a) a silly name for a currency
b) a way for hackers to laugh at everyone like when they could make free phone calls by whisling down the line, aka the good old days
c) a doomed and naive failure
d) the answer to all ills
Bitcoin is a crypto currency, available only online and takes no physical form. It can, however, be used to purchase off-line, real-world goods and services. Bitcoin combines elements of traditional currencies that have made them viable stores of value and means of exchange. There is a strictly limited supply of bitcoins, and a robustly secure way of managing transactions over the internet.
Bitcoin has exploded into the popular consciousness (of finance-watchers anyway) because of two overlapping and related sets of events. One is the process of quantitative easing, the rapid ratcheting up of the money supply which critics, who are numerous and vociferous, say amounts to wholesale debasement of the currencies being virtually printed. If these currencies – back by nothing other than the strength of the governments producing them and the attendant faith of everyone using them – were to tank, what would be good to use as money? Maybe bitcoin.
More recently the bail-out, or bail-in, of Cyprus seemed to set a terrifying precedent for anyone holding these currencies. When bank depositors had to take a ‘haircut’ – an imposed levy – on their accounts other folk got scared and looked for somewhere to store the value of their paper money, that wasn’t valuable paper money. Gold and silver have normally been the go-to value stores throughout history, but current fears of market manipulation in gold have stoked interest in bitcoin.
So is it a, b, c or d?
Well, bitcoin tanked on Thursday 11th April, after a crash on the MtGox exchange. Nay-sayers point to this as the end of a stupid experiment. Backers imagine that this is the beginning of a period of development of the nascent currency – teething troubles which will be sorted, making the currency stronger in the long run.
Whatever it is it feels more like the beginning of something, rather than the end.