Imagine a future in which a single worldwide currency is distributed among peers rather than centralized in a handful of wealthy banks. Freed from the intrusions of national governments and the manipulation of Wall Street fat cats, these virtual coins could be “mined” and spent by individual citizens anywhere on the Internet. Based on an open-source standard and difficult to trace, these immaterial coins would quickly become the ideal payment option for privacy advocates, political dissidents, and narcotics dealers.
This future is already here, and it’s called Bitcoin.
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Bitcoin is the first digital currency that is completely distributed. The network is made up of users like yourself so no bank or payment processor is required between you and whoever you’re trading with. This decentralization is the basis for Bitcoin’s security and freedom.
Your Bitcoins can be accessed from anywhere with an Internet connection. Anybody can start mining, buying, selling or accepting Bitcoins regardless of their location.
How can you use Bitcoin? First download the Bitcoin software, which will give you a Bitcoin “address” and let you start accumulating coins. You accumulate, or “mine,” Bitcoins by letting the software run long enough on your computer to generate a handful of encryption keys, one for each Bitcoin. When you pay for something online with one of these “coins,” you’re essentially using your key to sign a record indicating the coin has left your Bitcoin address and gone to someone else’s.
All addresses are anonymous–hence the appeal to privacy advocates–but the transactions themselves are registered publicly in a database distributed across a peer-to-peer network.
Critics point to the danger that Bitcoin will become a deflationary currency, the fact that its founders stand to profit more than later adopters, and evidence that it is already a volatile market.
Advocates point to the fact that the average Bitcoin’s value has increased in the past eight months from six cents to six dollars. And in response to the question of “what gives Bitcoins real value if they have no physical backing?”, they ask what gives US dollars real value–given that Richard Nixon severed the last tenuous affiliation between dollars and the gold standard back in the 1970s.
As much as there are reasons to be skeptical, the dismissive tone of Bitcoin’s critics reminds me of nothing more than the pundits who wrote off Wikipedia in 2001.
Bruce Sterling points to a piece by Kevin Carson describing Bitcoin’s potential to trigger a low-overhead revolution:
Interesting, watching the collapse of bitcoin today. Poor idealists, sometimes what the University of Maine teaches is just functionally useless in the real world.
@Bob Wall Street doesn’t need to be hacked–it brings itself to its knees
@Bob Bitcoin didn’t crash, it’s just young and volatile. For me, UMaine fostered genuine creativity, not idealism. Speaking from experience as an NMD graduate (’09) now working in HR for a ~200 person hospitality company, which includes the most highly awarded restaurant north of NYC, creativity is the most functionally useful trait in the business world.