It seems to me that of all the things beyond my understanding there’s one gaining importance in our society that simply mystifies me. No, it’s not the shenanigans surrounding the “dossier”, the FISA top secret surveillance warrant, the extension of the “Russian influence” probe far afield into non-related business activities of some years ago, or the political makeup of the prosecuting attorney’s task force investigating the president. That’s just Washington politics we kinda expect and accept. Nope, it’s the enigma of the “bitcoin.” (“Enigma,” according to Webster’s, means, “A perplexing, baffling, or seemingly inexplicable matter.”)
OK, so what is a “bitcoin” and why is it of importance? Well, according to Wikipedia, “Bitcoin is a cryptocurrency and worldwide payment system. It is the first decentralized digital currency, as the system works without a central bank or single administrator. The network is peer-to-peer and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes through the use of cryptography and a public distributed ledger called a blockchain.”
“Bitcoin was invented by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies or used as payment for goods and services. … The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 bitcoins used to indirectly purchase two pizzas delivered by Papa John’s.”
Sounds like some kinda sci-fi computer-nerd contrivance, doesn’t it? It’s a “cryptocurrency” invented by some unknown person or persons and created by a secret, complex computer-based “mining” process. It has no “backing” by any other currency, government, or substance of value such as gold. A bitcoin’s value is apparently determined by the users who buy, sell, spend, or accept them as payment. Furthermore, as I understand the process, there’s no “trail”, electronic or otherwise, of bitcoin transactions – a peculiarity I don’t quite comprehend.
So what? Recall that the first transaction involving bitcoins was to pay for two Papa John’s pizzas for 10,000 bitcoins? Well, as this is written, the value of a bitcoin had fallen to below $6,000 – its lowest price since November 2017 – before recovering to a tad over $7,000.
Yep, that’s right. According to a price index run by a bitcoin news web site the price has dropped considerably after reportedly reaching its peak when it hit nearly $20,000 a couple of months ago. This latest fall in value comes a day after several major US and UK banks banned customers from using credit cards to purchase the digital currency. China and South Korea have already banned digital currencies, while Japan and Australia have taken steps to tighten bitcoin regulations. How about them apples?
Wonder why these attempts at regulating an otherwise unregulated enterprise? Well among other things, a couple of weeks ago, hackers stole $530 million in “virtual” currency from a Japanese currency exchange. Yep, some smart computer “hackers” got away with over half a billion dollars of this “cryptocurrency.”
Not only that but stories are emerging about how bitcoin owners have lost their investments because they forgot their “keys” (or passwords). One key is “public” for entrance into the system and the other is the “private” key which provides access to the individual holdings. Both may consist of strings of numbers and letters up to 40-50 characters long and must be entered precisely within a short time window – or else the system locks the user out.
Okay, back to my inability to fathom this developing concept of a digitally generated currency whose value is backed by nothing more than the current perception of its worth by its users. I’m still fumbling with my new “smart phone” and trying to recall all those user ID”s and passwords for the numerous “portals” associated with my physicians’ offices, pharmacies, bank and credit union accounts, credit card “reward” systems and such.
More importantly, I found a quote from a respected international financier who called the bitcoin a “combination of a bubble, a Ponzi scheme and an environmental disaster” – he may well be right. At least that’s how it seems to me.
Bill Taylor, a Greene County Daily columnist and area resident, may be contacted at firstname.lastname@example.org.