What is Bitcoin?1. Bitcoin has been making some serious noise lately on the internet. I admit I haven’t spent a lot of time to meticulously examine it, but I will say that for the time being I am both intrigued and skeptical. And I’m not the only one.
2. The founder Satoshi Nakamoto is a mystery man, and to my best understanding no-one, including the people who run Bitcoin, have ever met (some question his existence). These same people try to portray a very simplified economic system. So simplified that one might wonder how much thought was really given to it, especially regarding the way it will evolve and grow. Someone made a comment (can’t find the source) that suggested computer science graduates shouldn’t pretend to know everything, including economics. From my experience with founders that lack a suitable background, I tend to agree. Economies evolve and develop. What may work now, won’t in the future. No economic system can be planned fully in advance.
3. Jason Calacanis recently wrote a post titled Bitcoin P2P Currency: The Most Dangerous Project We’ve Ever Seen (thanks for not sugar-coating it). Here’s what he had to say:
After month of research and discovery, we’ve learned the following:
1. Bitcoin is a technologically sound project.
2. Bitcoin is unstoppable without end-user prosecution.
3. Bitcoin is the most dangerous open-source project ever created.
4. Bitcoin may be the most dangerous technological project since the internet itself.
5. Bitcoin is a political statement by technotarians (technological libertarians).*
6. Bitcoins will change the world unless governments ban them with harsh penalties.
4. I got word on Calacanis’ post from boingboing. First comment there mentioned Flooz. As it happens,
“Flooz.com was a dot-com venture, now defunct, … the company attempted to establish a currency unique to Internet merchants…” (wikipedia)
And here’s the interesting part:
Evidence indicates the company was at least partly brought down by fraud. In 2001, Flooz.com was notified by the Federal Bureau of Investigation that a Russian organized crime syndicate was using Flooz and stolen credit card numbers as part of a money-laundering scheme, in which stolen credit cards were used to purchase currency and then redeemed. (wikipedia)
In other words, where there is money, there will be those that will try to abuse the system. If Botcoin’s main mechanism against fraud will be based around keeping BTC face value so low it won’t appeal to abusers, it will not appeal to the masses as well.
5. Either way, I’m sure we’ll hear a lot more about Bitcoin in the months to come. In the meanwhile, here’s Bitcon’s intro video:
And Jason Calacanis’ interview with Gavin Andresen (Bitcoin’s technical lead) and Amir Taaki (founder of BitcoinConsultancy.com) on This Week In Startups:
Update 9-11-11:
James Surowiecki about Bitcoin on MIT Technology Review (here).
And Krugman has a few words to say too.