The prophecy of the astronomers came to pass, and lo, the solar eclipse did occur, an omen of changing times. And right before this event, it came to pass in those days that BitCoin rose to the value of $4000. It shocked economists and flabbergasted skeptics. But the oracle of CNBC, Brian Kelly, foretold the cosmic surge…
After years of smugly ignoring BitCoin, even curmudgeons like your humble author have to admit that it’s starting to smell like a real investment. Having had experience with both metal coin collecting and trading card game collecting, I am now in the position of considering diversifying into owning what basically amounts to a digitally-stored number. You can play games with collectible trading cards, and you can pile your silver dollars in your lap and clink them through your fingers while gloating over your shiny horde, but what can you do with BitCoin besides buy it and sell it? What fun is that?
And how were we supposed to know it would come to this? The rise of BitCoin stands as one of the most unlikely stories in economic history.
The Hazy Origins of BitCoin
Who started BitCoin? That person is supposed to be “Satoshi Nakamoto,” but if you go to that Wikipedia page… it’s actually the alias of an unknown person? Shadowy rumors abound about this entity. It might not even be Japanese. It is supposed to own about $4.2B in BitCoin. It is variously ascribed to be several known experts in cryptography or even possible hoaxers who have come forward claiming to be it.
How do you trust a digital currency invented by a complete mystery? Well, the origins of the first person to implement BitCoin don’t matter because it’s a decentralized system based on an algorithm. The algorithm has been checked out, and it works. But unless you’re a cryptography expert, you have to take their word for it. By means of cryptographical hashing, blocks of virtual BitCoin and mined and appended to a blockchain, which tracks the real time world state of all BitCoins all the time. The algorithm is designed to keep BitCoin scarce, releasing only so many at a certain rate of time. Then the already-mined BitCoins become a world pool of currency.
If this isn’t sounding fishy yet, you haven’t been hanging around anarcho-capitalists long enough. These are the guys with the survivalist sheds out in the woods, who regularly try to usurp the civilized world’s economic systems with gimmicks like Liberty Dollars. No matter what, a group of apocalypse-minded sovereign citizens out there are determined to crack the secret code of living outside all governments, with tactics better suited to establishing a Minecraft server than anything in real life.
Despite the distinct smell of crackpot on BitCoin, it is based on a publicly-known set of mathematical rules, and nobody owns it outright. Which means no crackpot can spoil it. At last, the Ayn-Randian fantasy of a stand-alone currency unattached to any government is realized.
Why “Hazy” Isn’t Necessarily A Negative
We like to pretend that our fix on society is rock-solid, based in immutable laws of the universe. And that’s a delusion. Sit down and absorb this: Money itself is a delusion. The slips of printed paper in your wallet,
or bytes of data in your bank’s ATM, are hallucinations. The universe, outside of humans, has no concept called “money.” Non-human creatures do demonstrate a concept of barter, and we can all barter sometimes, but only humans insist on streamlining the process with a neutral unit of account so we don’t have to worry about how many apples a car is worth.
You might argue, “But what about gold, or titanium, or whatever commodity?” But that’s just as much of a delusion. The universe doesn’t value gold any more than it values uranium, it just happens to deposit so much of one and so little of another willy-nilly all over the place. We humans agree that gold has a price. We humans agree that diamonds are rare, too, but it’s raining diamonds on Neptune and Uranus. Dinosaur poop is also rare, but good luck buying groceries with it. We can use (and various societies in history have used) playing cards, shells, cattle, or big stone wheels, it doesn’t matter. There’s no such thing as a non-fiat currency, and this statement tends to set off anarcho-capitalists, so refrain from bandying it about at cocktail parties.
Anyway, we participate in this shared delusion of money because that’s how humans operate, and it makes things convenient for everybody.
I’m Sold! How do I BitCoin?
Well, there’s a lot of precautions you should take. It’s not something to jump into. There’s a Wiki about it, which the interested reader should make a task of studying carefully. Bottom line: Like EVERY investment, there’s some risks. Never “bet” more than you can afford to lose, should the virtual vaults of BitCoin crash tomorrow. There are tutorials out there on starting a BitCoin collection, like this one:
…but that’s three years old, and the person is just giving an example of using a view-rigging site to start earning uBitCoins. Yeah, don’t follow that far.
When it comes to BitCoin wallets, they’re so established that you can even fetch one from a Linux distro’s package manager. For instance, Electrum, the wallet software, is available on Ubuntu-based distros; install it and its user-friendly dialogs walk you right through it.
Keeping in mind that the only reason anything has value in an economic sense is because two or more people agree on its price, BitCoin does currently appear to be a valuable commodity. Its status as a
currency is far from stable, however. It can be treated more like an investment, exactly like stocks and bonds. For example, you can also buy a frosted proof set of coins from the US Mint, and you can indeed bust them out of the case and spend them at the corner shop, because they’re legal tender. But you’d be better off treating them as an investment to pass on later when they increase in value.
There’s no telling how BitCoin will fare in the coming years. The BitCoin Wiki is unfailingly chipper about its future, of course, but we have to remember that we have no historic precedent for BitCoin in all of economic history. Nothing like it has existed before, because nothing like it was ever possible until this century. Now that it’s getting its pants on, the eight-year-old crypto-currency has a slew of imitators, most of whom will likely go bust but a few might also become stable investments.
But for application developers, BitCoin support services are another opportunity to cash in on a market indirectly. After all, the one person guaranteed to profit in a gold rush is the guy standing by the mine entrance selling shovels and pickaxes.