Column: Much ado about Bitcoin

Nov 28 2013, 05:47 IST
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SummaryThe internet currency is a digital gold rush perfectly emblematic of the present

For the obsessive followers of the volatile virtual currency bitcoin, the price of a single bitcoin at the time their fixation began holds undue significance. I know one bitcoin cost around $9 when I first stumbled on it in the summer of 2011. That was before I single-handedly sent the price of bitcoin soaring.

I wasn’t trying to manipulate an underground economy. I was just doing my job as a blogger for the website Gawker when I broke the story of the online underground illegal drug market Silk Road, on which bitcoin was the only accepted currency because of its relative anonymity. The article went viral and introduced hundreds of thousands to bitcoin.

Senator Charles E Schumer, Democrat of New York, helped, too. During a news conference a couple of days after my article was published, he called bitcoin “an online form of money laundering.” I suppose a lot of people thought that sounded pretty cool. The price of bitcoin surged to $14.

Huh, I thought, maybe I should buy some bitcoin.

But I didn’t, and as of this writing, one bitcoin is worth around $880. Senate hearings held to discuss regulating bitcoin earlier this month were “lovefests,” according to The Washington Post. Abroad, Chinese investors are flocking. Bitcoin seems on the brink of respectability.

Still, there’s a zaniness about the currency. Bitcoin is built on a weird mix of the most old-fashioned kind of speculative greed, bolstered by a contemporary utopian cyberlibertarian ideology. Boosters say that bitcoin is the currency of the future. I’d argue that the phenomenon is a digital gold rush perfectly emblematic of the present.

Some of bitcoin’s appeal comes from the fact that it does not physically exist. Each bitcoin is just a string of numbers. Instead of a bank, a decentralised network of computers ensures the authenticity of bitcoin and issues new ones by doing complex calculations. This allows bitcoin to be traded peer to peer, bypassing credit card companies and payment processors. It’s digital cash, offering the same relative anonymity and freedom as a paper sack of bills. WikiLeaks began accepting bitcoin donations in 2011 in order to bypass PayPal and credit card companies, which had frozen payments to the organisation.

The WikiLeaks episode hints at the utopian promise built into bitcoin by its creator, a mysterious programmer called Satoshi Nakamoto, whose identity is a subject of dispute and intrigue. The ideas behind bitcoin can be traced to a 1988

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