History UsefulNotes / Bitcoin

* [[https://en.wikipedia.org/wiki/Dogecoin Dogecoin]] started as a joke -- a reference to the "[[Memes/OtherInternet doge]]" meme. But it somehow became one of the most popular cryptocurrencies in its own right. It's effectively a clone of Litecoin, but it's actually more economically robust, because it started with 100 billion coins and adds 5 billion every year afterward -- making it ''slightly'' inflationary, the way a "real" currency is. Mostly, though, it's used for tipping on websites like Website/{{Reddit}} and Website/{{Twitch}}. In keeping with the meme, everything is in [[UsefulNotes/{{Fonts}} Comic Sans]].

** It also offers a platform for "''non''-fungible tokens", also known as [=NFTs=], which got ''really'' popular for a period of time. An NFT is essentially a right to a unique token, which in theory could be used as a digital instrument of title (''e.g.'' proof that you own a digital artwork; in theory it could be anything), but it's rarely used in this way, perhaps because people don't understand its application. This is how people end up spending thousands of dollars for the "right" to an image file (like the "Bored Ape Yacht Club" collection) that you can easily procure for free by opening up the webpage, right-clicking on it, and downloading it.

* Individual Bitcoin users donate their computing power to the project. They work on the individual "blocks", a bundle of transactions released every ten minutes, in a process known as "mining". The user's computer, known as a "node", verifies the transactions in the block. They do this by looking for a random number that when combined with the contents of the block and ran through a hashing function (a convoluted math function that turns any data into a fixed amount of data), produces a result hash number that's lower than the "target difficulty" of the network. In other words, they're looking for a way to make it easy for the Bitcoin network to verify each individual transaction, but at the same time extremely difficult to generate an arbitrary value that would ''pretend'' that a transaction has been verified. This is known as "proof of work".

* Individual Bitcoin users donate their computing power to the project. They work on the individual "blocks", a bundle of transactions released every ten minutes, in a process known as "mining". The user's computer, known as a "node", verifies the transactions in the block. They do this by looking for a nonce that when hashed together with the block's signature hash produces a result lower than "target difficulty". In other words, they're looking for a way to make it easy for the Bitcoin network to verify each individual transaction, but at the same time extremely difficult to generate an arbitrary value that would ''pretend'' that a transaction has been verified. This is known as "proof of work".

* Governments (mostly) don't like it. Because of the total anonymity, Bitcoin is highly popular for off-the-books or totally illegal transactions. It can also be used to circumvent currency controls. Bitcoin users run a real risk of governments intervening to shut the project down. And because there's no ''physical'' asset to take away from the users, there isn't any real protection from this. In most countries, Bitcoin is tolerated and not outright illegal, but [[https://en.wikipedia.org/wiki/Legal_status_of_Bitcoin its true legal status is uncertain, to say the least]]. Bitcoin proponents claim conspiracy, but more likely it's OldMediaPlayingCatchUp. This is starting to change, as UsefulNotes/ElSalvador voted in June 2021 to [[https://www.bbc.com/news/world-latin-america-57398274 make Bitcoin legal tender]] alongside the US dollar effective that September—though the exchange rate between Bitcoin and the dollar is set by the market.

* Without any centralised authority, Bitcoin users have no recourse in case of fraud or malfeasance. While police and governments often recognise ownership of bitcoins and prosecute scammers, they cannot return stolen bitcoins without the cooperation of the people who hold them because the system was specifically designed so that no-one can transfer bitcoins from an address but the address owner; if the address owner refuses to admit that they're stolen property, you're not getting them back. There's no physical underlying asset that can be repossessed. There are no chargebacks or complaint forms. Bitcoin exchanges are not guaranteed or capable of error correction; banks and stock exchanges can roll back an erroneous or fraudulent transaction, but not Bitcoin.

* Bitcoin creates hardware scarcity. Miners tend to require specialised processors, US$500 graphics cards, and even more expensive ASIC boards. All that is difficult to procure and uses up the planet's rare earth minerals. It also pisses off people like {{video game|s}}rs, who are starting to have ''serious'' trouble procuring graphics cards because the Bitcoin miners are hoarding them; it's bad enough that graphics cards manufacturers are starting to design them to prevent them from being used for mining.
* Bitcoin can cause environmental problems. Miners are using a ''lot'' of electricity, which isn't necessarily generated cleanly. Bitcoin mining takes up more electricity per year than many entire ''countries'', and because the "proof of work" gets more difficult over time, it requires more processing power, which means more electricity. Bitcoin miners tend to look for sources of cheap electricity. In some cases, that's in poor foreign countries without much incentive to make clean energy. In other cases, they muscle in on a community's electrical grid and drive up the price of electricity for people with nothing to do with Bitcoin.[[note]]Consider the city of Plattsburgh, New York, which had a very cheap hydroelectric power plant. But Bitcoin miners found out about it, blasting the output over the fixed "cheap" amount -- and the local utility company had to buy the resulting overages on the spot market. It had a devastating impact on the community, which used its cheap hydro for electric baseboard heating. The city had to [[https://www.theverge.com/2018/3/16/17128678/plattsburgh-new-york-ban-cryptocurrency-mining temporarily ban new operations]] to stem the tide.[[/note]] The aforementioned El Salvador, with abundant geothermal capacity, is now [[https://www.reuters.com/technology/el-savador-exploring-volcanic-bitcoin-mining-bukele-says-2021-06-09/ marketing itself]] as a home for environmentally friendly mining.

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform, with most people using the standardised [[https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ ERC-20]] and [[https://ethereum.org/en/developers/docs/standards/tokens/erc-777/ ERC-777]] smart contracts; to distinguish them from coins running on their own blockchains, these are usually referred to as "fungible tokens" or simply "tokens". It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go and an apparent script kiddie accidentally set fire to another $300 million by sending "kill()" and "destroy()" commands to random contracts. The Ethereum Foundation has changed from demanding "proof of work" to "proof of stake"; after [[DevelopmentHell years of being]] [[ScheduleSlip nine months away]], the changeover finally occured on September 15th of 2022. Validators have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power. Ethereum is also largely blamed as the main cause of the GPU crisis that arose around 2019 and only started to die down around 2022, although other factors like the UsefulNotes/COVID19Pandemic causing factories to operate at lower capacities if not shutting down outright, the US electronic trade sanctions against China, and unscrupulous scalpers are also equally to blame for the shortage- not helped by pro-crypto trolls who taunted gamers on social media outlets and shady individuals releasing bypasses when GPU companies started putting in limiters to make their gamer-oriented cards unappealing to miners in a bid to force miners to buy specialized [=GPUs=] for mining.

* But of course, there are many that are just scams, rather than a legitimate attempt to create a viable cryptocurrency. Since early investors in Bitcoin got seriously rich, naturally many people would love to get in at the ground floor of "the next Bitcoin", and scammers are quick to target them. Less nefarious but potentially just as bad for the unaware investor are people who want to ''[[StartMyOwn create]]'' "the next Bitcoin" but don't actually have any idea what they're doing. Both types of "worthless" crypto have been dubbed [[PrecisionFStrike Shitcoins]], though it's contentious which ones merit this designation. The same applies for tokens on Ethereum and similar platforms, with the addition that [[https://dl.acm.org/doi/10.1145/3428335 scammers can create "counterfeits"]] with the same name and symbol as an existing token.

Other important concepts of the ecosystem include:
* Bridge contracts are a mechanism for transferring objects from one blockchain to another.
* [=NFTs=], or "non-fungible tokens", are tokens that are indivisible and non-interchangeable, usually used to tokenise artworks or collections of art. Individual artworks and NFT collections such as "Bored Ape Yacht Club" are some of the most prominent uses of the technology, but in principle [=NFTs=] may tokenise anything.
* Stablecoins are cryptocurrencies designed to maintain a stable value relative to a real-world currency or commodity, usually the US dollar (most prominently Tether, or USDT, and Terra USD, or UST, which failed in early May 2022), or to another cryptocurrency (the most notable case being [[https://coinmarketcap.com/alexandria/article/what-is-wrapped-bitcoin "wrapped bitcoin"]]).

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform, with most people using the standardised [[https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ ERC-20]] and [[https://ethereum.org/en/developers/docs/standards/tokens/erc-777/ ERC-777]] smart contracts; to distinguish them from coins running on their own blockchains, these are usually referred to as "fungible tokens" or simply "tokens". It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go and an apparent script kiddie accidentally set fire to another $300 million by sending "kill()" and "destroy()" commands to random contracts. The Ethereum Foundation has announced that it will change from demanding "proof of work" to "proof of stake"; after [[DevelopmentHell years of being nine months away]], the changeover will occur in September of 2022. When implemented, validators will have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power. Ethereum is also largely blamed as the main cause of the GPU crisis that arose around 2019 and only started to die down around 2022, although other factors like the UsefulNotes/COVID19Pandemic causing factories to operate at lower capacities if not shutting down outright, the US electronic trade sanctions against China, and unscrupulous scalpers are also equally to blame for the shortage- not helped by pro-crypto trolls who taunted gamers on social media outlets and shady individuals releasing bypasses when GPU companies started putting in limiters to make their gamer-oriented cards unappealing to miners in a bid to force miners to buy specialized [=GPUs=] for mining.

Bitcoin's success has led to [[FollowTheLeader a number of imitators]]. While Bitcoin itself is essentially synonymous with cryptocurrency, many of the others have noticed some of the issues with Bitcoin and tried to resolve them:

* [=NFTs=] are tokens that are indivisible and non-interchangeable, usually used to tokenise artworks or collections of art.
* Stablecoins are cryptocurrencies designed to maintain a stable value relative to a real-world currency or commodity, usually the US dollar.

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform, with most people using the standardised [[https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ ERC-20]] and [[https://ethereum.org/en/developers/docs/standards/tokens/erc-777/ ERC-777]] smart contracts; to distinguish them from coins running on their own blockchains, these are usually referred to as "fungible tokens" or simply "tokens". It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go. The Ethereum Foundation has announced that it will change from demanding "proof of work" to "proof of stake"; the change was originally set for 2021 but has been delayed to some time in 2022. When implemented, validators will have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power. Ethereum is also largely blamed as the main cause of the GPU crisis that arose around 2019 and only started to die down around 2022, although other factors like the UsefulNotes/COVID19Pandemic causing factories to operate at lower capacities if not shutting down outright, the US electronic trade sanctions against China, and unscrupulous scalpers are also equally to blame for the shortage- not helped by pro-crypto trolls who taunted gamers on social media outlets and shady individuals releasing bypasses when GPU companies started putting in limiters to make their gamer-oriented cards unappealing to miners in a bid to force miners to buy specialized [=GPUs=] for mining.

* [[https://en.wikipedia.org/wiki/Bram_Cohen#Chia Chia]] is designed to combat Bitcoin's environmental impact. Instead of demanding "proof of work", it uses "proof of space and time" -- it's not using the peer-to-peer network for verification, but rather for storage. It runs on what's essentially a weighted lottery system; the more data you can store, the higher the chances of you "winning" the stake in verifying the blockchain. While it does solve the energy consumption problem, it creates other problems in its users buying up high-capacity storage drives.

* Bitcoin can be lost forever. If you lose the password to your wallet file -- or worse, accidentally delete it entirely -- there's no way to get the Bitcoin inside. ''Billions'' of dollars' worth of Bitcoin have already been lost because of forgotten or lost passwords. In a few cases, Bitcoin were lost because the owner died or disappeared and never told anyone the password to their wallet file. This is exactly what happened to "Satoshi Nakamoto" -- he's believed to control over 5% of all Bitcoins that will ever be mined, but he hasn't been heard from since 2010.[[note]]And since we know which wallet belongs to Satoshi, it would be trivially easy for someone else to prove that they're him -- just move a Bitcoin to someone else.[[/note]]. It's even possible to accidentally send Bitcoin to an address which ''never'' had a wallet file attached to it. It also adds to Bitcoin's volatility -- if a large amount of Bitcoin once thought lost suddenly reappears, that will have a big inflationary effect on it.

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform, with most people using the standardised [[https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ ERC-20]] and [[https://ethereum.org/en/developers/docs/standards/tokens/erc-777/ ERC-777]] smart contracts; to distinguish them from coins running on their own blockchains, these are usually referred to as "fungible tokens" or simply "tokens". It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go. The Ethereum Foundation has announced that it will change from demanding "proof of work" to "proof of stake"; the change was originally set for 2021 but has been delayed to some time in 2022. When implemented, validators will have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power. Ethereum is also largely blamed as the main cause of the GPU crisis that arose around 2019 and only started to die down around 2022, although other factors like the UsefulNotes/COVID19Pandemic causing factories to operate at lower capacities if not shutting down outright, the US electronic trade sanctions against China, and unscrupulous scalpers are also equally to blame for the shortage- not helped by pro-crypto trolls who taunted gamers on social media outlets and shady individuals releasing bypasses when GPU companies started putting in limiters to make their gamer-oriented cards unappealing to miners in a bid to force miners to buy specialized GPUs for mining.

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform, with most people using the standardised [[https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ ERC-20]] and [[https://ethereum.org/en/developers/docs/standards/tokens/erc-777/ ERC-777]] smart contracts; to distinguish them from coins running on their own blockchains, these are usually referred to as "fungible tokens" or simply "tokens". It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go. The Ethereum Foundation has announced that it will change from demanding "proof of work" to "proof of stake"; the change was originally set for 2021 but has been delayed to some time in 2022. When implemented, validators will have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power. Ethereum is also largely blamed as the main cause of the GPU crisis that arose around 2019 and only started to die down around 2022, although other factors like the UsefulNotes/COVID19Pandemic causing factories to operate at lower capacities if not shutting down outright, the US electronic trade sanctions against China and unscrupulous scalpers are also equally to blame for the shortage- not helped by pro-crypto trolls who taunted gamers on social media outlets and shady individuals releasing bypasses when GPU companies started putting in limiters to make their gamer-oriented cards unappealing to miners in a bid to force miners to buy specialized GPUs for mining.

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform, with most people using the standardised [[https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ ERC-20]] and [[https://ethereum.org/en/developers/docs/standards/tokens/erc-777/ ERC-777]] smart contracts; to distinguish them from coins running on their own blockchains, these are usually referred to as "fungible tokens" or simply "tokens". It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go. The Ethereum Foundation has announced that it will change from demanding "proof of work" to "proof of stake"; the change was originally set for 2021 but has been delayed to some time in 2022. When implemented, validators will have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power. Ethereum is also largely blamed as the main cause of the GPU crisis that arose around 2019 and only started to die down around 2022, although other factors like the UsefulNotes/COVID19Pandemic causing factories to operate at lower capacities if not shutting down outright, the US electronic trade sanctions against China and unscrupulous scalpers are also equally to blame for the shortage.

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform, with most people using the standardised [[https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ ERC-20]] and [[https://ethereum.org/en/developers/docs/standards/tokens/erc-777/ ERC-777]] smart contracts; to distinguish them from coins running on their own blockchains, these are usually referred to as "fungible tokens" or simply "tokens". It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go. The Ethereum Foundation has announced that it will change from demanding "proof of work" to "proof of stake"; the change was originally set for 2021 but has been delayed to some time in 2022. When implemented, validators will have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power.

* Bitcoin is an environmental disaster. Miners are using a ''lot'' of electricity, which isn't necessarily generated cleanly. Bitcoin mining takes up more electricity per year than many entire ''countries'', and because the "proof of work" gets more difficult over time, it requires more processing power, which means more electricity. Bitcoin miners tend to look for sources of cheap electricity. In some cases, that's in poor foreign countries without much incentive to make clean energy. In other cases, they muscle in on a community's electrical grid and drive up the price of electricity for people with nothing to do with Bitcoin.[[note]]Consider the city of Plattsburgh, New York, which had a very cheap hydroelectric power plant. But Bitcoin miners found out about it, blasting the output over the fixed "cheap" amount -- and the local utility company had to buy the resulting overages on the spot market. It had a devastating impact on the community, which used its cheap hydro for electric baseboard heating. The city had to [[https://www.theverge.com/2018/3/16/17128678/plattsburgh-new-york-ban-cryptocurrency-mining temporarily ban new operations]] to stem the tide.[[/note]] The aforementioned El Salvador, with abundant geothermal capacity, is now [[https://www.reuters.com/technology/el-savador-exploring-volcanic-bitcoin-mining-bukele-says-2021-06-09/ marketing itself]] as a home for environmentally friendly mining.

* Without any centralised authority, Bitcoin users have no recourse in case of fraud or malfeasance. There's no proof of ownership that the police or government will accept. There's no physical underlying asset. There are no chargebacks or complaint forms. Bitcoin exchanges are not guaranteed or capable of error correction; banks and stock exchanges can roll back an erroneous or fraudulent transaction, but not Bitcoin.

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform, with most people using the standardised [[https://ethereum.org/en/developers/docs/standards/tokens/erc-20/ERC-20]] and [[https://ethereum.org/en/developers/docs/standards/tokens/erc-777/ ERC-777]] smart contracts; to distinguish them from coins running on their own blockchains, these are usually referred to as "fungible tokens" or simply "tokens". It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go. The Ethereum Foundation has announced that it will change from demanding "proof of work" to "proof of stake"; the change was originally set for 2021 but has been delayed to some time in 2022. When implemented, validators will have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power.

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform. It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go. The Ethereum Foundation has announced that it will change from demanding "proof of work" to "proof of stake"; the change was originally set for 2021 but has been delayed to some time in 2022. When implemented, validators will have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power.

* But of course, there are many that are just scams, rather than a legitimate attempt to create a viable cryptocurrency. Since early investors in Bitcoin got seriously rich, naturally many people would love to get in at the ground floor of "the next Bitcoin", and scammers are quick to target them. Less nefarious but potentially just as bad for the unaware investor are people who want to ''[[StartMyOwn create]]'' "the next Bitcoin" but don't actually have any idea what they're doing. Both types of "worthless" crypto have been dubbed [[PrecisionFStrike Shitcoins]], though it's contentious which ones merit this designation.

* Ether, the native cryptocurrency of the [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] platform, is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform. It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, the Ethereum network is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go. The Ethereum Foundation has announced that it will change from demanding "proof of work" to "proof of stake" sometime in 2021. When implemented, validators will have to put up a stake of 32 Ether to participate in the validation process. (Small investors can join a validator pool.) Validators are chosen at random to create new blocks, and check and confirm blocks they don't create; they get rewards for doing so (and lose their stake if they create or validate malicious blocks). This will greatly reduce Ethereum's environmental impact, since validators don't have to use significant computing power.

* Bitcoin can be lost forever. If you lose the password to your wallet file, there's no way to get the Bitcoin inside. ''Billions'' of dollars' worth of Bitcoin have already been lost because of forgotten or lost passwords. In a few cases, Bitcoin were lost because the owner died or disappeared and never told anyone the password to their wallet file. This is exactly what happened to "Satoshi Nakamoto" -- he's believed to control over 5% of all Bitcoins that will ever be mined, but he hasn't been heard from since 2010.[[note]]And since we know which wallet belongs to Satoshi, it would be trivially easy for someone else to prove that they're him -- just move a Bitcoin to someone else.[[/note]] It also adds to Bitcoin's volatility -- if a large amount of Bitcoin once thought lost suddenly reappears, that will have a big inflationary effect on it.

* A venture this big without a centralised authority will naturally ''develop'' a centralised authority. This creates a problem of trust -- if any group of people forms a cartel representing more than 50% of the mining power in the entire blockchain, they can "outvote" the rest of the world and suddenly take over the verification process unilaterally -- and not necessarily correctly. In other cases, groups form out of convenience to facilitate Bitcoin transactions, but these entities are unregulated and unprepared. For several years, the biggest Bitcoin exchange was a website called Mt. Gox, which was formerly a ''TabletopGame/MagicTheGathering'' online card exchange -- they were in over their heads and went bankrupt, and all the Bitcoin stored on the exchange was either wiped out or stolen by hackers.

* Governments (mostly) don't like it. Because of the total anonymity, Bitcoin is highly popular for off-the-books or totally illegal transactions. It can also be used to circumvent currency controls. Bitcoin users run a real risk of governments intervening to shut the project down. And because there's no ''physical'' asset to take away from the users, there isn't any real protection from this. In most countries, Bitcoin is tolerated and not outright illegal, but [[https://en.wikipedia.org/wiki/Legal_status_of_Bitcoin its true legal status is uncertain, to say the least]]. Bitcoin proponents claim conspiracy, but more likely it's OldMediaPlayingCatchUp. This is starting to change, as UsefulNotes/ElSalvador voted in June 2021 to [[https://www.bbc.com/news/world-latin-america-57398274 make Bitcoin legal tender]] alongside the US dollar effective that September—though even then, the exchange rate between Bitcoin and the dollar will be set by the market.

* Bitcoin is an environmental disaster. Miners are using a ''lot'' of electricity, which isn't necessarily generated cleanly. Bitcoin mining takes up more electricity per year than many entire ''countries'', and because the "proof of work" gets more difficult over time, it requires more processing power, which means more electricity. Bitcoin miners tend to look for sources of cheap electricity. In some cases, that's in poor foreign countries without much incentive to make clean energy. In other cases, they muscle in on a community's electrical grid and drive up the price of electricity for people with nothing to do with Bitcoin.[[note]]Consider the city of Plattsburgh, NY, which had a very cheap hydroelectric power plant. But Bitcoin miners found out about it, blasting the output over the fixed "cheap" amount -- and the local utility company had to buy the resulting overages on the spot market. It had a devastating impact on the community, which used its cheap hydro for electric baseboard heating. The city had to [[https://www.theverge.com/2018/3/16/17128678/plattsburgh-new-york-ban-cryptocurrency-mining temporarily ban new operations]] to stem the tide.[[/note]]

* Governments don't like it. Because of the total anonymity, Bitcoin is highly popular for off-the-books or totally illegal transactions. It can also be used to circumvent currency controls. Bitcoin users run a real risk of governments intervening to shut the project down. And because there's no ''physical'' asset to take away from the users, there isn't any real protection from this. In most countries, Bitcoin is tolerated and not outright illegal, but [[https://en.wikipedia.org/wiki/Legal_status_of_Bitcoin its true legal status is uncertain, to say the least]]. Bitcoin proponents claim conspiracy, but more likely it's OldMediaPlayingCatchUp.

* [[https://en.wikipedia.org/wiki/Ethereum Ethereum]] is the second most popular cryptocurrency after Bitcoin. It works a lot like Bitcoin, but it has a bunch of interesting new features, including "smart contracts" -- think of these as separate wallet files where the funds are explicitly tied to a contractual obligation, and the transfer happens automatically if the obligation is met. It's a big platform for "initial coin offerings" -- ''i.e.'' you can [[StartMyOwn start your own cryptocurrency]] and offer it to people on the Ethereum platform. It's also one of the main platforms to get into the "non-fungible token" or NFT craze. It's got no supply cap, and transactions are verified every 12 ''seconds''. Unfortunately, Ethereum is ''very'' susceptible to "the wrong kind of people" manipulating the contracts, to the point that a single contract led to hackers stealing $50 ''million'' worth of Ether in one go.

* Depending on your jurisdiction's tax laws, Bitcoin can be considered taxable. They ''do'' have value, in the sense that they can be exchanged for real currency. You can buy Bitcoin, wait for it to appreciate, and then sell it for a profit -- as you can for a foreign currency or a stock. But most tax authorities have special rules for stocks, currency, and other financial instruments. They'd probably see Bitcoin as a commodity like gold, rather than a real currency. Again, depending on the jurisdiction, you'd probably have taxable income if you sell it at a profit -- but you might have to go "mark to market" and pay tax on the amount of money you make every year, regardless of whether or not you actually sold it.

* Bitcoin is not ''really'' anonymous. Sure, you're only known by your wallet address, which is a random string of characters that can't be traced to you. At least not by ''itself'' -- hacking also relies a lot on SocialEngineering, so it's still possible to connect you to your wallet address by tricking you into revealing it. And once that happens, ''every'' transaction in Bitcoin you've ever made from that wallet is now definitively traced to you.

* Bitcoin is an investment. If you want to make a decent amount from mining, it takes a lot of real-world money. And it gets more expensive over time, because the "proof of work" gets more difficult over time. Miners tend to require specialised processors, US$500 graphics cards, and even more expensive ASIC boards. And they've also got to pay for the electricity. Some unscrupulous miners have instead taken to installing malware on ''other'' people's computers to make ''them'' do the mining.
* Bitcoin is an environmental disaster. Miners are using a ''lot'' of electricity, which isn't necessarily generated cleanly. Bitcoin mining takes up more electricity per year than many entire ''countries'', and because the "proof of work" gets more difficult over time, it requires more processing power, which means more electricity. Bitcoin miners tend to look for sources of cheap electricity. In some cases, that's in poor foreign countries without much incentive to make clean energy. In other cases, they muscle in on a community's electrical grid and drive up the price of electricity for people with nothing to do with Bitcoin.[[note]]Consider the city of Plattsburgh, NY, which had a very cheap hydroelectric power plant. But Bitcoin miners found out about it, blasting the output over the fixed "cheap" amount -- and the local utility company had to buy the resulting overages on the spot market. It had a devastating impact on the community, which used its cheap hydro for electric baseboard heating. The city had to [[https://www.theverge.com/2018/3/16/17128678/plattsburgh-new-york-ban-cryptocurrency-mining temporarily ban new operations]] to stem the tide.[[/note]]

* [[https://en.wikipedia.org/wiki/Bram_Cohen#Chia Chia]] is another cryptocurrency designed to combat the environmental issues that Bitcoin is imposing due to its high energy consumption. Instead of having processors mine the value of a blockchain, Chia uses "proof of space and time" by way of storing data. The more data you can store, the higher the chances of you "winning" the stake in verifying the blockchain. Essentially it's a lottery system. While indeed it does solve the problem of using a lot of energy, the usage of storage space meant that it led into a surge of people buying up high-capacity storage drives.

* It's ''stupid'' valuable. By early 2021, the exchange rate hit ₿30,000 per U.S. dollar.