Bitcoin is completely private. There’s no central banker. There’s no records showing who owns them. There’s no paper trail to what you use them for... The value of Bitcoin has been problematic as one would expect from a fledgling experiment of this size. Sure enough the dollar value of the bitCoin has swung massively over the years, mostly when a security failure appeared or a hacking took place.
Since its inception in 2009 I’ve kept a silent eye on the development of the digital currency “Bitcoin”. I wasn’t willing to talk much about it, simply because it had the ability to be one of several different things. For one, it could be the biggest disruptive “invention” of the last 200 years, or it could have been the single biggest failed experiment on record costing billions.
I’d say that most folks don’t have a clue what BitCoin is. I don’t want to lay out the whole history of it, that would take a book worth of pages, but here’s the Readers Digest condensed version. Back in 2008 an anonymous person or persons going by the name "Satoshi Nakamoto” laid out plans for a peer-to-peer electronic cash system. The general idea is that a series of servers called “miners” create these units of digital currency and add them to a ledger that is shared to all the bitcoin programs around the world. But there is a schedule of when and how many of these digital units get developed and the total amount to ever be created is to be 21 million.
Users can “buy” these digital currency units and use them for transactions by “spending” them with any other person or merchant that will accept them. So in theory and in practice, what we have here is an alternative currency with some very interesting properties. First off and the most serious is that it is completely private. There’s no central banker. There’s no records showing who owns them. There’s no paper trail to what you use them for. Thus, the first knock against this alternative currency is that it will be used for illegal purpose. That is usually what you’ll hear from the main stream as they attempt to downplay the concept and use of Bitcoin.
Well they’d be right. By being completely invisible as far as transactions go, there’s obviously those who use them to buy illegal items. If you’re a heroin dealer and you want to buy opiates from a grower in Asia, mailing the guy a check, or using a credit card is out of the question. Using cash carries its own problems such as conversion into another currency and the banking regulators looking for large cash withdrawals and deposits. With bitcoin you simply push your buttons, and instantly his account now shows on the global ledgers that he’s gotten your bitcoins. This goes for arms dealers, pornographers you name it. So yeah, bitcoin can be used for nefarious reasons. No doubt.
But is that really why so many in Government are scared to death of this thing? Nope. They’re scared because they can’t control it. They can’t tax it. It takes the power of a central authority out of the hands of the few and into the hands of the many. This scares them to death and rightfully so. It is their biggest fear. But as far as I’m concerned, my fears weren’t based on the anonymity or the way it can take power away from the banking elite. I think both of those things are quite delightful. My fears have always been with 1) security 2) perceived value and 3) how hard Government would push back to make it illegal and declare its use “financial terrorism”
The value of Bitcoin has been problematic as one would expect from a fledgling experiment of this size. Sure enough the dollar value of the bitCoin has swung massively over the years, mostly when a security failure appeared or a hacking took place. In less than a year it’s been as low as 13 dollars and as high as 230 dollars. It has fallen to 50, up to 80, and back to 70. It has been all over the map, moving in response to demand and “fear”. Because it isn’t backed by anything, not even a regulating body or like with the dollar the “full faith of the US Government” it fluctuates based on perceived value and demand. Because there has been numerous hacking attempts, folks have run from it, and during severe crisis like the Cyprus banking disaster people have flocked to it as a safe haven.
This has scared a lot of folks away from the idea of considering it. My stance has been pretty simple. I love the idea that “the people” have pushed back against the system. They’ve forged ahead to try and come up with something “better” than the depreciating junk we carry around in our wallets. I admire that. But, because it is new, because it is fraught with mishaps, missteps, and such wild fluctuations, I haven’t been on board with getting involved with it. Not to mention the idea that I’m sure Uncle Sam would like to make even the idea of it illegal.
But just yesterday something quite amazing happened. While an ever growing body of merchants around the world have been accepting Bitcoins as payment for product and services, it was still considered by most as being a “fad” or a short term trend. Then Germany’s finance minister comes out of the clear blue and states that “bitcoin is recognized as a unit of account” meaning it is legal tender.
By having an economy as big and as important as Germany recognizing it as a true unit of account on par with other monies, Bitcoin has just leapt from the shadows into the lime light. This is a truly incredible development. But it asks more questions than it answers. Will they come up with some way to try and tax it? Will they try and make disclosure of ownership the law? Will other countries open up to it, or fear losing control of their Central banking and declare it illegal?
Something potentially as big as BitCoin cannot be ignored. Yet it is very hard to embrace as it goes through its growing pains. Hundreds of people have lost thousands of dollars as bitcoin “exchanges” have been hacked and shut down. Officials in high office have declared it to be a terrorist tool. Social scientists fear it because if they cannot tax it, they can’t promote and pay for social services they so dearly love. 200 dollar price fluctuations make it too scary for conservative investors.
I do not own any bitcoins as of right now. That very well might change in the future. But I’m more than willing to let it go through its birthing pains and see what emerges on the other side. Time might show us that indeed this thing is not only real, but the first model of an even bigger concept where the decentralization of “money” becomes the global goal. I don’t know. But I’ve watched it from its inception and here we are about 5 years later and Germany a country of great import, has just formally recognized it.
That changes things. Stay tuned.