I find the growth of mainstream awareness of Bitcoins amazing. To be perfectly honest, I didn’t quite know what they were until the mainstream media starting reporting on them, and even then if I hadn’t done some of my own research would not have fully understood. If you’re in this group you can find out more on the Bitcoin official website and (even more helpful) Wikipedia page.
For those of you who trust me, a Bitcoin (BTC) is a boarder-less “crypto-currency” which first came into use in 2009. The concept is that there is no government backing the currency and it can be used from country to country without need for exchange. The control of the currency is all electronic, from management to transactions, and it’s release into use is scheduled from now until 2140, when it reaches the maximum of 21 million BTC.
Recently there have been some major Bitcoin developments: a man in Alberta is attempting to sell his house for Bitcoins, which is the largest “real world” transaction to date. Secondly, a Bitcoin ATM has been created, which is one step closer to making the currency something the majority could consider using, expanding it beyond it’s current internet sub-culture.
Now that I have, hopefully, provided enough evidence that this is a real thing and I’m not crazy, what does this all mean? As I’m sure you can imagine, with the increase in mainstream awareness, critics have been coming out of the woodwork. Every talking head on TV now has an opinion about them, and I’m sad to say that there are very few that are positive, or even thinking clearly.
To me, this type of monetary policy is actually a step in the right direction. To get to my reason why, I need to first explain a few of the criticisms and why I don’t think they’re valid:
It is not backed by any government.
So what? If the last 6 years have taught us anything is that money backed by a government can be worthless as well. Not only that, but when there is a government involved there are all types of lies and cover-ups to deal with. Along with competing priorities and human error.
It is primarily electronic.
Again, so what? The large majority of our current transactions are electronic, as well. When do you really use cash? With the use of cheques, debit and credit cards, along with the growing popularity of online shopping, people don’t have to see cash for years at a time if they really don’t want to. If you think that the government is printing all of the money they are releasing into the economy, give your head a shake.
It has no underlying value and relies on a group of users believing it is worth something.
… which is the exact same as our currency. Only difference is that there is a larger group of people who believe in it and a government who is telling us it’s all going to be ok. Ever since our currency was debased, it is just a made up system of numbers that rely on the users to believe it is worth something. In terms of “underlying value” it is not worth more than the paper it is printed on. At least with the Bitcoin there is no false confidence.
Why the Bitcoin interests me.
To me this is democratic currency. It is made by the people and it’s value is based on how it is adopted. The other interesting thing is that it is predictable, in a sense. We know how it is being released over the next 130 years, which is way more than could be said for government-run currency. All of the points raised by critics are nothing different from how world currency is being managed right now.
There is a large amount of volatility right now, so proceed with caution, but I think that once it has wider adoption some interesting things are going to happen.