Money is supposed to be a store of value. After the recent
collapse in the dollar convertible price of Bitcoins, the inevitable scrutiny in the viability of the monetary system is warranted.
The official description of Bitcoin states: Bitcoin is an experimental, decentralized digital currency that enables instant
payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority managing
transactions and issuing money carried out collectively by the network. Purported myths and ground rules on how the alternative currency operates, provides calculated
reading. Whether this accounting system can or would be accepted as a credible medium of exchange on any large scale is certainly
an open question.
The need for an alternative currency to
fiat debt created tender is apparent. However, establishing faith and acceptance in a competing and digital method of payment
for transactions is almost inconceivable to the average consumer.
"Bitcoin’s inventor, Satoshi Nakamoto, is a mysterious hacker (or a group of
hackers) who created it in 2009 and disappeared from the internet some time in 2010.
a social-media site, and WordPress, which provides web hosting and software for bloggers. The appeal for merchants is strong.
Firms such as BitPay offer spot-price conversion into dollars. Fees are typically far less than those charged by credit-card
companies or banks, particularly for orders from abroad. And Bitcoin transactions cannot be reversed, so frauds cannot leave
retailers out of pocket.
Yet for Bitcoins to go mainstream much has to
happen, says Fred Ehrsam, the co-developer of Coinbase, a Californian Bitcoin exchange and "wallet service", where
users can store their digital fortune. Several Bitcoin exchanges have suffered thefts and crashes over the past two years.
But the real threat is competition. Bitcoin-boosters like to point out that, unlike fiat
money, new Bitcoins cannot be created at whim. That is true, but a new digital currency can be. Alternatives are already in
development. Litecoin, a Bitcoin clone, is one.
Wow . . . the innovative advantage for merchant acceptance might make
one think that Amazon will be jumping into the cauldron and become the big daddy digital vender.
Nonetheless, the spike and fall that has the appearance of a Bitcoin bubble will certainly give pause to any large retailer
that is flirting with accepting payment through an exchange.
"That single point of failure is the most popular Bitcoin currency exchange,
Mt Gox. There are other exchanges, but the bulk of Bitcoin trading happens
there. Mt Gox claims to have been hit over the last couple weeks’ mania by the twin ills of denial-of-service attacks
and sudden, excessive popularity, both of which amount to the same thing: Mt Gox’s systems falling over. The operation
(which is based in Japan) has also shut down its own service at least once in an attempt to "cool down" the market.
And every time that has happened, a panic sell-off has been the result.
That’s not surprising: Mt Gox’s status as the best-known exchange has led it to become the main data source for
most of the Bitcoin rate visualizations out there, so when Mt.Gox goes down it affects visibility for a lot of people. And
when people can’t see what’s going on, they panic, find another exchange and sell, sell, sell. Same goes for the
biggest exchange unilaterally deciding to cool down the market – hardly a sign of viability."
Bitcoin crash was simply a function of clearing house settlement failure, the claim that Bitcoins retain the properties of
money evaporates. Blaming the breakdown on an exchange, illustrates that Bitcoins have more in common with the properties
of a stock or commodity, than a hard currency.
like a traditional ATM, says Berwick. Instead of connecting to your bank account, the software he and his team have developed
is installed on an ATM and converts cash to Bitcoins stored in a Bitcoin wallet or extracts cash based on what's stored in
your personal Bitcoin account."
back into a legal tender paper currency might go a long way to establish a workable alternative to using the bankster banking
system. However, this digital currency is only as solid as the confidence level of users to store wealth in a medium that
promises the return of capital or its equivalent value.
"Bitcoins are "mined" by unlocking blocks of data that "produce a particular
pattern when the Bitcoin ‘hash’ algorithm is applied to the data."
Blockchain.info, which tracks Bitcoin-related data, estimates that miners are generating
$470,000 in Bitcoin-related revenue per day. In fact, due to the recent interest in the virtual currency and its popularity,
operating margins for Bitcoin
miners are close to record highs."
practices do not conform to the properties required to qualify as money. It would seem to describe Bitcoins as an alternative
accounting organism to the central banking system. In that regard and goal, the merits of instituting a functioning and reliable
digital currency, should be encouraged. Nevertheless, the lack of market stability in Bitcoin value convertibility dooms this
experiment in the absence of manipulative swings in currency quotations.
The destructive consequences of floating currency rates have plagued consumers and savers alike for decades. The
desired objective is a decentralized monetary system, digital or coinage that has a fixed convertibility and stable purchasing