bitcoin

Can BitCoin, the First Open Source Currency, Threaten the Dollar?

May 17, 2011

It’s been called “the most dangerous technological project since the internet itself.”  Can the BitCoin give power back to the people?

bitcoin Can BitCoin, the First Open Source Currency, Threaten the Dollar?

In the book “Mythmakers & Lawbreakers” edited by Magpie Kiljoy, Alan Moore is interviewed and makes a very profound point.  The writer was paraphrasing a professor at the London School of Economics, and stated the following:

“[The lecturer] was saying that the only reason that governments are governments is that they control the currency; they don’t actually do anything for us that we don’t pay for, other than expose us to the threat of foreign wars by their reckless actions. They don’t actually really even govern us; all they do is control the currency and rake off the proceeds.”

Now, I’d certainly been aware of our government’s currency power creating problems for people in a system which they had never had a hand in creating or to which they had willingly agreed in the first place, quite contrary to Thomas Jefferson’s vision of a government that would dissolve and reconstitute every few decades.  But, it wasn’t until reading the Moore interview that a crystallization occurred, and I began to wonder if currency was perhaps the best way to neutralize a government’s power.

The initial thought had been that this solution could be arrived at by encouraging people to engage in black markets, which many billions do worldwide already.  Not effective enough.  Then it occurred to me that someone must create an alternate currency through which individuals can disengage from their country’s currency, thereby bypassing violent insurrection.

This is essentially what the creators of BitCoin have done with the introduction of their open source digital currency, controlled by each user, kept on one’s computer and impervious to hacks and manipulation, including the inflation that occurs when governments flood countries with newly-minted currency.

Not only does the BitCoin already have practical value—for users are already exchanging them via the internet—but it has struck a symbolic blow against states everywhere, even in its very early stages.

What are the defining characteristics of a BitCoin?  They cannot be tracked or frozen, for one thing.  They cannot be taxed, which would remove yet another source of power the state has over individuals.  The power of the state essentially lies in its taxation powers, which allows it to wage war and allow for modern empire, as well as dispense that taxpayer money to other countries.  BitCoin exchanges can be done anywhere in the world and fees are extremely minimal compared to similar exchanges within and across banks.

BitCoins have already been used to purchase books, video games and other items.  Of course, since the BitCoins can’t be tracked, it opens up a wealth of exploitable opportunity for black markets such as drug dealing and prostitution.  This alone will alarm politicians, who one can imagine are already considering making the new currency illegal.  The same thing could be said of CraigsList, however, and yet it is still legal.

How does one generate BitCoins?  This is where things get interesting and slightly confusing to the not-so-tech savvy.  Each computer can act as a BitCoin miner.  The computer “mines” BitCoins at a predictable rate, which requires time and energy (processing power, electricity and anywhere from 5 to 10 years), and then the fully mined BitCoins are stored locally on the computer.  The risk being that computer theft or computer crashes will erase BitCoin files, leaving users BitCoin-less.  It seems likely, however, that there will be ways of backing up BitCoin accounts.

One of the most fantastic aspects of BitCoin is that it is open source software, which means that one wouldn’t have to buy the software, but simply download it.  Open source has long been a dream of many hackers going back to the creation of home computers and the internet, and has taken on renewed vigor as corporations and governments have gradually consolidated power over computer software and the internet.

The catch with BitCoin is that there will be a limit to the number of BitCoins ultimately generated.  According to a Launch Conference article, only 21 million can be generated by 2140, “but at this point the electricity and time it would take to produce a BitCoin is larger than the actual value of a BitCoin (your laptop might take five years to make one batch of 50, and they currently trade at $6.70 per BitCoin).”

This built-in limitation would seem to restrict the BitCoin to the fringes, unless more and more people download the software, and the value of the BitCoin skyrockets.  And since it has limitations, it’s clear that not all human transactions could be done by way of the BitCoin, which would certainly limit its mission to put power back in the hands of people.  Question: would the tech savvy have an advantage in generating BitCoins?  This seems to be what BitCoin Tech Lead Gavin Andreson is intimating when he told Jason Calacanis on “This Week in Start-Ups” that generating BitCoins has become a specialized business.

In the interview, Calacanis gives BitCoin 24 months before it is dismantled by the US government.  And my good friend noted yesterday that it probably won’t take long before it’s somehow infiltrated and subverted by the US government.  Gavin Andresen, in fact, has already been asked to speak about the software to the CIA’s investment arm In-Q-Tel.  Also interesting is the possibility that open source currencies could revolutionize work: power relationships, work days, etc., freeing up humans to enjoy life instead of being tethered to jobs they hate.

Whatever happens, the invention of the BitCoin is a rather seismic event, and might point to the way of the future, in which the people might finally wrest the power that the state and corporations have held over individuals for far too long.

 

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