Category Archives: News
Is Bitcoin Hype or Reality? Real, And Also Controversial
Is Bitcoin Hype or Reality?
That’s the question on many minds as the value of 1 BTC soars from $47 to $147 in just two weeks.
The key question for speculators is where Bitcoin is along the Hype Cycle. Is it about to crash from the Peak of Inflated Expectations or powering through the Trough of Disillusionment?
The New Yorker posted a editorial about the growth of Bitcoin that explains some of the interest in Bitcoin.
In Cyprus, after the government made a run on personal bank accounts, Bitcoin grew dramatically.
The following Monday, the price of the decentralized electronic currency bitcoin rose from forty-five to fifty-five dollars on the major exchanges, and by Wednesday it had nipped up to sixty-five dollars. The financial media generally agreed that the two dramas are related.
The evidence coming out of Spain is circumstantial—a spike in Google searches for “bitcoin,” and another on mobile-app downloads of Bitcoin-related software were widely reported
This episode called out the salient lack of trust in financial institutions.
The weakness in existing currencies stems from lack of faith in institutions—particularly central banks.
This is not a new concept. Looking at writings by Bitcoin creator Satoshi Nakamoto shows that Bitcoin was devised as a system for removing the possibility of corruption from the issuance and exchange of currency.
But, eventually the government will take notice to the rapid growth of value in an alternate currency. More from The New Yorker:
As it happens, a few days ago, the Financial Crimes Enforcement Network (FinCEN), the federal agency that enforces laws against money laundering, announced new guidelines requiring certain “virtual currency” trading entities to register as Money Services Businesses (M.S.B.s).
But is this pragmatic?
Since mining yields pocket change for most, even if it were technically a violation of the way FinCEN sees the law, mining without registering would be like “laundering” a twenty-dollar bill by taking it to the grocery store and asking for two tens… it’s hardly worth the resources for anyone to care about it, no matter how illegal they decide it should be.
Bitcoin: Real But Trust Takes Time
Is Bitcoin hype? Bitcoin Foundation’s Chief Scientist Gavin Andresen clearly sees a great future ahead, and offers a few words of wisdom:
Until now, society has underutilized cryptography. If people accept it more broadly, cryptography can facilitate many things: the exchange of money, transparent elections, transparent government.
Trust takes time.
Bitcoin Stories: The Million-Dollar Pizza (10,000 Bitcoins in 2010)
Bitcoin Stories: The Million-Dollar Pizza
One of the more famous Bitcoin stories is about one of the earliest real world purchases made with Bitcoins in 2010. A Bitcoin Forum user named Laszlo offered to pay 10,000 BTC for a pizza. Here’s his original offer from May 18, 2010:
I’ll pay 10,000 bitcoins for a couple of pizzas.. like maybe 2 large ones so I have some left over for the next day. I like having left over pizza to nibble on later. You can make the pizza yourself and bring it to my house or order it for me from a delivery place, but what I’m aiming for is getting food delivered in exchange for bitcoins where I don’t have to order or prepare it myself, kind of like ordering a ‘breakfast platter’ at a hotel or something, they just bring you something to eat and you’re happy!
I like things like onions, peppers, sausage, mushrooms, tomatoes, pepperoni, etc.. just standard stuff no weird fish topping or anything like that. I also like regular cheese pizzas which may be cheaper to prepare or otherwise acquire.
If you’re interested please let me know and we can work out a deal.
Thanks,
Laszlo
Four days later, Laszlo proudly reported that he had successfully traded 10,000 Bitcoins for pizza, which was about $25 at the time. Not a bad price but pretty slow delivery time.
Just under three years later, the value of Bitcoins has soared to $100 per BTC, making that pizza worth over $1 million!
Here is a photo of the actual million-dollar pizza, and presumably Laszlo’s son going after a slice.
That forum thread is still active, with the latest post today reading simply:
“Wow. I wish I had 10,000 bitcoins now.”
Can Bitcoin Be Trusted as the Global Economy’s Safe Haven?
Can Bitcoin Decentralize Trust?
In the wake of the financial crisis in Cyprus, interest in Bitcoins has soared, making Bitcoin a currency with $1 billion USD in market value. But is Bitcoin the new safe haven for the struggling global economy?
Bloomberg BusinessWeek contributor Paul Ford points to decentralizing trust as the key to Bitcoin’s growth in value and adoption.
I’m increasingly convinced there’s one thing that Bitcoins do that’s genuinely interesting. They decentralize trust. Trust is hard to earn; verifying transactions is a brutal problem, which is why PayPal locks down your account when there’s too much money flowing into it. Creating trust is traditionally the work of federal governments and branding agencies. Trust is also an easy thing to squander. Just close a beloved service, à la Google Reader. Or allow your banks to fail, causing an entire country to suddenly realize that the value of their deposits, the fundamental integrity of their financial selves, was arbitrary all along.
Along comes Bitcoin, a currency in which every transaction is stored by the entire network and every coin has its own story. There’s nothing to trust but math. Suddenly an idea that sounded terrible—a totally decentralized currency without a central authority, where semi-anonymous parties exchange meaningless tokens—becomes almost comforting, a source of power and authority.
That’s where Bitcoin thrives: where people would prefer to throw in their lot with anonymous strangers instead of the world economy. It’s gold-bug thinking reinvented for an age of fluid transparency and instantaneous transactions. And as such it’s an excellent indicator of anxiety. Where you see Bitcoins in action you find a weird and heady mix of speculative angst, a fear of being left behind, and people who appear to have lost faith in institutions, who feel most left behind. These are people who’ll trade in purely arbitrary tokens, willing to forgo the comfort of banking systems for the weight of mathematics and the Internet behind it.
Bitcoin image by zcopley used under Creative Commons license.
