Ted Bauman Pointed Out Bitcoin’s Big Weakness

Ever since Satoshi Nakamoto invented Bitcoin in 2008, Bitcoin enthusiasts have claimed it can be used to transfer money to anybody anywhere (as long as they’re online) without interference from governments, banks or payment processors. A ragged band of high-tech libertarian geeks, they celebrated a future where people could buy and sell without government oversight. It’s no accident the first major business to take advantage of the perceived privacy of Bitcoin was The Silk Road, a website that hosted deals by dealers of illegal drugs. To keep the identity of buyers and sellers private, all payment was done in Bitcoin. It worked for several years, until the government figured out how to track down the identity of The Silk Road’s owner. Learn more on crunchbase about Ted Bauman

Ted Bauman, the Editorial Director of Banyan Hill Publishing, recently pointed out the flaw in using Bitcoin to buy and sell things. All transactions must be validated by checking the history of the Bitcoin involved. This involves checking with “miners” who check to make sure that the exact Bitcoin being used not already been used for anything else. This process is what makes Bitcoin secure from fraud and hacking. The database of all Bitcoins and how they’ve been previously in transactions is distributed across many different computers. It takes time and computing power to check on them. However, people don’t want to wait, certainly not for ordinary, day-to-day transactions. If you want to use Bitcoin to buy a pizza, you don’t want your pizza to get cold before the restaurant can accept your ordinary. Yet such transactions can now take ten to twenty minutes to complete. But you’re hungry.

Bitcoin just isn’t scalable, as Ted Bauman pointed out. And if Bitcoin makes people wait that long now, what would happen if it became generally accepted and used for shopping around the world? Unless the cryptocoin’s backers figure out a way around this problem, that will never happen.

Bauman edits The Bauman Letter and The Plan B Club for Banyan Hill Publishing, based in Delrey Beach, Florida. He lives in Atlanta, Georgia. He has dedicated his life to helping people live their lives outside the reach of government prying. Born in Washington D.C., as a young man he emigrated to South Africa. He worked there for 25 years, usually as a nonprofit executive. One of the groups he helped to found, Slum Dwellers International, has grown to 35 countries, helping 14 million people.

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