Bitcoins, Litecoins and Other Fairytales from the Digital Enchanted Kingdom

bitcoin-fantasy

Before it became a “thing”, or rather, before I wanted to slit my wrists solely to avoid hearing or reading another story proclaiming it “the next big thing”, I considered buying some bitcoins. Being pragmatic, I took the concept of “virtual” currency at face value, and firstly decided to see if there was anything I would actually do with them. While bitcoin evangelists would be quick to point to the “thousands” of online sites that accept bitcoin as payment, that list largely reads like some unholy fusion of a flea market and a back-alley in Bangkok. And since I didn’t have any pressing need to purchase guns or drugs, gamble or launder money at the time, I decided there was no point and therefore no pressing need to possess any bitcoins. This was also at a time when they were worth relatively little, and I didn’t see any point in purchasing them as an investment or store of value, because that would have been like putting all of my money into Shakey’s Pizza gaming tokens or buying shares of Twitter.

Despite often labeling myself as a cynic, in reality, I’m a consummate optimist because I keep making decisions under the naïve assumption that humans will behave in a manner consistent with rational thought. And naturally, a few years later, Twitter has a market cap of $29 billion dollars, despite never having made a profit and not having a sustainable business model, and bitcoins are worth a thousand dollars each, despite the fact that I still can’t use them to buy much of anything other than drugs, pornography or magic crystals. Of course, had I bought some just for the hell of it at the time, I would have done the same as anyone else who stumbles into a windfall by virtue of dumb fucking luck, and claimed it was the result of my savvy prognostication.

Obviously, the reality is that the price of bitcoins has nothing to do with rational behavior or an honest assessment of its fundamental legitimacy as a viable currency, but, like most of the financial markets, is the result of a relentless circle-jerk of speculative investors and idiots. I could accept this, though, if everyone would dispense with the attempts to legitimize or rationalize bitcoin prices with a horseshit manifesto about it being the currency of the future and just admit that it’s the virtual “gold rush” of the modern era, which I can accept, so long as I never have to endure an episode of “Amazon Bitcoin Hunters” on the Discovery Channel.

I don’t have a problem with the idea of virtual currency, but I don’t buy into it as some utopian panacea to fiat currency, especially as a justification for the price, since the only significant demand for the currency, at present, is by people who sure as hell aren’t going to be using it to buy hemp t-shirts or handmade lilac-scented soap. As a currency, it’s pretty goddamned meaningless if 95% of it is stuffed under the mattress or buried in a pickle jar in the backyard for the foreseeable future.

Opportunists aside, who could give a damn whether it’s a viable currency or not, you’re left with idealists who might as well pay for shit with rainbows and moonbeams or anti-fiat wonks who are the fiscal equivalent of the assholes on Doomsday Preppers. I’m willing to concede that, like bitcoin, fiat money technically has no intrinsic value. Of course, intrinsic value hardly means anything these days. Most derivative securities have about as much actual intrinsic value as the exaggeratedly large-breasted drawings of Kelly Kapowski I would scribble in my notebook in junior-high history class.

Notwithstanding, the relevant point is that fiat money, or at least the dollar, is backed by the “full faith and credit” of the U.S. Government, which may or may not mean anything, depending on how much faith and credit you have in the government. But despite whatever misgivings we may maintain concerning the government, our fiat currency will remain a viable currency so long as it exists. And despite the U.S. Government’s impressive track-record of ineffectiveness, incompetence and corruption, it does a (relatively) decent job of keeping the value of those dollars fairly stable, even though it’s constantly conspiring to eventually fuck us out of keeping those dollars. Conversely, bitcoin is backed by the full faith and credit of people (not to be confused with The People), and as inept as the government can be, it is relatively predictable and consistent. People, on the other hand, are capricious assholes.

And while it’s easy to argue that fiat money is inherently weak because of its dependence on the government’s blessing or existence, I would argue that if ever comes the day that the dollar has no value because either the U.S. Government or the economy has collapsed, bitcoins, at that point, will very likely be equally worthless. None of this will matter to me, of course, because by then, I’ll be dressed in some combination of football pads and riot gear, preparing to assault some asshole’s doomsday bunker.

But assuming bitcoin doesn’t become the currency of the future after the world’s governments are toppled, it’s a pretty safe goddamned bet that it will eventually fall under the province of some government regulatory scrutiny, if it ever reaches some increasingly unlikely critical-mass adoption. Despite whatever Ben Bernanke might say, which was a result of either tacit dismissal of bitcoin as pure speculative bullshit or (in my opinion) an attempt to goose the market because he’s secretly hording his own bitcoin stash, it’s an inevitability that the government would eventually step in, if for no other reason than eventually someone would allege that Al-Qaeda is buying WMDs with bitcoins. That’s why anonymity is also a rather pointless feature, because in the long-term, that will certainly never stand, so far as the government is concerned.

The other big specious argument for bitcoins and their ilk is the concept of a finite supply, which is supposed to be some manner of protection against inflation or promise of longer-term stability. The counter to that argument would be that bitcoins are thus inherently deflationary, but the reality is that when you have a unit of currency that is, for all intents and purposes, infinitely divisible, the notion of a finite supply is pretty goddamned meaningless. When we’re paying for goods with millibitcoins (which is essentially the case now) or nanobitcoins, the supply increases at a pretty damned geometric rate.

Of course, the more fashionable alternative to circumventing the finite supply, or more accurately, jumping on the crypto-currency bandwagon if you missed the bitcoin boat is just to create your own currency. And thus, we can have Litecoins and Peercoins and Namecoins and Quarkcoins and Megacoins and <Your Name Here>Coins. To wit, once Venture Capital’s jumped on the bandwagon (e.g., Ripple), it’s a pretty explicit admission that <Blank>coins have become an official fad and they’re ready to chase the rainbow, too.

Even for those who accept payment or make payments in bitcoins or their ilk, except for the extreme idealists and whack-jobs who demand to be paid wages in bitcoin and such, it’s not so much a currency as it is an ad-hoc payment network. Obviously, someone who was selling an ounce of heroin for one bitcoin two years ago (I don’t really know what an ounce of heroin is actually worth) isn’t selling it for the same bitcoin today, and thus the price is only expressed in bitcoins as a function of the price in traditional currency, and it’s a safe bet that most of those who are taking payments in bitcoins are likely turning straight around and cashing them in for real money (depending on how sporting they are). It’s possibly, however unlikely, that when the bitcoin bubble eventually bursts and the value stabilizes, the value of a bitcoin (or whatever fraction we settle on) actually means something, but more likely it will remain a proxy for traditional currency, which ostensibly reduces the whole bitcoin concept to an overly-complicated version of PayPal.

Of course, because history never fails to repeat itself, it’s not surprising that there’s a desire to chuck the thousand or so years of evolution of centralized banking out the window to return to bartering with digital seashells. This is not to say that the system, such as it exists, is perfect by any fantastic stretch of the imagination, but we’re here largely because we are opportunistic and short-sighted creatures and will invariably fuck things up, otherwise. To be fair, I have no problem strolling about with my virtual wallet filled with virtual bottle caps, but until the day that technology can overcome human nature as well, we just can’t have nice things.

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