I think one of the most fascinating things going on right now is Bitcoin. What is Bitcoin? Don’t feel dumb. Even my aunt, who is in banking, hadn’t heard of it. The best explanation I have heard was on this Podcast on Vice. Sidenote, Vice is the best thing on YouTube. I have been interested in cryptography for some time. One of my favorite non fiction books is The Code Book by Simon Singh. In 2012 I was fascinated by an article in Wired that discussed The Silk Road and ones ability to buy just about any nefarious product using a new “crypto-currency” called Bitcoin. How was it that people were buying illegal drugs on the internet? And what was this new currency? Not long after I head the Winklevoss twins invest $11 in Bitcoin or 1% of all of Bitcoin. Then Techcrunch started reporting all kinds of Bitcoin startups. RoboCoin, Coinbase, BitPay, KryptoKit, Mt Gox just to name a few. You can find more by looking at the Bitcoin tag on Techcrunch.
I can understand why some people are hesitant. The government could outlaw the currency. The currency could get hacked. The price of the currency is still very volatile. I think those three reasons are very valid. The government could outlaw the currency. But I think if it was going to outlaw it, it would have done something sooner. After all, the government is in possession of some of the currency. The FBI shut down the Silk Road and when it did that, it came into possession of 144,000 Bitcoins. You can go to Mt.Gox to see the current price, but as of today, it is trading at $954 USD. That means the FBI is sitting on $137 million dollars. Which is a drop in the Federal bucket. I get that.
The currency could get hacked. From what I keep hearing, the NSA is the only ones that could do it. I think we shouldn’t underestimate other governments, especially considering money is at stake. But if I understand the currency like I think I do, the bigger the currency gets, the harder it gets to hack. And there are large computers out there mining Bitcoin all the time.
The price is volatile. I think volatility fixes itself as people lose there fear of the currency, as it becomes more clear the government is not going to regulate it, and more institutions and people accept and use it. And of course, more people will accept and use it when it is less volatile. Well, that and they figure out there are no transaction fees. Did I mention that. Imagine a world with no credit card transaction fees. Credit card companies charge 3% plus a flat rate per transaction. And I don’t know about you but I don’t carry cash anymore. You can say what you want about Bitcoin, but it is a huge threat to Visa, Mastercard, Discover Card, and, well, any business that charges a transaction fee to exchange money for a good or service. Why do the nerds want Bitcoin? That is why.
There is just one thing that doesn’t add up. One thing that makes me a little nervous and excited about Bitcoin. Who made it? No one knows! They have a name but they are pretty certain it isn’t a real name. That seems legit. I have heard people speculate that the currency is so clever and such an innovation in more than one way that it must have been done by more than one person. Could it be that a think tank in our government created Bitcoin? Maybe they didn’t want to risk devaluing any market or the dollar, so they introduced it in this way. Cryptically. They hid their involvement. And are waiting to see what happens. I think the reason the NSA hasn’t hacked the currency is the currency was made by the NSA. BAM! That is my hot sports opinion for the day. Why? Here is another interesting characteristic of the currency: it keeps a public ledger of itself and all its users and transactions. If you make a transaction with Bitcoins, that transaction is in the public domain. Wait. What!?!?! YES SIR!!! This is not an anonymous currency. Which begs the question: why were all these people using it on The Silk Road? Of course they were going to get caught. It was like shooting fish in a barrel. Or it was like figuring out what the drug dealers account number was and watching who he made transactions with. Could you imagine a world where every transaction was public record? There would be no more illegal activity.