Note: this post is several months old.
In the past few weeks cryto-currency has had an amazing ride. Bitcoin, which traded for $12 one year ago, suddenly spiked to $1200 after several months of stagnating after a bubble popped this past summer. In a recent article by Edward Hadas of the New York Times’ Dealbook, it was declared that Bitcoin and cryto-currency was doomed to fail from the start due to being a “private currency” that is inherently right wing. I disagree.
Bitcoin has no central authority. The creator is unknown and despite what the article suggests, isn’t in charge of dishing out currency. Anyone that wants to be part of Bitcoin can (provided they’re well off enough to be riding on the internet, obviously). There are a total of 21 million Bitcoins, and thousands of computers are doing complex algorithms to mine them. Once the 21 million are mined, that’s it. However, Bitcoin can be divided into infinite parts, so it can just deflate further. They’re found in 25 Bitcoin blocks (currently worth $29,000), which can take a computer years to find.
Naturally, collectives called pools show up. Pools are networks of computers working together to find blocks and share the reward. Finding blocks gets more and more difficult as they’re discovered, decreasing supply while keeping up demand. While the average computer is no longer powerful enough to hash out (literally – that’s the term used for mine speed, such as gigahashes per second) coins, application specific USB and PCIe devices have been created to let anyone get started for a couple hundred to a few thousand dollars. Markets, such as Coinbase, buy Bitcoins from owners and sell them to buyers. Wallets store bitcoins. They can be either local, or in the cloud, like coinbase. Every wallet contains a record of every Bitcoin transaction ever, making counterfeiting all but impossible.
The nature of Bitcoin is very democratic. A year ago anyone could just run a program on their computer for a few weeks and they’d have thousands of dollars today. Anyone can create their own exchange. It’s the best example of organized anarchism ever. Anarchism is not a right wing view. It’s down, not right, on the political compass.
Hadas mentions says “The authorities, especially in the United States, first allowed banks to act almost as if they were in a right-money world, lending and speculating wildly. That led to a typical right-money disaster — a sudden loss of trust and the failure of leading institutions.”
Bitcoin doesn’t have this problem, as everything is peer-to-peer and final.
Hadas might be right. Bitcoin might be doomed. But it’s still the future.