Many of us make use of electronic payment systems, such as credit or debit cards, on a daily basis. Whether buying groceries at the supermarket or transacting business through an online bank account, electronic payment is widely embedded into everyday life in many parts of the world. Such systems are one step removed from the physical coinage and notes representing the ascribed value of goods and services.
With the advent of Bitcoin, a fully digital currency, value itself also becomes virtual. The term Bitcoin first appeared in 2008, having been created by a programmer, or group of programmers, using the fictitious name Satoshi Nakamoto. The currency is stored in digital wallets and can be earned, exchanged with others or used to buy things.
The network has been programmed to create 21 million bitcoins, of which over half have been unearthed since 2009. The currency is released through a process of “mining,” whereby powerful computers are used to solve complex mathematical problems and create new coins. As coins are released, the difficulty of the mathematical problems increases. Miners earn payment in the currency and the system of release is thus self-sustained.
Bitcoin is a fledgling but fast-growing currency, with the value of all bitcoins in circulation believed to be equivalent to US$1.5 billion as of August 2013. Though far from universally accepted, businesses are incentivized to use the currency because it involves only minimal payment fees and is not subject to geographical borders or public holidays. Like gold, Bitcoin is also not subject to banks or a central authority—a point of regulatory freedom that is often perceived as a benefit. Instead, it is controlled by all of its users around the world, using peer-to-peer technology.
The creation of a virtual currency provides a renewed opportunity to consider what we as human beings attribute value to and strive for. Bitcoin really only has a value because people say it does. How many of our other value judgments can be classified in the same way? What is it about us that makes even a virtual currency subject to the greed, crime and corruption associated with gold or cold, hard cash? Likewise, what is it about governments, financial systems and society at large that turns us off and makes Bitcoin’s lack of central authority so attractive?