Megabytes or Megabucks?
by Scimson on March 30, 2014 - 8:18pm
Christine Evans-Pughe, a science and technology writer who holds a bachelor’s degree in physics and electronics, describes the different possibilities offered by Bitcoin in her peer-reviewed article “From Megabytes to Megabucks.” (Evans-Pughe) It was published in the Science & Technology journal in 2012. The Bitcoin is a cryptocurrency which uses computer security encryption to work and is not controlled by any entity. In 2011, the Bitcoin received a high media coverage, which made its value raise up to 30 USD. This article was written a few months after these events. Today, as of March 2014, the value of the Bitcoin turns around 500 USD. However, this past December, it was worth over a thousand US dollars.
The anonymous creator of Bitcoin, Satoshi Nakamoto, stated his motivations to have been the elimination of the need to trust banks with our currency. There was a crash of the value of the currency in 2011 which many associated as a crash of the currency. However, the crash is explained by the crash of a single exchange center which lacked proper security. Even though many people saw this event as a failure of the currency, it is rather just a failure of the exchange center itself just like when a company goes bankrupt. It is the company’s fault not the money’s fault. Compared to standard currency, Bitcoin uses a peer to peer architecture that is shared between all its users. It has a really low operating cost because it requires no central entity to control it. Amir Taaki, a renowned British software developer and entrepreneur in the Bitcoin industry, believe that Bitcoin is the first democratic currency that is controlled by the people rather than the power holders.
Virtual currency can often appeal as something to be cautious with, since it has no real representation. However, Nakamoto claims the banks in which we place the trust of our currency only hold a bare fraction of our money, meaning that current currencies aren’t real either. Bitcoin, like any currency, is a collective agreement that it has value. Real world currencies are most often earned by giving human time. Likewise, Bitcoins are created by lending computing power to the Bitcoin system so it can verify transactions, also called mining. The first virtual currencies appeared in games. In 1997, the first massively multiplayer online game Ultima Online was launched as well as eBay, the internet reselling website. Those two environments combined to create what is known as “Gold Farming”, an industry which is believed to be worth a few billions. “Gold Farming” is defined as earning some currency or item in a game and selling for real money to people who don’t have the time or simply don’t want to acquire the virtual money themselves. In a sense, virtual currency always had a real world value, Bitcoin is the first to be secured enough to apply to the real world. In the case of in-game money, there is also a central entity, which is the company that made the game, which controls the money. The currency is therefore really prone to corruption as it is only regulated by humans. However, central authorities do have their advantages. If someone buys something online and doesn’t receive it, then there is someone to turn to in order to complain.
Since Bitcoin is decentralized and distributed over a peer to peer network, many people are cautious to place their trust in the system. There are many inquiries related to what information is transmitted between peers and if the information can be interpreted. There are also problems with the compliance and accessibility of the Bitcoin. To really establish itself as a dominating currency, it would need to be regulated, which defies the purpose of its decentralization. Currently, it is also complicated to understand how to use it. It is not yet as user-friendly as it should be. Taaki compares the current state of the Bitcoin as “the Internet without the Web browser.” Currently, there aren’t any international regulation regarding the Bitcoin. Its legal development might prove to be a revolution of our current economic system, or simply an attempt to alternative currencies.
Evans-Pughe, C. "From Megabytes To Megabucks [E-Currency]." Engineering & Technology (17509637) 7.4 (2012): 59-61. Academic Search Premier. Web. 30 Mar. 2014.