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To Bitcoin or not to Bitcoin

by Michael Badnarik  

That is the question. The answer is… probably not. In my last newsletter I was making an effort to find something happy to write about. A desperate superficial review of Bitcoin suggested that it was a form of currency that was impossible for the government to control. When I called Tim Frey to ask him about it, he said that he was now accepting Bitcoin in payment for silver. That’s when I jumped to the wrong conclusion. I assumed that if Tim was accepting Bitcoin, then he had checked it out and thought it was legitimate. As it turns out, that was a “bit” more confidence than he actually has. Speaking with him recently, I discovered that he accepts Bitcoin, but his account auto-magically converts the Bitcoin into FRNs… which he immediately (or very soon after) uses to purchase more silver. Another precious metals man after my own heart. Within hours of distributing my newsletter I began fielding eMail responses which asked – and I’m paraphrasing – “Are you out of your freaking mind?!” I certainly hope not, but I doubt if I’m qualified to give an unbiased answer to that question. In any event, I’ve investigated a bit further and I now believe there are two possibilities: Worst case, Bitcoin is an electronic Ponzi Scheme. Bitcoins are somehow created or “mined” using computer horsepower and complicated calculations. I graciously assumed this was similar to searching for the next largest prime number. I didn’t take the time to understand this process, and it is precisely the part that made me suspicious. I should have been more cautious before I sent my happy note. As it turns out, Chris Duane has produced a YouTube video called BitCoin Ponzi Scheme. [] Not everyone agrees with him, of course. One recent comment says, “This guy has no idea what he’s talking about. Bitcoin is already international, and grows every? day.”, but that could have been left by one of the Bitcoin inventors. Tim Frey has a more generous point of view. He thinks that the value of a Bitcoin fluctuates with demand, which means that someone with numerous Bitcoin “wallets” (and a lot more disposable income than I have) could manipulate the value up by purchasing thousands of Bitcoins in scattered amounts, and then when the value peaks, they could dump their Bitcoins for “real value” FRNs (tongue in cheek), causing the bottom to fall out of the Bitcoin market. It is at least plausible that if Bitcoin really was outside the government’s control, that the government could use its vast resources to manipulate the relatively small Bitcoin market. In either scenario, Bitcoin should not be trusted for accumulating wealth because of its instability. Tim is willing to use it because it provides an electronic transaction with smaller handling charges than Pay-through-the-nose-Pal. Personally, my preference remains with the precious metals: gold, silver, and lead. Please note that my original message said, “Unfortunately, I have witnessed an irrational resistance to precious metals, and more than one person has indignantly refused to buy my book because I won’t accept FRNs. Perhaps Bitcoin will solve this problem.” Then again… perhaps not. My apologies if anyone considers themselves inconvenienced by my original post. If I were you, I would call Tim Frey at (800) 874-9760 to convert those worthless FRNs and electronic Bitcoins into real, Constitutional money. Mea Culpa. To make some small restitution, I will offer Secret to Sovereignty for one-half ounce of silver purchased from Tim Frey whether you use Bitcoin or not. The original deadline of April 30 will still apply, so time is short.   Michael Badnarik was the 2004 Libertarian Party presidential candidate. Learn more about Michael and his continuing work at

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