Bitcoin is a new digital currency that is as of this writing worth around $100 or so, up from mere pennies when it was first launched (and was previously at a high of over $200).
It can be bought at currency exchanges across the internet and used to pay for purchases at a number of online businesses.Bitcoin is based on a peer-to-peer network of individuals running the same software and keeping it alive and in check, as it were.
It is independent of any government and wants to be the paperless, purely digital currency of the future that can be accessed on your mobile device or computer.
If you want to learn more about Bitcoin, check out it’s Wikipedia entry or listen to this fantastic podcast on Bitcoin on NPR’s planet money. This post is intended as a quick critique , based on the recent uptick of Bitcoin coverage in the media, and bubble-like surge in Bitcoin’s value.
1. While Bitcoin is designed to emulate gold in that there’s a ‘finite’ amount of it that can possibly exist, it is very much UNLIKE gold in that Bitcoin copycats can (and likely will) emerge, which makes it more like a normal currency, attached to a group identity (i.e. Bitcoin vs. the other brand vs. the next, much as you would list the Yen vs. the Dollar vs. The Euro).
In other words, if you can emulate gold digitally then so can others, and the whole enterprise is undermined.
2. Related to the above, Bitcoin is vulnerable to in-country laws that could decide to reject it. The same Libertarian minded people who now cheer Bitcoin’s peer-to-peer basis independent of any government can potentially one day see it as some sort of international, UN-type currency that undermines national legitimacy or wants to take away their (fill in the blank). In the end the ‘group’ that maintains the digital currency will be a pan-national power player like any corporation or even government, albeit a sexy, new kind of power player that looks more like ‘Anonymous’ than ‘American Express’.
3. In being independent of any government it is also independent of any democratic accountability or any potential for a single citizen to take part in influencing monetary policy. Is this really what people want? In theory, you can hold your government accountable via the ballot box for monetary policy and influence their decisions, and this is important (and please no comments about how that is not the case in the real world, because in the long term it probably is).
Please note that these thought are NOT to suggest that a digital currency is a bad idea or that Bitcoin, even if it is currently in a bubble and even after the bubble bursts, will fail to function as a legitimate currency. Whether it will or not only time will tell. But as someone said (in the NPR podcast linked to above, and I am paraphrasing) “if you buy, make sure it is money you are prepared to lose”; or you may make a killing.
Just my two cents (US).