Dollars and cents of Bitcoin currency3/12/2014
What is a dollar worth? If we’re being literal, the value of a dollar is tied to the gross domestic exports of the country. But if the recent recession taught us anything it’s that if the stock market takes a plunge, the dollar in your pocket could quickly be worth half its value. So came the hot-button alternative currency, Bitcoin. Unregulated, anonymous, global and short on supply, Bitcoin is one of many “cryptocurrencies” that could supposedly save the U.S. from future recessions.
Why is gold so valuable? Because it is rare, and there is a finite supply. That concept of supply-and-demand is the basis for all cryptocurrencies, including Bitcoin. Existing purely as a digital currency of exchange, Bitcoin and its peers offer a way for investors and consumers to safeguard their earnings against recessions and other economic disasters. How? Bitcoins’ value is derived solely from demand and supply. If investor interest grows, Bitcoin value grows with it.
Of course that interest is not without its turbulence. While retailers are lining up to accept the alternative currency, other countries have scrutinized its legality. The dichotomy of interest vs. investigation has lead to a roller coaster of Bitcoin value over the past year. In January 2013, a single Bitcoin could be purchased for $20; by early December, it skyrocketed to $1,200. However, in just a couple months, its value decreased to $500 due to exchange crashes and China forbidding the currency.
The questions of Bitcoin’s legality are extremely tenuous. Bitcoins are allowed to exist much in the same way of gift certificates and company stock. Bitcoin has a publicly known value and can be used as a means of payment in a transaction. Still, many governments are uneasy about the unregulated and anonymous nature of cryptocurrencies. Bitcoins’ value took a major dip last fall after the FBI discovered its exclusive usage on an illegal online black market, Silk Road. Bitcoin holders could log onto Silk Road to purchase illegal drugs, hire hackers, even hitmen.
The good news is, until the government regulates Bitcoin or it outright fails, dozens of alternatives exist: Litecoin, Namecoin, Dogecoin, Coinye and many more. CV
Patrick Boberg is a central Iowa creative media specialist. For more tech insights, follow him on Twitter @PatBoBomb.