The Bitcoin Economy

Bitcoins were invented in 2008 by a computer programmer whose identity remains unknown. They are a virtual currency, meaning they exist nowhere but on a network of virtual accounts. The system is decentralized, so it is not subject to the control of any government, central bank or, arguably, any single authority at all.

Bitcoins exist as entries in encrypted online accounts, one can use them to pay or be paid by transferring them, or a fraction of them, from one account to another. The values of the Bitcoins are determined through complicated mathematical algorithms. As a result, their value has been highly variable in January 2014 the exchange rate fluctuated between being as low as $190 to as high as $900.

Bitcoins have achieved notoriety lately after the FBI found out that the Silk Road, an online marketplace where sellers peddled drugs, firearms and other illicit goods and services, was taking Bitcoins as payment. This revelation pointed to how the relative anonymity of the Bitcoin currency can be used by criminals who want to avoid being tracked by law enforcements.

Bitcoins have reached that point in public awareness where their existence is becoming widely known, and widely misunderstood. Much of the discussion of Bitcoins today focuses on whether the digital currency is doomed, or here to stay.

As volatile as the Bitcoin is, it points to a future where the global consumer economy exists entire online, fueled by virtual currency. The winners in this scenario are those that can anticipate and adapt to that reality without falling prey to shady practices. Whether this new, potentially more ‘free’ economic reality will truly be revolutionary remains to be seen.