what is bitcoin

What is Bitcoin and Why Do I Hate it?

I’ve been the target of jokes among my friends because I’ve been quite vocal about why I hate Bitcoin. Now that the hype is over, I thought I would write something that answers the 2 questions people ask me the most about it: What is Bitcoin and why do I hate it? Most important, at the end I look at why it’s important to learn from our mistakes. Our financial future depends on making the right choices and one way investors make money in the future is to learn from the past.

First, hate is a strong word. I can’t think of anything or anybody I actually hate, in the darkest sense of the word, but the term, “righteous anger” comes to mind. It’s not that I hate Bitcoin—I hate what it has become and what it was used for. I hate that a promising technology become the latest and greatest scam, and I hate that people got absolutely crushed when they jumped on the bandwagon too late.


Most of all, I hate that recent history shows that the warning I was giving my friends—my real friends and my “friends” on Facebook was correct. During the hype, I said that I would love to be wrong. I wasn’t. This cyber gold rush ended for many just like the real gold rush of the mid 1800s–broke and wondering what happened.  Let’s dive in.

What is Bitcoin?

First, I hate that people actually took out second mortgages on their homes and cashed in their retirement money to invest in something they didn’t understand. They followed the herd. Some did it early enough that they made some money—good for them but most weren’t so lucky. So let’s take a super general look and answer the question, what is bitcoin?

DISCLAIMER: I’m not a crypto expert and I don’t expect others to be either but if you’re putting your money into something you should have a working understanding.

If you want a “simple explanation” watch this 21-minute—yes, 21 minute video. Or you could watch this 3-and-change-minute video complete with nice animation and a British guy talking using those British terms we Americans love like, “paying for university” and “going to the pub to have a pint.”

Whichever you watch, you’ll learn that Bitcoin is basically the answer to the fact that we all hate that most of our financial transactions now come with a fee. Every. Single. Time!!! You think you’re coming out ahead when you use your credit card for rewards points but the credit card fee that the merchant is paying is baked into the cost of whatever you bought.

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Bitcoin doesn’t need that middleman because when a transaction happens, it’s recorded in a lot of places instead of on one for-profit company’s books. It cuts out the problem of currency exchanges and all kinds of other economic factors like hyperinflation because only 21 million Bitcoin will ever be produced–or at least that’s what they’re saying right now.

Currently, a government can control the value of its currency simply by printing more. Look at Japan, 50 American dollars equals 5,570 Japanese yen. That means that the yen is devalued to the point where a loaf of bread at an American store that only takes yen would cost over 15,500 yen! What a pain! The comparison is far more complex than just looking at the exchange rate but you get the idea. With Bitcoin, all of this would be a non-issue. It’s a true global currency. Cash is going the way of the dinosaur anyway so Bitcoin represents an exciting new frontier in how we transact money.

I’m on Board!!!

The Blockchain

Now let’s backtrack for a minute. Bitcoin is not so much the award-winning, everybody-get-excited technology in all of this. Bitcoin was simply the first currency to use a certain hero technology. The real hero is the blockchain.

WARNING: Skip this section if you don’t care about the nerdy details of the technology.

Let’s head back to YouTube to watch a video on blockchains. Blockchains are chains of blocks (duh) that contain information along with security codes. A block in a Bitcoin blockchain includes where the Bitcoin (or piece of) came from, who it went to, and how much.  The block also holds a hash (think of a hash as a secret code) and the hash from the block before it. (hence…the chain)

If a block is changed, the hash changes and when the hash changes, it is no longer chained to the block before it. In order to successfully change a block, not only do all the blocks before it have to be changed, a bunch of time-consuming recalculation of the chain has to happen and everybody with a copy of the blockchain has to be informed. If you dig into the complexities of how it all happens you will learn that altering the information in the blockchain, while possible, is a massive undertaking.

Think of it this way: If you wrote a book and used a network of computers to verify its authenticity, you might give the entire network a copy of your book. If somebody tries to maliciously change any part of the book, they would have to trick everybody in the network who has a copy to make an update. Those people in the network aren’t going to let that happen so there’s not a good way to make an update without a lot of work. That’s why the blockchain is so secure.

If you don’t much care about all the details, here’s what you need to know: The blockchain is secure but notice that I didn’t say unhackable. Remember what they said about The Titanic. Same thing applies…because we don’t know what future technologies hold, nothing is unhackable. Do some research into quantum computing and you’ll see what I mean.

Here’s an AWESOME graphic about blockchains from IBM

NO…Bitcoin isn’t “Hacker Proof”

Look, the blockchain is awesome technology but the super-computer nerds want you to know that Bitcoin isn’t hacker proof. There are plenty of theoretical ways to break the blockchain but the good news is that nothing has brought down the blockchain yet.

But millions—lots of millions of dollars in Bitcoin have already been stolen. Why? Because humans are humans and most are notoriously bad at cybersecurity. Bitcoin is great until you want to cash out. When you’re ready to exchange your new-school Bitcoin for old school money, it has to go to an exchange.

When it goes to an exchange you set up an account, when you set up an account, you will likely use the same old password you do on everything else that’s easily hackable by a 13-year old sitting in a basement playing video games.

In 2017 South Korea exchange Youbit went out of business when cyber-thieves (a band of 13 year cyber pirates maybe?) stole 20% or $35 million of its client’s Bitcoin holdings. Or how about Mt. Gox—which handled as much as 70% of Bitcoin transactions back in 2014. It was hacked and filed for bankruptcy the same year. Read this article to learn of the real-world impact Mt. Gox has had on the people who were left bitcoin-less.

And the biggest in history? The $530 million Coincheck hack reported in early 2018.

Get the point? Just because the Blockchain is secure doesn’t mean the road to your wallet doesn’t get subjected to the same cybersecurity nightmares that everybody else faces. When you can actually use Bitcoin for everyday business and it doesn’t have to go through an exchange process, it will become more secure.

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(Another reason I hate it…you can’t actually use it like real money yet and because it’s now heavily associated with fraud, it won’t be “real money” any time soon.)

The Epic Bitcoin Plunge

Remember the end of 2017, specifically December 18 when the price of Bitcoin hit $19,114? By then, all of the get-rich quick “investors” were betting big. In fact, here’s something I posted around that time that was met with a lash of day-traders who told me I was nuts.


This graphic was met with all kinds of hate mail, texts, and even people wanting to debate in person.

Although I had over 100 of years of historical data to prove that when something rapidly rises, it will rapidly fall, the “investors,” the people who had never invested a day in their life, poured their money into Bitcoin and didn’t see any possible way to lose money. They mortgaged their homes, they cashed in their retirement savings, some people offered to sell their homes for bitcoins—the hysteria was crazy.

I hate Bitcoin because it brought out the worst in people—greed! To use an analogy, people who had never played tennis a day in their life stepped onto the court with Serena Williams thinking they could actually win. In this case, they jumped into an investment market that was barely a market that professional traders were avoiding.

These brand new “investors” thought they were going to win big as if that’s a responsible way to risk their or their family’s financial future. The people who got in before the craze started and cashed out much earlier than $19,114 did make money but those were the exceptions–and very few exceptions. Most people stayed in too long.

As of today, August 6, 2018 Bitcoin sits at $6,967—that’s a 63% plunge from its highs. As you can see from the chart above, Bitcoin looks bad. People who analyze charts will tell you that this is a really bad chart because every time Bitcoin recovers a little and shows signs of life it gets beat up even more and it hits a new low. Lower highs and lower lows in the investing world equals stay away.

All of those “traders” who told me that I was nuts for not seeing the potential—they’re nowhere to be found now. Next to nobody talks about Bitcoin, barely anybody puts any money into it, and you still can’t use it like you can real money.

As of now, it’s basically useless to mainstream consumers.

There are plenty of other reasons I hate Bitcoin—when it does get close to becoming a real currency, we all know what will happen—it will get regulated. Governments will take control and you know what it will feel like? The currency we have now, just more futuristic and convenient.

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What happens when the Zombie Apocalypse happens and computers don’t work? (This is kind of joke but we can make the same argument for credit cards)

Last, if you know anything about Bitcoin you know that it’s only one of many cryptocurrencies to choose from. Can you imagine if you chose which type of dollar you should hold? Maybe other people are smart enough to figure all of that out but I’m definitely not!

Debbie Downer

Yes, I’ll take that label but hear me in this. The technology could become the next big currency. It could be the future of how we transact money but the reason I’m digging up my old Bitcoin debate is for a very important reason.

I want you to learn from the past so you don’t buy into the next financial fad. There is absolutely no reliable way to get rich quick. Yes, a few people will win the lottery but that’s hardly a wealth building strategy. Get rich quick has become way too popular. The same rules that applies generations ago still apply today: wealth is gain by investing in yourself to earn the money and investing in the markets so your money works for you.

Second, you aren’t smart enough to be a day-trader. The stats are that 9 out of 10 people never make a dime when they treat the stock market like a casino. (Bonus: Those people that tell you they’re making loads of money—they’re not.)

Finally, put your trust in the tried and true investment markets. For hundreds of years people have made a lot of money by investing early, investing regularly, and staying true to a long-term financial strategy. It works.

If you have no clue where to start, reach out to me. I’ll point you in the right direction but don’t join the ranks of the greedy. The greedy will sometimes score a win but it takes thousands of wins to build wealth. They’re never that lucky.

What is Bitcoin? It’s a craze that ruined a lot of people’s lives and for that reason, I hate it.


Disclaimer: All financial advice in this article is for educational purposes. Not all financial advice is appropriate for everybody so don’t make decisions until you talk to somebody who can look at your personal financial picture. Need help finding a financial adviser you can trust? I can help!