
was a successful security breach that resulted in four thousand,

(04:24):
seven hundred bitcoins being stolen. At the time of the story,
that amounted to about sixty four million dollars worth of
the digital currency. At the time I'm writing this, Due
to the fluctuations in bitcoin value, it was more like
seventy two point four million dollars. Both the revelation that
so much money was stolen in a single heist and

(04:45):
that the value of that heist changed by nearly ten
million dollars over just two days are additional arguments against
bitcoin being called a currency. As the value of bitcoin
changes more than a few people have warned about an
oncoming wreck ng in which the value quote unquote corrects itself.
That's financial speak to say the currency itself is inside

(05:06):
a bubble that will eventually burst and as a result,
will see the market value for bitcoins drop. That may
or may not be true. At the end of the day,
we have to acknowledge that bitcoins have value because people
want them. As long as people do want them and
are willing to pay for them, bitcoins will have that value.
Should people stop wanting them or stop paying for them,

(05:28):
the value will diminish. Ultimately. This is true about any currency,
though most state sponsored ones are backed by some other
promise of value that gives the currencies more stability under
normal circumstances. To learn more about bitcoins, cryptocurrency, and some
of the craziest heights and tech, subscribe to the tech
Stuff podcast. We publish on Wednesdays and Fridays, and take

(05:49):
a longer, in depth look at technology. I'll see you
again soon, won