Bitcoin – libertarian economic dream, geeky fad, or black market nightmare?
Since its theoretical inception in 2008 courtesy of a pseudonymous developer known only as “Satoshi Nakamoto” Bitcoin has gained both interest and notoriety, but does it actually have the potential to become a usable long-term currency?
Although Bitcoin is promoted as an “experimental digital currency,” many detractors have cited Bitcoin’s highly volatile exchange rate, inflexible supply, high risk of loss, and minimal use in legitimate trade as significant barriers to more widespread acceptance.
There is, however, a small but growing trickle of real-world bricks-and-mortar businesses who are willing to dip a toe into the cryptocurrency waters, and Bitcoin ATMs are starting to make their way in to the real world, albeit in tiny numbers – Las Vegas-based Robocoin plans to ship 12 to 15 of the units by the end of the year.
Bitcoin is also gaining varying levels of recognition from nations and legislators, primarily in an attempt to control their use (and taxation) and mitigate the perceived opportunities for money laundering and illicit trade. Germany’s Finance Ministry categorises Bitcoins under the term “unit of account,” and the US Financial Crimes Enforcement Network (FinCEN) currently classifies American “Bitcoin miners” who sell their generated Bitcoins as “Money Service Businesses”.
The chances are, however, that Bitcoin has come to your attention through recent legal actions in the US.
In June 2013 the US Drug Enforcement Administration was reported to have listed 11.02 Bitcoins as a seized asset – the first time a government agency had claimed to have seized Bitcoin – and most recently the FBI seized some 26,000 Bitcoin from Silk Road, an online marketplace best known for trading in drugs (amongst other things).
There was a time when handing over a suitcase stuffed with greenbacks was the untraceable currency transaction of choice, but Bitcoin presents the enterprising criminal with a relatively anonymous and frictionless way of processing transactions across borders – the US legal action against Silk Road claims that they handled $1.2 billion (9.3m BTC) in sales since early 2011, netting to a tidy $80 million (600,000 BTC) in commission.
As a de-centralised digital currency Bitcoin may have started out as a idealised, libertarian economic experiment, and has certainly seen its fair share of niche geek adoption, but I don’t think we can write it off as a “black market nightmare” just yet.
It is unfortunate for Bitcoin’s developers and advocates that the lion’s share of public attention has gone to its illicit uses – as the worlds first globally-accessible, decentralised, digital currency it offers an unparalleled opportunity to re-invent the infrastructure of economic exchange and to find out how open, frictionless financial transactions could really work in the modern, digital world without the intervention of political lines drawn on a map.
To quote William Gibson, “The street finds its own uses for things.”