Features 2 May 2014 11:38am Is Bitcoin a safe investment?This month's debate asks - is Bitcoin a safe investment?YES Ruben Alexander writer and editor at Bitcoin magazine NO Dr Ittay Eyal department of computer science at Cornell University, and co-author of Majority is not Enough: Bitcoin Mining is Vulnerable Yes Ruben Alexander There has never before been an independent algorithm-based currency like Bitcoin, but that doesn’t mean it isn’t a safe investment.No group can freeze an individual’s Bitcoins and it is nearly impossible to guess the keys required to spend another’s Bitcoins, suggesting it is quite safe.When a Bitcoin is verified in one’s possession, it is stored in a public ledger with more than 140,000 copies around the world, again proving it is safe.When you compare Bitcoin to an inflationary fiat currency it still appears a safe and preferable investment, both when you consider a currency’s layers of debt, which make it considerably more complex, and when you consider its susceptibility to capital controls such as the bail-ins certain Cyprus bank customers have endured or gold confiscations at the borders of India.

Any investment needs to demonstrate an increase in value over a period of time to be valuable.To date, the value of Bitcoin has increased significantly.It was worth $1 on 9 February 2011, and has seen a 600-fold increase.There is still a considerable opportunity for growth as Bitcoin is a perfect fit for low-cost global remittances due to its instant transfers for little to no fees.It is a useful currency for international travel, and it has a bright future ahead as the main internet commerce currency.No Ittay Eyal In many senses, Bitcoin is a revolution and its current exchange rate embodies this hope.However, its security faces significant challenges and casts doubt on its safety as an investment.Bitcoin has a novel architecture, a decentralised ledger called the blockchain.So far, this core has almost always been rock solid.Nevertheless, its security is yet to be formally proven.It will take more time until the blockchain’s properties are fully understood and all necessary protections are in place.

For Bitcoin to be truly secure, it should be protected at the algorithm level, which Bitcoin’s core developers are still working on.All applications and services using Bitcoin are new.They face many issues for the first time and do not always handle them successfully.Transaction malleability is one example to have caused confusion for some services, and possibly losses for the exchange Mt.This goes to show the challenges lie not only in the security of the blockchain, but also in using it correctly.bitcoin tax evasionFinally, the brave investor who sees both the promise and potential risks faces another challenge: How to keep Bitcoins safe?bitcoin symbol vectorComputers and large internet services are prone to data loss and hacker attacks.bitcoin mining pro pdf

Physical copies are prone to similar dangers.Bitcoin is a promising technology, with a potentially bright future and high revenues for investors.However, until these challenges are met, it is not a safe investment.Ruben Alexander Operating systems receive regular software updates to address bugs.Similarly, Bitcoin periodically pushes out updates to users.Developers have fixed the transaction malleability bug in version 0.9 of Bitcoin’s software.ethereum etf timelineIt only affected poorly-customised wallets from third-party exchanges, such as Mt.litecoin poundOthers with well-implemented wallets, such as itBit or direct peer-to-peer transfers, were not affected.ethereum shirtWith regards to your storage point, all Bitcoins are stored on the blockchain, which keeps the balance of all Bitcoin addresses, and Bitcoin users require both a public and private address.bitcoin m1

The public address is used to receive Bitcoins, just as an email address receives an email.The private address is to spend Bitcoins, and is very similar to signing a cheque.You claim these addresses are at risk when on computer hard drives or smart phones, but they don’t need to be stored at all.For those interested in secure long-term storage, a passphrase can be engraved into aluminium, written on paper and laminated, or stored in one’s memory without leaving a private address on a hard drive.bitcoin cz wikiWith regards to risks in the more familiar investment vehicles, distant stock markets have been shown to not only be highly interconnected, as seen with the 1987 Black Monday crash, but also highly vulnerable to centralised computer failures, which have affected NASDAQ and the London Stock Exchange.bitcoin farmer programFinally, consider the value in being an early investor in Wikipedia.

By 2012, it was valued at $6.6bn and the Linux kernel had a value of $1.4bn in 2008.Similarly, Bitcoin allows any user to invest in an exciting new project now.Ittay Eyal Cutting-edge projects suffer from bugs.True, Bitcoin developers do an amazing job patching bugs swiftly, but I wouldn’t recommend running banking software on the latest Linux version.It’s simply not safe.Despite its huge potential, Bitcoin is not a safe platform yet.As for storing private keys; a friend recently received his first Bitcoins.It was a small amount, but real money nonetheless.His difficulty deciding where to store them demonstrates just how challenging it is.The first option is an online wallet or exchange, but a couple fail every month.The second was on his phone in an Android app, but he recently installed a mirror app that may access all his phone’s “sensitive data”.The third was on his computer, but there are more viruses than Bitcoins in circulation; it may already be compromised.Computer security isn’t ready for Bitcoin storage yet.

The only other option was an offline wallet, known as cold storage.How many copies to keep?Not too many so they can’t be found, but not too few so they can’t all be lost.It is not impossible to safely store Bitcoin, but it’s far from trivial and requires careful planning and a basic understanding of the system.Finally, I object to your comparison of Bitcoin to banks and stock markets.It is a currency.Ruben Alexander Your example of running banking software on Linux needs addressing.Not only have banks like the state-owned Bank of China run Linux across 20,000 retail branches since 2008, the entire US Postal Office runs on Linux, the US Federal Courts, colleges, governments, businesses and even the Federal Aviation Administration.Let’s assume someone wants to use Bitcoin, but doesn’t want to store it.Is there a service as secure as cold storage, but as easy to use as an online banking account?I also challenge your claim Bitcoin is a currency.If another country outside the US was to make a dollar, it would be considered counterfeit.

Yet any country with gold in the ground can mine it.Bitcoin can be mined anywhere and still be genuine, making it an easily tradable commodity and a safe investment.Ittay Eyal Bitcoin’s code is well written, but not the level of a mature Linux release.These mature versions are the ones large organisations use.When investing in Bitcoin, be aware the software is still developing.As for online services, like Coinbase, these face the same challenges my friend faced, but on a larger scale.They store a lot of secret data.They must replicate it for reliability, but each replica is a potential breach.And when storing large amounts, they face highly motivated thieves.Whichever way we define Bitcoin, its unique properties hold great potential.But until its code stabilises, until independent auditing of online services becomes prevalent, and until there are established practices for storing Bitcoin, one cannot consider it a safe investment.Related articles Bitcoin: changing the face of M&A?