27 November 2013
Much Ado About Bitcoin
By ADRIAN CHEN
Published: November 26, 2013
FOR the obsessive followers of the volatile virtual currency bitcoin, the
price of a single bitcoin at the time their fixation began holds undue
significance. I know one bitcoin cost around $9 when I first stumbled on
it in the summer of 2011. That was before I single-handedly sent the price
of bitcoin soaring.
I wasnt trying to manipulate an underground economy. I was just doing
my job as a blogger for the website Gawker when I broke the story of the
online underground illegal drug market Silk Road, on which bitcoin was the
only accepted currency because of its relative anonymity. The article went
viral and introduced hundreds of thousands to bitcoin.
Senator Charles E. Schumer, Democrat of New York, helped, too. During a news
conference a couple of days after my article was published, he called bitcoin
an online form of money laundering. I suppose a lot of people
thought that sounded pretty cool. The price of bitcoin surged to $14.
Huh, I thought, maybe I should buy some bitcoin.
But I didnt, and as of this writing, one bitcoin is worth around $880.
Senate hearings held to discuss regulating bitcoin earlier this month were
lovefests, according to The Washington Post. Abroad, Chinese
investors are flocking. Bitcoin seems on the brink of respectability.
Still, theres a zaniness about the currency. Bitcoin is built on a
weird mix of the most old-fashioned kind of speculative greed, bolstered
by a contemporary utopian cyberlibertarian ideology. Boosters say that bitcoin
is the currency of the future. Id argue that the phenomenon is a digital
gold rush perfectly emblematic of the present.
Some of bitcoins appeal comes from the fact that it does not physically
exist. Each bitcoin is just a string of numbers. Instead of a bank, a
decentralized network of computers ensures the authenticity of bitcoin and
issues new ones by doing complex calculations. This allows bitcoin to be
traded peer to peer, bypassing credit card companies and payment processors.
Its digital cash, offering the same relative anonymity and freedom
as a paper sack of bills. WikiLeaks began accepting bitcoin donations in
2011 in order to bypass PayPal and credit card companies, which had frozen
payments to the organization.
The WikiLeaks episode hints at the utopian promise built into bitcoin by
its creator, a mysterious programmer called Satoshi Nakamoto, whose identity
is a subject of dispute and intrigue. The ideas behind bitcoin can be traced
to a 1988 tract called the Crypto Anarchist Manifesto
[below], which loftily predicted a future where
anonymity-protecting technology made state control of the market impossible.
Everything would be for sale to anyone all the time, 100 percent tax-free.
Many of bitcoins hard-core fans see the currency as a revolutionary
step toward this anarchocapitalist wonderland.
Im skeptical. I dont think well all be paying in bitcoin
for tickets to Kanye Wests 2024 presidential victory tour. You cant
use bitcoin for much today besides gambling in online casinos and reserving
seats on Virgin Galactic spaceflights, and a vast majority of it is held
by speculators. Even with the imprimatur of government regulation, the promise
of bitcoin seems to end with helping online retailers avoid credit-card
processing fees. Bitcoin is mainly innovative in the way of credit default
swaps: new ways to gamble with money.
Bitcoin is most interesting on an emotional level. Its sheen of technomagic
has let uber-rational geeks treat the casino-floor frenzy as a serious
technological story. Tech blogs breathlessly track the price of bitcoin.
Each new business that accepts bitcoin is heralded with the fanfare of a
despot opening his countrys borders to a new, previously outlawed luxury.
The drumbeat suggests that getting rich is as simple as being an early adopter.
So many have bought in because the Internet is very good at stoking the fear
of missing out. Theres even a trendy acronym, FOMO, to describe the
anxiety inspired by scrolling through the social media accounts of people
having more fun than you. Bitcoin fosters a particularly potent brand of
FOMO. Recently there was the story of the Norwegian 20-something who discovered
that his long-forgotten bitcoin, bought for basically nothing, was worth
so much that he traded some of it to buy an apartment. Bitcoin holders have
taken to posting screenshots of their swollen accounts. I know a guy who
bought a few hundred dollars worth of bitcoin as a sort of joke years
ago. Now hes made enough to buy a nice car.
All I can say is that the crash is going to be great. Bitcoin is too dependent
on speculative mania to be of practical use as a currency. But as a symbol
of the misguided dream that one can tap into the global data stream and download
riches like a pop song, its gold.
Adrian Chen is a freelance journalist and an editor at The New Inquiry.
A version of this op-ed appears in print on November 27, 2013, on page A25
of the New York edition with the headline: Much Ado About Bitcoin.
The Crypto Anarchist Manifesto
Timothy C. May
A specter is haunting the modern world, the specter of crypto anarchy.
Computer technology is on the verge of providing the ability for individuals
and groups to communicate and interact with each other in a totally anonymous
manner. Two persons may exchange messages, conduct business, and negotiate
electronic contracts without ever knowing the True Name, or legal identity,
of the other. Interactions over networks will be untraceable, via extensive
re-routing of encrypted packets and tamper-proof boxes which implement
cryptographic protocols with nearly perfect assurance against any tampering.
Reputations will be of central importance, far more important in dealings
than even the credit ratings of today. These developments will alter completely
the nature of government regulation, the ability to tax and control economic
interactions, the ability to keep information secret, and will even alter
the nature of trust and reputation.
The technology for this revolution--and it surely will be both a social and
economic revolution--has existed in theory for the past decade. The methods
are based upon public-key encryption, zero-knowledge interactive proof systems,
and various software protocols for interaction, authentication, and verification.
The focus has until now been on academic conferences in Europe and the U.S.,
conferences monitored closely by the National Security Agency. But only recently
have computer networks and personal computers attained sufficient speed to
make the ideas practically realizable. And the next ten years will bring
enough additional speed to make the ideas economically feasible and essentially
unstoppable. High-speed networks, ISDN, tamper-proof boxes, smart cards,
satellites, Ku-band transmitters, multi-MIPS personal computers, and encryption
chips now under development will be some of the enabling technologies.
The State will of course try to slow or halt the spread of this technology,
citing national security concerns, use of the technology by drug dealers
and tax evaders, and fears of societal disintegration. Many of these concerns
will be valid; crypto anarchy will allow national secrets to be trade freely
and will allow illicit and stolen materials to be traded. An anonymous
computerized market will even make possible abhorrent markets for assassinations
and extortion. Various criminal and foreign elements will be active users
of CryptoNet. But this will not halt the spread of crypto anarchy.
Just as the technology of printing altered and reduced the power of medieval
guilds and the social power structure, so too will cryptologic methods
fundamentally alter the nature of corporations and of government interference
in economic transactions. Combined with emerging information markets, crypto
anarchy will create a liquid market for any and all material which can be
put into words and pictures. And just as a seemingly minor invention like
barbed wire made possible the fencing-off of vast ranches and farms, thus
altering forever the concepts of land and property rights in the frontier
West, so too will the seemingly minor discovery out of an arcane branch of
mathematics come to be the wire clippers which dismantle the barbed wire
around intellectual property.
Arise, you have nothing to lose but your barbed wire fences!