I made a quick mention of Bitcoin in a previous post but its back in the news as Jason Calacanis and the LAUNCH team post some updates on their show and then subsequent traffic from new stories. Bitcoins are a virtual currency stored on your computer or other device that can be exchanged between people as a form of payment.
From the Bitcoin site:
“Bitcoin is the first digital currency that is completely distributed. The network is made up of users like yourself so no bank or payment processor is required between you and whoever you’re trading with. This decentralization is the basis for Bitcoin’s security and freedom.
You don’t have to be a criminal to wake up one day and find your account has been frozen. Rules vary from place to place, but in most jurisdictions accounts may be frozen by credit card collection agencies, by a spouse filing for divorce, by mistake or for terms of service violations.
In contrast, Bitcoins are like cash – seizing them requires access to your private keys, which could be placed on a USB stick, thereby enjoying the full legal and practical protections of physical property.”
Calacanis and his team have uncovered the following:
After month of research and discovery, we’ve learned the following:
1. Bitcoin is a technologically sound project.
2. Bitcoin is unstoppable without end-user prosecution.
3. Bitcoin is the most dangerous open-source project ever created.
4. Bitcoin may be the most dangerous technological project since the internet itself.
5. Bitcoin is a political statement by technotarians (technological libertarians).*
6. Bitcoins will change the world unless governments ban them with harsh penalties.
These coins can be sent to and from users three ways:
1. Direct with peer-to-peer software downloaded at bitcoin.org
2. Via an escrow service like ClearCoin
3. Via a bitcoin currency exchange
The benefits of a currency like this:
a) Your coins can’t be frozen (like a Paypal account can be)
b) Your coins can’t be tracked
c) Your coins can’t be taxed
d) Transaction costs are extremely low (sorry credit card companies)”
Watch the TWiST show here:
Gavin Andresesn explains Bitcoin:
Who is Satoshi?
Calacanis’ final prediction:
“Bottom line: The world is going to be turned over by bitcoins unless governments step in and ban them by prosecuting individuals.
This is about to get really interesting, everyone.”
Avery Pennarun’s four reasons Bitcoin will fail:
- FAIL #1: If you like bitcoin, then you must think the gold standard was a good idea.
- FAIL #2: Even if it was a good idea, governments would squash it.
- FAIL #3: The whole technological basis is flawed.
- FAIL #4: It doesn’t work offline.
And here’s Rick Falkvinge:
“Here’s what’s on my radar: banking. There’s at least a dozen different variants of decentralized cryptographic currencies and transaction systems out there, very sophisticated and totally incomprehensible. There’s Ripple, BitCoin, ecash and others.
Just as BitTorrent made the copyright industry obsolete in the blink of an eye, these stand to make banks obsolete. These, or their successor, will hit a tipping point as soon as somebody makes it easy enough to use. The technology is there, the use case is there — there’s certainly no shortage of annoyance with big banking. It’s just a matter of usability now.”
Gigaom weighs in:
“And what is Bitcoin’s value backed by? Well, that’s where things get complicated. The value of a Bitcoin is determined in part by supply and demand — the system is set up so that there are only a finite number of Bitcoins in existence, which prevents the problem of people just “printing” more Bitcoins the way crumbling governments have in places like Germany in the 1920s. Bitcoins are actually generated by the routine functions of a computer that is processing large mathematical problems (known as “Bitcoin mining”), so the supply is controlled, and will never exceed 21 million.
Even apart from convincing people that they should start accepting or using it as currency, however, the biggest problem Bitcoin could have is a legal one: if the U.S. government decides to treat it as a “private currency,” then it could be subjected to all kinds of strict regulation — such as the need to integrate with the taxation system, or provide for exchange into U.S. currency at certain rates — or it could simply be outlawed entirely.”