If you are not living under a rock you may have already heard and read about the currency of the 21st century: Bitcoin.
For those who don’t know, Bitcoin is a virtual currency. It is basically a protocol based on a block chain made of cryptographically-signed transactions. Sounds complicated, well it is.
Up until this point in time I have refused to comment on the validity and effectiveness of Bitcoin as a virtual currency. I have left it to caveats in economic discussion with fellow students, but now there is a growing fear that Bitcoin might crash.
Overtime the intention is that there will be a limited number of Bitcoins after all the blocks are “found” and miners will only receive transaction fees rather than “newly-minted” Bitcoins. At times I feel like I am discussing currency in a video game, but this is very real.
Just today the value of Bitcoins reached over $266 (real life dollars) and then proceeded to plummet to $70 and then “stabilised” (I am using that word loosely) at approximately $105. So far it is sounding very secure and an appropriate form of investment…
Many bloggers and journalists alike are all throwing their own argument out there whether or not it is a bubble or if it can sustain a high price in the long run. I do believe in the end there may be some true value to the Bitcoin but I don’t believe that it will replace our current forms of currency.
Bitcoin boasts that it is a form of currency that is immune to inflation, bank defaults, sovereign control, or confiscation. While that is all well and good it introduces the question of its stability and its ability to withstand the short sightedness of individual consumers. This is as a result of it being a true free market in the sense that demand and supply are the only factors in consideration to its pricing.
I have friends who have already joined the hype and bought themselves Bitcoins, but I will not be joining them anytime soon. For now I will remain to be cynical and speculative, but feel free to share your opinion.
Also, just as a side note, since when has Business Insider started to use Reddit as a credible source of information?