Bitcoin is an experimental new digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out collectively by the network. Bitcoin is also the name of the open source software which enables the use of this currency. The software is a community-driven open source project, released under the MIT license. (bitcoin.org)
It is the first decentralized digital currency, according to weusecoins.com.
Rick Falkvinge, the founder of the Swedish and first Pirate Party (with representation in the European parliament and has spawned Pirate Parties in more than 50 other countries), says he has invested all of his money saved and borrowed into the currency because 1. “the currency has increased in value one-thousandfold against the US dollar in fourteen months,” 2. “it does away with all bureaucracy, all transaction fees, and perhaps foremost, all transaction delays and gatekeepers in the financial system,” 3. “doing the math, I predict that it has at least another thousandfold increase to go in the coming few years, and that’s counting conservatively.”
Falkvinge also says bitcoin “can’t be seized or frozen by governments and you can transfer any amount anywhere instantly without any authority knowing or interfering.” (falkvinge.net)
Perhaps for these reasons among others, Bitcoin is currently trading at $16.52 dollars and $12.32 euros.
Back in 2o11, Forbes and Wired both did extensive exposes on the fall of the Bitcoin, particularly in face of at least one heist of $500 K and another of about half that, but it has since fairly remarkably rebounded. Hackers can potentially steal the money from your computer, but you can also have your computer trace the funds, so it’s all in all safer. Still, places like Clearcoin and MyBitcoin, while kind of defeating the purpose of a decentralized currency, can make technophobes more at ease.
In true open source movement style, the creator of Bitcoin is the probably pseudonymous Satoshi Nakamoto (apropos, score one more for the open source movement). You can learn more–maybe–at their website.
I think Falkvinge articulated the case for the new currency well, but let me say it my own way: 1. governments can’t be trusted with my money and 2. banks can’t be trusted with my money. I can trust myself, though, to be as responsible as I choose, and Bitcoin gives everyone the option to do that. So maybe you won’t be responsible. The digital money is still worth more.
We’ve been heading this way for a long time. Dollars aren’t worth anything. Bitcoins are programmed to be mined so that their circulation, unlike dollars, is controlled. And since just about all money exchange is digital now any through ebay’s creation of Paypal (same company) or the evils of Google Wallet, a more desirable means of transaction is naturally worth something.
Most Gen X-ers and younger probably don’t remember a time when dollars were backed by anything. We may know that a certain amount will buy us a gallon of gas or a new Kendrick Lamar album, but we don’t stop to think why, beside deceptively not so clear ideas like inflation and market value or what’s driving it.
David Graeber, in his Debt, the First 5,000 Years, debunks Adam Smith’s notion that in some distant past we used the barter system–15 chickens for a cow, if you like that exchange–until we finally came up with the money system. But hard currency, he argues, was preceded by the notion of debt exchange. Debt, as we know, is a virtual currency, so a digital currency from this way of looking at it is as old as the hills–except it’s not debt. It would seem to discourage debt, but we’re only human.
Ron Paul has a point when he criticizes the Fed, but is slightly off his rocker when he rants about the gold standard. Gold is very limited and heavy. The point is to have a standard. And a well-built computer algorithm, one obviously that maintains long-term trust, could establish that.
Now the term “coin” is just a name. We could call them tokens or points or shells. It doesn’t really matter. It never did. What makes any method of trading so valuable, no matter what its name–dollar, dinar, debt, or doubt–is much you trust it to do its job and make things easier on you. What makes Bitcoin so valuable, apart from its novelty and the MIT minds behind it–ironically–is the little aperture of excitement that lets you see for a split second that money is really no longer necessary.
Let’s go back to Adam Smith’s fable of the chickens and the cow. His rationalization for its impossibility is that back then you’d be unlikely to find anybody who would want your 15 chickens for trade, let alone for a cow. However, in today’s global marketplace, where everybody and anybody can post their goods and services online for exchange, that fable is less like a myth and more like a solid framework. I’m ready for a new Amazon.com that is not based on money at all, but trading. Imagine craigslist but without the ridiculous hindrance of dealing at the local level. A money-less exchange of goods at online trading post. Now I’m not sure they’ve figure out a way to tax even swapping so that might be a kind of dangerous line of business, if you’re forced to call it that. Your second option could be to trade in “e-points”–maybe the closest thing to Bitcoin. But if you had a trading post as big as e-bay or Amazon, ideally shoppers could have the option of trading however they liked, with or without money.
This is not a socialist’s dream, mind you, but a capitalist’s dream, rather than the nightmare we’re currently experiencing. How much more do we have to endure the nauseating inside politics over the debt ceiling before we get to wake up?
In sum, today’s global system of governments and banking–money as we currently know it–is causing more problems than it’s worth. The fact is, there are plenty of better alternatives–a decentralized P2P model being the soundest at the moment–and money being an ill-fashioned crutch we just might not need anymore.