Apr 14, 2013

Posted by in Economics, Issue of the Day | 0 Comments

Cyber currency

Proof of how dramatically and rapidly our world is changing thanks to technological innovation can be found in something we cannot see or touch but which has substantial if intangible value. It is a virtual currency known as bitcoin.

It can be exchanged for gold, used to buy consumables and even major purchases such as a house yet it is not issued by any central bank nor does it belong to any nation. This is truly cyber-money and it presages an amazing new world.

The origins of bitcoin are shrouded in mystery. It all started with a character known only as Satoshi Nakamoto who, in 2008, electronically published a paper so sophisticated in its concept that its greatest appeal was to mathematical wunderkinds. Fascinatingly, no-one knows whether Satoshi is a male, female or a nom-de-plume for a collective. Or, if they do know, they’re not letting on.

There is a simple beauty to the bitcoin concept: more are being created all the time but there will eventually be a finite number when the total ‘in circulation’ will reach a peak. That will be 21 million bitcoins by 2140, Some 11 million are in circulation now and as demand rises, so does the inherent value in each of them.

Some of the appeal lies in the virtual untraceability of bitcoins which can facilitate ‘interesting’ purchases such as drugs and also provides a quality cover for money laundering. You can get yourself some of this currency by mining them online or buying from those who currently have a stash.

Bitcoins have attracted increasing attention recently because of a soaring rise in their value. Two years ago, they were worth a notional $US1 but rose to $US20. Then – in the wake of the recent Cyprus controversy of threatened partial government seizures of bank deposits – bitcoins went through the roof to nearly $US150. As with every boom there is almost inevitably a bust and they have fallen back in value but – as those who believe in the markets will tell you – there is usually a long-term rising trend.

Where this bitcoin adventure will go is anybody’s guess but there will almost certainly be copycat ventures. And, eventually, they will surely move us toward a truly futuristic world in which currency becomes passé. Just don’t hold your breath for that one.

 

Acknowledgement: Anthony Faiola, Washington Post

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