The second problem is that Bitcoin is unstable. Yes, it is worth $816 right now,
That comes into play if you store bitcoins long-term. (If you hold on them for months)
If you just buy them using - say - localbitcoins to make purchase (i.e.: spend them in the couple of days following you acquiring them) you're not affected much by the price fluctuation.
If the merchant on the other side of the transaction uses a payment processor like bitpay or coinbase, the merchant will get the money immediately and won't get affected at all by the price fluctuation neither.
You buy an article worth 10$, the merchant will get 10$ exactly, you'll pay a nearly equivalent amount of you local currency through localbitcoins (say, you'll spend around 12 CHF). This is valid today, last month or next year. It doesn't matter if the intermediate is 10'000BTC 1BTC or 0.000000001BTC.
The third is no regulation. Nothing prevents exchanges from making off with whatever they have and coins stored with them.
The point of bitcoin is making a reliable transaction between 2 parties. Whatever the other party does after receiving the money isn't a problem directly linked to bitcoin. This could also happen if you gave USD/EUR to someone shady. Your ability to complain depends only on your ability to identify the merchant and on the jurisidiction where the transaction happened. If you wired money internationally to a bogus online pharmacy with no actual legal address that promised you cheap meds, you're screwed even if the money used was USD. If it's a real registered merchant in a country with a decent justice system, you can still sue the merchant even if the transaction occurred over bitcoin.
So don't complain if some new shady exchange runs with your money. It's not that different from trying to buy drugs from the first on-line pharmacy that you've found.
(When using a regular currency, you could still do something like a charge back if you went through an intermediate like a credit card or paypal. But that's a functionality that honest merchant want to get away from, due to the high amount of charge-back fraud).
Now notice that with bitcoin the situation is only a current temporary limitation, not a technical limitation. 2-out-of-3 signature scheme *could offer* some kind of security in such scenarios: a 3rd key could be used in case of dispute. (Note that unlike real-money escrow, the 3rd party never had access to the money and can't run away with it. Notice that unlike charge-back, it's not the same company being judge/jury/executionner at the same time. And like with everything else, your not restricted to any 3rd party, you're free to pick your best choice together with the merchant).
Might as use PayPal and have some added protection.
Paypal has a few short-comings:
- for a payment, it requires both the client and the merchant to use paypal's services. (both end-point of a transaction are forced to use the same service).
whereas with bitcoins, as long as both end-points use the same bitcoin protocol, they could be anything the user want. The merchant could freely pick bitpay or coinbase to get its payment processed and converted into USD, i might be buying my bitcoins over localbitcoins with CHF. Nobody is forced to use bitpay, or coinjar, or coinbase, or localbitcoins, or mtgox, etc.
- paypal can unilaterally decide to sport accepting payments and freeze an account. Via/MasterCard can stop processing donation. Whereas with bitcoins, I'm still in charge with what happens with the coins.
For reference, see what happened with the credit-card donation at wikileaks. the same is impossible with bitcoin. there is no single entity controlling the network that could decide what happens. only the end-points (merchant and client or donator and foundation) are responsible.
- paypal is a single company. if they go berzerk, or if they are pressured by the government, anything could happen. (See the previous 2 points). bitcoin is just a protocol. There's no single company in charge of it.
- charge-back fraud. (as in I buy something, and once I've recieved it, I file a charge back at my credit-card or at paypal) that's something merchant hate. and they have no choice with credit cards and paypal. but no problems with bitcoin: once bitcoin are sent, it's done. no risk for the merchant to suddenly lose money.
And even with "2-out-of-3" security the situation is different. The arbitration comes from a 3rd party that both the merchant and the customer have decided to trust. If such a security providers decide to pull some shit, it'll lose trust and next time burnt party will refuse. overtime you'll see the bad apples getting kicked out of business, and a small collection of good trusted escrows emerging (as an inspiration look at the trust labels on webshops accepting bank transfers). Whereas, currently, a merchant can only accept that charge-backs will happen when using credit-card and paypal, no other choice.
They have no intrinsic value. Dogecoin can be stated to be far more valuable. Why? Because I said so.
Fiat money has no intrinsic value. It's just some paper with some numbers printed on it. Some government has decided something and might be able to do a bit of something inside their own jurisdiction (like forcing by law people to accept some specific bits of paper), but that's about it.
Gift card have no intrinsic value. It's just a bit of plastic associated with an amount.
Prepaid wireless phone credits have no intrinsic value. It's just a virtual number inside the database of your service prodiver.
etc.
The only thing which have some intrinsic value might be precious metals, which have some physical and chemical properties making them interesting (which are also the reason why those metal started being considered precious to begin with). But please tell me when your local market starts accepting payment done with golden bars (or when they accept payment in chickens - as barter is about exchanging only intrinsicly valuables).
Virtually any payment system is done through something arbitrarily agreed upon. The only thing is how the value got agreed upon. It might be government, it might be a company. The only subtle difference with bitcoins, it that there isn't a single entity in charge. The value is reached by a whole network, where the decision is influenced by how much it is used for payment, and by the speculation about it is future, in a strange feed-back loop.
(Note that the initial value of gold and other precious metal has also been determined in this way. There's no "central gold agency" in charge of fixing the price of gold. The value of gold got settled on by the effect of its market)
You can say that you value Dogecoin more bitcoin. If more people agree with you, that might as well actually happen. If its valuable to enough persons, it will be valuable. (And that has historically hapenned with Dogecoin).
In the case of Dogecoin, most of the value was due to speculation, so the value changed as speculator decided to value something else more.
In the case of bitcoin, there's a big inertia, there's also a huge world-wide usage, so it's value doesn't depend on the whim of a few actors.
It's used by people for transaction, meaning that its valuable for people, so it has virtual value, same as fiat money, the only difference being that no government got involved.
Look at the recent series of crashes over the last couple of months. Even if the bitcoin has been a rough roller coaster as of lately, it seems to be trending to stabilise a bit around 1000$=1BTC. Because it's not only your opinion of Dogecoin vs. Bitcoin. But because there's a whole market, with billions USB worth of BTCs flowing regularily.
There are better investments
That's the point where I agree. BTC aren't an investment (at least not for anybody but the most bat-shit crazy speculators who enjoy really high risks).
In fact you shouldn't even consider bitcoins as a currency (well, okay, BTCs technically are a form of virtual currency) as much as you should consider it as a payment system.
BTCs aren't to be compared to USD or EUR, as much as BTC is to be compared to SEPA and contrasted to PayPal, Western Union, etc.
And from that point of view it brings lots of interesting new stuff: in terms of freedom of choice, independence from a fixed 3rd party.
compare what SEPA brought to payment between european bank. Bitcoin protocol is here to bring a similar bunch of advantages between individual and business across the internet: high speed, low fee, freedom of choice, etc.
In fact, it may not even be considered theft, and good luck getting a government to actually bother prosecuting the exchange owners.
BitCoins are a solution in search of a problem:
They don't have anonymity, unless one does shell games with wallets. Might as use PayPal and have some added protection.
There are better investments. I'd rather invest in a crowd-funding site so a geek can get his latest app to market. If it fails, at least someone had a chance at a dream.
They have no intrinsic value. Dogecoin can be stated to be far more valuable. Why? Because I said so.