Benjamin Wallace, for Wired:
In the public’s imagination, overnight the bitcoin went from being the currency of tomorrow to a dystopian joke. The Electronic Frontier Foundation quietly stopped accepting bitcoin donations. Two Irish scholars specializing in network analysis demonstrated that bitcoin wasn’t nearly as anonymous as many had assumed: They were able to identify the handles of a number of people who had donated bitcoins to Wikileaks. (The organization announced in June 2011 that it was accepting such donations.) Nontechnical newcomers to the currency, expecting it to be easy to use, were disappointed to find that an extraordinary amount of effort was required to obtain, hold, and spend bitcoins. For a time, one of the easier ways to buy them was to first use Paypal to buy Linden dollars, the virtual currency in Second Life, then trade them within that make-believe universe for bitcoins. As the tone of media coverage shifted from gee-whiz to skeptical, attention that had once been thrilling became a source of resentment.
A really fascinating read. Long.
Bitcoin, for the uninitiated, is a form of online currency not linked to “real world” money, so supposedly is less traceable – it rose in public awareness along with a service called Silk Road, a server that lets people buy and sell narcotics – where bit coin was the preferred currency.
Wallace’s piece examines the history of bitcoin, the forces behind its creation and ascension, and what has ultimately led to its downfall as well (bitcoin’s value has dropped precipitiously).
When I heard about bitcoin, my first thought was “this is going to fail. Miserably.” The second thought was “I wonder how long it will take to fail.”
No form of currency is going to work unless it is tied to real money that I can cash out and buy real goods with offline.
HI Jim, the only real money is a commodity that everybody needs or wants where work is required to generate it. Throughout history there have been many – grain being just one. The money you reference being the stuff you and I know as legal tender is the legacy resultant we (being a democracy) have legalised by severing through law the relationship to a commodity.
Believe it or not through the history of the USA this has been attempted 7 times. An interesting metaphor for the US monitory history can be seen in documentary “The Secret of Ozz”. Bitcoin from what I see is as democratic a currency as can be had.
To illustrate the point all economies are suffering the result of a ineffective understanding of the infective aspects of Keynesian economic theory. Simplified that is governments need to manage the laws of supply and demand through centralised planning. The choice left after ineffectively managment is: 1) print more money and cause hyper inflation and destroy the economy, or 2) imposed astronomical taxes and destroy the economy.
The beauty of Austrian economics is you have no choice, but to get on with it, (hypothetically you would never have wound up in this mess in the first place.) So given Bitcoin makes possible the default economic principles inherent in nature (described in Austrian economic theory) and eliminates the possibility of cheating the system (the business of eroding public savings through inflation and risking the stability of the system by bending the rules to facilitate the overleveraging of the fractional resave banking system)
I think Bitcoin has potential, and a prosperous future so long as we have a Fiat money. ( note: our existing money is nothing other than faith in our collective wisdom manifest in our “enlightened” Governments, that are easily influenced by the likes the lobbyist and the revolving door to the money controllers at Goldman Sachs and the independently controlled Federal Reserve.
People who think bitcoin has failed because of a bubble are severely mistaken. It’s a small market, there was a spike in media attention. You could say bitcoin went viral. This caused a bubble in the price on exchanges. When it crashed it means nothing except a bubble crashed. It doesn’t mean bitcoin is now being used by nobody and never will. People are still using it. Open your eyes?
Bitcoin is bigger now than ever before, the client is better, but the value is low.
Those are not the same thing. You can now even play poker on the iphone with it.
What people miss is that Bitcoin can grow in adaption but the value can go down. This is because there are 7200 new coins produced every day for another year.
They are produced in a higer speed than new money enters. But in a year or two, three as more people accept and start using Bitcoins and the rate of new coins is halfed. The value could start to increase again.