If you’ve heard of Bitcoins, you’ve probably heard all the speculation about their instability as a currency. The constant flux, however, has made some people very rich, depending on when they decided to invest. Currently, unless Bitcoins have crashed by the time this article gets published, one is worth about $935.
Bitcoins are an enigmatic subject. At first glance, it’s easy to picture Bitcoins as some sort of video game-like change you can earn in a virtual space.
But what are they, exactly?
A growing number of news articles have debated the definition of Bitcoins and their role in the marketplace. The U.S. Treasury Department, for one, believes they are definitely a currency.
Bitcoins are basically a digital currency. An open-source algorithm began creating them in 2009, but the formula will only churn out a limited number of them. Currently, there are about 11 million Bitcoins, with the maximum number set at roughly 21 million Bitcoins.
They appeal to the libertarian streak in young, millennial, dotcom startup entrepreneurs. Or just about anyone who likes the idea of a decentralized payment network. No middle man. No central bank. No government authority.
And given that lack of authority, talk of Bitcoins in the past has often been associated with an aside about black markets, namely drugs, gambling, and other illicit financial transactions that want to sneak on by without any sort of policing.
Why Bitcoins Matter
Beyond the use of Bitcoins in underworld markets and as an investment, the real question is whether the average consumer will eventually use them as a viable source of monetary exchange, thereby changing the rules of global markets.
Could you imagine paying for a shirt or a dress from a foreign company with Bitcoins from your phone? With no international fees? With cash that no one regulates?
The early adoption of Bitcoins in broader markets, such as national retail brands, has largely stayed within the confines of restaurants, apartments, law firms and online services. For example, Bitpay converts Bitcoin payments into dollars.
In recent months, a few economic journalists have seriously questioned the value of Bitcoins, such as Matthew O’Brien of The Atlantic, who used the volatile nature of Bitcoins as the foundation of his premise, and Andrew Ross Sorkin of The New York Times, who supported O’Brien.
But Timothy Lee of The Washington Post offered a strong rebuttal, arguing that it’s too soon to suggest that the average consumer can use Bitcoins. With some refinement, its future potential as a payment app to replace credit cards deserves greater significance, Lee writes.
As Lee says, it’s nice to think of the possibilities. And if you want, you could invest in some right now.