03 Dec THE EVOLUTION OF MONEY
There’s a new currency that is slowly gaining respect in the global marketplace. The question remains, is it real or just a short-lived fantasy?
The money is called Bitcoin, and it exists “in the cloud.” It was developed and is administered by a consortium of computer geeks, much like open source software and the internet itself. It belongs to no country, although many governments are watching it very closely and have even shut down a few sites that were suspected of laundering money in ways that involved Bitcoins.
According to one of the many online articles on the subject, “Bitcoin is first and foremost a virtual currency. It is also a decentralized currency, meaning that there is no one person or party in charge of it. It’s not backed by a government or any form of hard asset, which means that its value is protected only by the integrity of a distributed network of accountability and the willingness of people to accept them for goods or services.*”
Sounds a little shaky, right? Yet the idea appeals to a lot of proponents for a variety of reasons. The value of Bitcoins is market based, and many holders are speculators. The Winklevoss twins, the college classmates of Facebook’s Mark Zuckerberg whose lawsuit against him was immortalized in the movie The Social Network, have reportedly purchased 108,000 Bitcoins and profited handsomely as the price of the currency wobbles ever higher.
Others are attracted to the peer-to peer nature of the transactions, which keeps fees extremely low. Although no big-name online retailers accept Bitcoin as a form of payment, there are a growing number of online merchants who do. And recently, the first Bitcoin ATM made its debut outside of a coffee house in Vancouver BC.
The concept challenges one to reflect on what makes currency work after all. The U.S. dollar started out as a convenient substitute for the gold that it was connected to, but that has not been the case since 1973. In the end, it is the faith and credit of the issuer that guarantees the value of any currency.
*www.macobserver.com: how to understand bitcoins