Sodium Haze: 'Bit Coin' - a prelude to the future of money?

Sunday, 12 June 2011

'Bit Coin' - a prelude to the future of money?

Those of you who have watched the video advocating monetary reform 'Money As Debt II' might remember that one of its closing gambits was a plug for digital money.

They argued that digital money with its complex security algorithms would have three advantages:

(1) It would be secure

(2) No bank could lend it out since digital money is tied to the owner (so an end to fractional reserve banking)

(3) It had all the convenience of digital transfers of balances with none of the drawbacks.

Now we don't have a global system like this of digital money - or do we?

"Created in 2009 by an anonymous Japanese computer science student using the pseudonym Satoshi Nakamoto, Bitcoin was initially adopted by hackers as a means of bartering services. Now it is fast becoming the unofficial currency of the web."

Has the restless driving of the internet already provided the solution to Monetary Reform while we slept?

The Haze was interested in this article in this mornings Guardian about the Japanese internet currency.

Apparently drug dealers love this untraceable currency.

"Anyone can buy virtual "coins" at a variety of online exchanges, using major global currency – but they aren't just used for drugs. The list of legitimate businesses that accept Bitcoin is growing all the time, from legal services to landscape gardening, video game retailers to makers of alpaca socks. With one Bitcoin currently traded at around £9.22, the value of the whole Bitcoin economy is estimated at around £32.6m and growing fast."

Wow - £32 million? And NO INTEREST FOR ANYONE TO PAY TO BANKS? How can such a thing be possible - doesn't everyone know that the only way we can create money is to allow bankers a private monopoly to loan it to us at interest?

"Unlike traditional national currencies, Bitcoin has no central issuing authority. In theory, the 'coins' can be created, or 'mined' by anyone, but they require a powerful computer and a lot of time to generate. Their supply is controlled using a series of complex mathematical algorithms built into the software."

The Haze will look into how the supply is controlled as this seems critical.

"An odd alliance of libertarians, geeks, businesspeople and drug kingpins hail Bitcoin as the future of the internet – global, private and immune from national economic crises and the whims of reckless bankers"

Well quite - however...

"Its critics in the political sphere fear that it could give rise to an online Wild West of gambling, prostitution and global bazaars for contraband."

Whereas the current system does nothing to stop contraband and we have a Wild West of insane derivatives traders who create inflated prices, economic instability and system wide meltdowns.

BitCoin won't be the solution to our money supply problems but it does clearly show how digital money may well be a practical solution that would allow us to do away with Fractional Reserve Banking once and for all.

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