Why You Should Take Bitcoin Seriously
Today - for the first time - the value of a bitcoin eclipsed U$1,000. The rapid rise of this open source peer to peer crypto-currency has drawn a lot of attention, ranging right across the spectrum, from euphoric and utopian boosters, to cynical skeptics declaring another bubble. The real truth is that Bitcoin will probably not live up to some of the hype that suggests it could end up being worth as much as $35,000 each. However Bitcoin is also not a bubble per se, but a genuine innovation, a fascinating set of phenomena, and an open lab for some super smart people to rethink the medium of money.
Thus I offer a few brief reasons as to why you should take the rise of Bitcoin seriously, and take some of your precious time to pay closer attention to what's going on:
Bitcoin is open
Bitcoin disrupts the monopoly on the medium of money
New wealth is being created and fast
Big capital and corporations are already involved and many more will soon
The power of human imagination and belief is incredible
Free markets are similar to democracy in that they're more a process, a theory, something we strive towards, but in reality never truly manifest. Bitcoins offer an interesting example of something that gets close.
In our traditional economy it costs money to start a business, and it costs money to participate in capital markets. You could think of this as a stake, or start-up capital, or in many cases an inheritance. It's why many people lament the pervasiveness of privilege and resent that their great ideas are not truly able to compete in the marketplace (although some would argue crowd funding is helping to alleviate that).
The Bitcoin economy is remarkably open and accessible. The software is free and open source. There are many ways in which you can earn or trade for Bitcoins. You don't need to spend money to get Bitcoins. The data of each transaction is accessible. The data for the market as a whole is accessible.
As a medium (or technology), money is used to manage trust and transfer value.
Paper money for example has been around for some time, and many feel its features make it a preferable option, where possible. Plastic money, usually in the form of credit, has also been popular for a number of decades, although many resent the costs and high interest that are often associated with this particular medium.
Living in a largely digital world, many feel the upgrade of money to a digital medium is long overdue. Traditional institutions have tried introducing their own digital money, however Bitcoins are the first to capture the public's attention.
As I argue above, one of the primary reasons Bitcoin has been successful is that it is open. As open source software, Bitcoin has, and will continue to be copied, modified, adapted, and "forked" into all sorts of directions and purposes.
While Bitcoin is the leading candidate to be the Internet's currency, to break the monopoly that nation-states have had over the medium of money, this threat is not literal. Bitcoin itself may not be the new medium for digital money. The power and threat of Bitcoin is in the concept itself. For if Bitcoin were to fail, fall, burst, or be taken over in an incredible demonstration of wealth and power, there would be dozens of other platforms ready to take its place, each with a different approach, all desiring to be an alternative media for money to be used and exchanged.
The rapid rise of Bitcoin is creating an interesting opportunity for entrepreneurs and creative professionals. All of a sudden early adopters who were smart to recognize the substance and potential of Bitcoin are sitting on some substantial holdings that might encourage them to be a little generous and share their new found wealth.
The opportunity would be to give them reasons, as many as possible, to part with some of their coins. This involves first understanding this emerging economy, and the marketplaces and actors within. I've found it fascinating to watch who is already starting to serve this constituency, and rather than purchase bitcoins with traditional currency I've encouraged people to earn coins using their professional and/or creative capacities.
One of the myths of Bitcoins are that it is libertarian and largely comprised of small actors and significant outlaws.
On the contrary, technology and media in general are just containers, vessels for the content and people who use them. Bitcoin is just a platform for any economic activity that its users chose to use it for. Libertarians and start-up companies may be the loudest and sometimes looniest boosters of Bitcoin, however there are tons of big companies and government regulators who are paying close attention, and thus via the principles of the observer effect, also actively participating. Think of a traffic jam on the highway. It's not so much the accident that slows traffic but the rubber necking of everyone slowing to stare at the scene that makes the phenomena significant and have an impact.
Banks compete over who can manage or associate with frequent flyer loyalty programs, they may soon do the same with crypto currencies.
I wonder however if they will take the perceived risk of being one of the first to support a currency like Bitcoin, or will they take advantage of the open source software to create their own version, re-branded and re-purposed, setting forth a race to create a corporate backed crypto currency that may or may not be accepted?
Finally the biggest reason why Bitcoin should be taken seriously is due to the power of human imagination and belief. The fact that people imagine, understand, and believe in Bitcoin is significant. In many ways it is a virus, explicitly designed to break the monopoly on money, and encourage us to think about money in a completely different way.
Bitcoin alone is not responsible for this shift. One of the impacts of digital media is to decentralize and make reproduction incredibly easy. The medium of money was already ripe for disruption, in need of an upgrade, and maybe Bitcoin just happens to be the right idea, at the right time.
What if Bitcoin is more an alternate reality game (ARG) that was designed by someone, or some organization, to get people playing with the idea that money could be as flexible and adaptable as any of our digital media?
What makes Bitcoin valuable today, is the belief that people have put into it. Bitcoin continues to rise in price because people want to believe that the Internet will have its own currency, and that Bitcoin may be the one.
I'm not entirely convinced that Bitcoin will be the one, or the leading or the dominant. I do however believe that the knowledge that surrounds this emerging economy, is the kernel, or the basis, by which the future global economy will be configured.
That's why I'm paying attention. I encourage you to do so as well.
Update: The price of Mt. Gox got as high as U$1,073, after a large amount of volume over 24 hours from buyers who wanted in, followed by an even greater volume of sellers who caused the price to drop rapidly back to the low U$900s. Since then the price bounced back above and below U$1,000 a number of times. This milestone has drawn quite a bit of interest and increase in trading volume.