Is bitcoin currency or commodity? Answer: yes. Is it a good idea? Answer: uncertain.
Posted by David Brooks | Thursday, April 4, 2013
Bitcoin, the virtual, anonymous money-like stuff that has been embraced by Free Staters, Linux geeks, early adopter speculators and the occasional normal business, is a fascinating topic - why would I have written about it otherwise? - but it can be hard to grasp. So I heartily recommend a long analysis titled "The Bitcoin Bubble" by Felix Salmon, a finance blogger at Reuters.
You should read the whole thing here. Here are a few snippets to whet your appetite:
The source code for bitcoin is free and public, which means that just about every hacker and cryptographer in the world has had a crack at it. And they’ve all come to the same conclusion: it really works. There are question marks over just how anonymous it is and just how scalable it is, but when bitcoins first arrived in early 2009 – right at the height of a massive global crisis of capitalism – they had immediate and magnetic appeal to the anarcho-utopian crowd of techno-libertarians who drive an enormous amount of innovation online.
Bitcoin’s built-in mistrust of institutions doesn’t just set it apart from fiat currency, it also sets it apart from other virtual currencies, such as Facebook credits in the US, QQ coins in China, or Linden dollars in Second Life.
If the currency of a country ever fluctuated as much as bitcoins did, it would never be taken seriously as a medium of exchange: how are you meant to do business in a place where an item costing one unit of currency is worth $10 one day and $20 the next? Currencies need a modicum of stability; indeed, one of the main selling points of bitcoin was that it couldn’t be destabilized by government institutions. But that comes as scant comfort to people watching the value of a bitcoin behave like some kind of demented internet stock during the dot-com bubble.