The Weakness in Bitcoins
Team Leader: Rory O’Connell 3
Members: Chris DiSarcina 4, Nicole Clark 1, Daniel Primavera 2
Our Thesis: Bitcoin’s inevitable failure will be caused by its vulnerable and unstable market value.
Our Argument:
Bitcoin sites, because they are online, are vulnerable to DDoS (Distributed Denial of Service) attacks that can shut down the webpage for hours. If an attack like this happens long enough owners may sell and cause the coin to depreciate. Even the official Bitcoin site acknowledges that buyers shouldn’t invest all of their money into their service. They know the risks with their currency and are aware that it could crash at any moment. There is also the fact that Bitcoin transactions are irreversible, you have to trust that the person accepting the coin will hold up their end of the deal. They do have the option to pay you back, but you need to trust them or they might run with your money.
Bitcoin’s are generally used for the purchase and distribution of illegal drugs and weapons. The Silk Road is a hidden website used as an anonymous market place. It takes some sorts of Internet skill to make it there; market-goers need to mask their IP addresses to protect a sense of anonymity. Once on the Silk Road website, users are able to pay for tabs of acid, pounds of marijuana, semi-automatic weapons, and more, using Bitcoin as currency. This will lead to the downfall of Bitcoin because governments will not knowingly allow citizens to purchase illegal goods. Those weapons and drugs can be wielded to kill. This is a major cause of the future downfall of Bitcoin. It’s not recognized as an official currency so it poses a threat to national currency.
A problem that is inherent with Bitcoin is scamming. Other than the fact that by using this type of currency you are completely trusting an “online stranger” with your bank information, if you were to be scammed it is almost impossible to reverse. You must trust in the Bitcoin server to secure your information/currency but because all transactions with this type of currency are “anonymous and non-reversible,” the transactions are very vulnerable to being scams. After a case of scamming, the details of the transactions and the scam are basically untraceable leaving the user helpless in recovering their funds.
There are many theories that could cause bitcoin to crash. The whole platform could get hacked which is known to have happened before. The government could also intervene in the system and put a stop to bitcoin as a whole. A drop in the price of bitcoin could also cause the site to crash. A theft scare or hacking of the system could cause the site to end. An increase of the supply of bitcoins could also cause the system to crash as a whole. These theories are all possible and could happen to the system in the future.
Sources:
“Bitcoin Charts.” N.p., n.d. Web. 16 Apr. 2013. <http://bitcoin.org/en/you-need-to-know>.
“Some Things You Need to Know.” Bitcoin. N.p., n.d. Web. 16 Apr. 2013. <http://bitcoincharts.com/charts/mtgoxUSD#rg60ztgSzm1g10zm2g25zvzp“Some Things You Need to Know.” Bitcoin. N.p., n.d. Web. 16 Apr. 2013..
Strauss, Steven. “Nine Trust-Based Problems With Bitcoin.” The Huffington Post. TheHuffingtonPost.com, 14 Apr. 2013. Web. 16 Apr. 2013. <http://www.huffingtonpost.com/steven-strauss/bitcoin_b_3081812.html>
“Traveling Down the Silk Road to Buy Drugs With Bitcoins.” Motherboard. N.p., n.d. Web. 16 Apr. 2013. <http://motherboard.vice.com/blog/traveling-down-the-silkroad-to-buy-drugs-with-bitcoins>
“Theories on a Bitcoin Crash.” Motherboard. N.p., n.d. Web. 16 Apr. 2013. <http://motherboard.vice.com/blog/the-bitcoin-crash-begins>.
“Six Things That Could Cause Bitcoin Prices To Crash.” Business Insider. N.p., n.d. Web. 16 Apr. 2013. <http://www.businessinsider.com/what-could-cause-bitcoin-prices-to-crash-2013-4>.
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Dubitability 
This is a very impressive accomplishment, Team, especially considering the very short deadline. I’m particularly appreciative that you begin with a succinct and very specific thesis, making it immediately obvious what you’ll be arguing and on what basis. That’s always a strong strategy.
The first paragraph of your Argument is extremely strong. Each of your three points is persuasive, and each in a different way.
1. The first, that the site itself is vulnerable, will make investors wary of the danger that the currency in turn is vulnerable.
2. The second, that the “owners” of the currency don’t vouch for its reliability, is almost a promise that trouble lies ahead.
3. The third, and perhaps most important, is that (unlike paypal and ebay, which promote reliability and sanction the dishonest) bitcoin malfeasance leaves injured parties without any recourse or satisfaction.
I guess it’s fair to say what bicoins are “generally” used for, although considering the hilarious infancy of this currency, judging from today’s transactions would be like spanking the newborn and then calling him a loud and constant complainer.
Your argument that bitcoin will be undone by governments appalled by how it’s used is interesting, but not yet persuasive. Unless you can say how it could be outlawed, you haven’t proved that it can be eliminated. If no government authorizes, mints, distributes, or accepts bitcoin, the currency doesn’t depend on any government. Only an open “currency exchange” trading bitcoin for other currencies could be outlawed, it seems. But if bitcoin is self-sufficient, and a large enough community trades in it, what can a government do to stop it?
The scamming problem is quite severe, as you persuasively argue. This goes to the very nature of all money, doesn’t it? Since all transactions in representative currency are based on trust, blind transactions with strangers almost cannot occur. The party receiving the coin has almost no incentive to deliver anything in return.
You will have to be more clear on what you mean by “the government” for this conclusion to be persuasive. I don’t think you mean “cause the site to crash”; you might mean cause the currency to crash. As for the “increase of the supply of bitcoins,” that’s one problem the operators of the system seem to have solved. They create as many as they want the system to have.
Altogether, a very impressive and well-sourced argument, Team. And thank you for finding a way to independently determine the appropriate grades.