Some random thoughts on Bitcoin, the decentralized online currency. Here's something to stir the pot and have some fun:
- In most cases, it's impossible to discuss "currency" as a topic without it quickly devolving into mysticism (sources of value, what everyone wants a currency to be, etc.) or eschatology (order, governance, chaos, etc.). I find that type of discussion a waste of energy. If anybody says with authority: "a currency MUST have..." run from the room.
- Currency, from a pragmatic perspective, is just a simplifying agent in a financial platform. What? It's similar to the role of simple sugars in metabolism. Complex foods are reduced to them. Complex body parts and behaviors are built from them. While there is a limited quantity of sugars, there's a mechanism for efficiently allocating those sugars to various potential uses. Too much or too little sugar, the system breaks down.
- Bitcoin is a currency platform. Thousands of people are developing new applications for it. In this way, it's very similar to the Internet. When the Internet was young, people used to say: why would anyone want to pay for a online subscription to the Internet when you have AOL/CompuServe? It doesn't have any content (intrinsic value), you can't transact on it (e-commerce or financial services), and it may collapse tomorrow (since nobody is in charge). Things changed.
- Lots of people are saying: "The deflation built into bitcoin was a terrible idea. People are getting rich." In fact, it was a brilliant idea. It brought in speculators (people that are buying/selling it as if in a game). It created a bubble. The bubble put it on the map. The bubble has attracted thousands of developers/participants. Think of how the Netscape IPO fueled the Web/Internet.