Bitcoin

December 11, 2017

Greetings from the sideline,

“Just because you don’t understand it doesn’t make it wrong.”  Someone once said that in response to a question I had about Scientology, which I had mistaken for Boknononism.  But I remember thinking at the time that it was a reasonable response even though it didn’t answer the question.

This week the news has featured the wild economic climb of Bitcoin.  Its value has risen from $1000 to over $17,000 this year, most of that in the last months.  People are buying it like crazy, people are warning it’s a bubble, some others say it’s a great haven to dodge taxes, and everyone has a story about someone who knows someone who got in early and is now living on their own private island.

But what is it? 

I asked several people who all said some version of this: Bitcoin is going crazy right now!  It’s just nuts how much it has gone up!  People are getting rich!  If I had bought it when I meant to, I would be a millionaire!

But what is it?

For the best information on subjects such as these I ask young, smart people.  Then I pretend I understand what they said and go look up the information in my encyclopedia and my Funk and Wagnall’s dictionary.

So, where does Bitcoin get its value?  Evidently there are 21 million bitcoins in existence.  Well, they don’t exist, they were created in a piece of fiction by an anonymous programmer who for some reason chose the name Satoshi Nakamoto instead of L. Ron Hubbard. 

The Bitcoin premise is this; people ‘mine’ for Bitcoins by solving complex math problems. This excluded me immediately, and here not even White privilege helps.  At some point the miners are providing time, electricity and computing capacity (hardware) as part of the Bitcoin banking system, which it adamantly denies being one of.  I would explain that now but my head would explode and I have a big day ahead of me.

I visited a couple of the sites where people can purchase Bitcoin (using some ordinary old fashioned currency) and I couldn’t help making the comparison to the language in a letter I received from a South African prince who wanted to give me $5 million dollars to help him get his fortune out of the country. 

So the process is simple: you open an account by giving some computer your money.  If you don’t have enough money you can borrow some from the computer so you can buy Bitcoin on margin, which never goes wrong.  As far as I can tell, you can’t buy Bitcoin using Bitcoin, because that would cause a tear in the space-time continuum. 

I did learn from asking real people that Bitcoin is a cryptocurrency, which sounds somewhat morbid to me.   There is already competition in the cryptocurrency arena; Etherium and Litecoin are already trading in huge numbers luring millions of investor dollars away from proven equities like Kmart.

Bitcoin can be used to buy things, and it is completely untraceable.  So if you want to get a surprise birthday gift and don’t want the charge to show up on your Visa card, problem solved!  Also handy for buying cocaine, laundering money, purchasing explosives, and transferring $5 million out of a South African country.

Savvy readers will note a trace of cynicism in my tone.  You might say that the Bitcoin process is no less valid than the ‘theory’ that the US dollar is backed by gold and the world’s confidence.  You might suggest that I am going to miss out on a huge opportunity because of my lack of imagination.  You might say: “Just because you don’t understand it doesn’t make it wrong.”

The idea that people are investing in something like a mythical coin that has no value until someone invests in it is not that hard for me to grasp.  And no one has to remind me that people will bet on anything; look at the list available on Superbowl Sunday.  

There will probably come a time when Bitcoin will be as common as pennies in the world economy.  When it is, I will definitely bend over to pick one up off the sidewalk.  Keeping one hand on my wallet as I do.

Hope this finds you mining for truth,

David

Copyright © 2017 David Smith