Currency Of The Revolution, Or Tool For Online Vendors? The Many Faces Of Bitcoin [Feature]
It's become an annual event: the fall of Bitcoin. You've probably read about it multiple times, and maybe even believe that the online, decentralized currency is already gone forever. It isn't.
Created by a mysterious, anonymous entity back in 2009 - when the recession was at its worst - Bitcoin is a completely digital currency with no central servers. Transactions are distributed across the network of users, and developers claim counterfeiting to be impossible.
Anyone who wishes can mine Bitcoins by putting their computer to work solving complex math problems, but the total number of Bitcoins that can be created is capped. The currency is designed to increase in value as demand for Bitcoins go up, and it has - occasionally too quickly to be sustainable. By the summer of 2011, for example, one Bitcoin was worth as much as $30 USD. Within weeks it fell as low as $5 - just one incident the media has called the death of Bitcoin.
These spikes and drops - accelerated by speculators - haven't stopped Bitcoin's value from rising over time. Outliers aside, the currency's been trending upwards since it's creation in 2009. While I'm writing this a single Bitcoin is worth over $48 USD - the most it's ever been worth. This just days after a glitch temporarily brought the price down to $37.
It's unclear whether the current value will hold, but major online companies - including Reddit and WordPress - are starting to accept the currency, increasing its legitimacy.
Around the world organizations shut out by traditional merchant processors - Wikileaks, lulzsec and the creator of a 3D printable gun, for example - are turning to the digital currency for donations. And online casinos based entirely around Bitcoin are bringing in serious revenue. A vibrant community of developers, users and enthusiasts surround Bitcoin, and more than a few exchanges around the world allow anyone to trade a conventional currency for the digital one.
So yeah: Bitcoin's not dead.
A Revolution, Or A Business Opportunity?
I was looking for someone to explain the basics of the currency to me, so I emailed the Bitcoin "press" mailing list. Two people responded: Jon Holmquist and Amir Taaki. Both see Bitcoin as a tool, but they differ greatly as to what that tool is for. Holmquist sees an effective tool for commerce; Taaki, for revolution.
The UK-based Taaki is a lot of things - an activist recently arrested for squatting in London, the pioneer of multiple open source projects, a video game developer. He's even a former professional online poker player.
Right now he's organizing UnSystem, a Bitcoin conference in Vienna he says will bring together "anarchists, hackers, squatters and subversives." He speaks of the conference, Bitcoin, and the world in far-sweeping terms.
"Bitcoin is powerful", he tells me. "It's tearing a hole in the fabric of society itself."
When I ask how Bitcoin differs from cash, he responses with a list of things cash cannot do.
"How do I buy drugs online with cash?" he asks. "Or a WordPress install? Or donate to WikiLeaks, or lulzsec. Evade sanctions by hedging my money, buy anonymous services, gamble and play poker, pay for torrents or Megaupload accounts, exchange money at no cost?"
Jon Holmquist, meanwhile, sees Bitcoin primarily as a tool for business. The California man makes his entire living working with Bitcoin-based online retailers.
"For me it's less about ideology and more about what works," he tells me. "Bitcoin is a tool that works."
To Holmquist Bitcoin is a game-changing technology for anyone who runs a business online. Direct payment means little or no processing fees - something any business owner can appreciate.
"A lot of places offer discounts for cash, even though that's not allowed by their credit card licensing agreement," he points out.
Bitcoin brings the advantages of cash to the online world, by eliminating the need for merchant processing services like PayPal.
"I read a lot of news about the payment industry and there's nothing like Bitcoin," he tells me. "It's basically the next step forward for bank wires. It's transferring value, but all online, without any banking structure."
Holmquist runs a few retailers that use Bitcoin, including BitcoinStore.com - which sells electronics - and Coinabul.com - which allows you to trade your Bitcoins for gold.
Taaki, meanwhile, tells me that to him Bitcoin is not a business opportunity: it's a technology that helps people evade control.
"It's a very human technology: it brings trade back to me and you," he says. "Not as some merchant-client relationship - you are both a merchant and a client, producer and consumer."
He tells me Bitcoin alone can't change the world - that "you need the whole prescription to be taken holistically." But Bitcoin, in his view, can help keep the Internet free.
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