A long but fast-moving tale of digital currency and its discontents.
Brother, can you spare a byte? Digital currencies are a new feature of the financial landscape, and none to date has been as successful as Bitcoin. The brainchild of libertarian hackers, “pioneers who risked their money, time, and freedom to build the early infrastructure of a new economy,” Bitcoin now runs the risk of going legit. That is to say, writes financial journalist Eha, the hedge fund crowd on Wall Street is now aware of Bitcoin and its possibilities, so much so that its capitalization now stands in the billions. The author, who has been writing about the currency for the last five years, traces the evolution of Bitcoin in a shadow economy backed by a computer network vastly more powerful than anything the straight economy can muster, all designed to move money around in a river of wealth undetectable to the world’s governments and tax authorities. That it has become successful, manipulated by private funds and venture capitalists, is testimony to what Eha praises as its triple-threat nature: it functions as a “store of value, like gold,” as a point of payment system like a credit card or PayPal, and as a financial network on par with the Western Union of yore. It is also a $1.2 trillion industry, which explains why the capitalists are circling. As they do, writes Eha, some of the founders aren’t happy that their idealistic venture is now turning into a beast covered with leeches. One visionary who divined that a serious Bitcoin economy would have to build a serious infrastructure of companies around it has relocated to Japan, which for all its economic woes is still a forward-looking place, and others have migrated to places like Panama City, where looser regulations may help advance the cause of digital currency.
Catnip for monetary policy wonks, particularly those on one side or another of “the ideological divide between Bitcoin’s libertarian-anarchist wing and mainstream technocrats.”