We are in an era when, if you are not careful, technology will race away from you, and you'll end up a befuddled person confronting a puzzling world of alien systems and incomprehensible institutions. Thus while I don't believe in giddily embracing every new development, in case it becomes popular, you shouldn't ignore the arrival of significant developments either, just because it takes effort to comprehend them.
Thus the installation of this "Bitcoin" machine recently between the Jamba Juice and the FedEx on the second floor of the Merchandise Mart seemed the moment to pause, bite the bullet, and try to understand what Bitcoin is, and the best way to do that is by trying to explain it to you, assuming that, like me, up to this point you've kept the whole issue on the periphery of your perception.
Assuming I'm not that last person who hasn't yet grasped it. If you're buying your pizza and paying your mortgage in Bitcoin, well, laugh away. I haven't joined Uber yet either.
It isn't as if I have no idea. Bitcoin is some kind of online currency. Though that is the limit of my knowledge, along with the recollection that the whole thing collapsed a while back, which can't be true, as testified by the arrival of this machine.
So...let's poke around.
CNN Money describes Bitcoin this way: "Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men – meaning, no banks! There are no transaction fees and no need to give your real name. More merchants are beginning to accept them: You can buy webhosting services, pizza or even manicures."
Well, that is interesting. Its creator being unknown puts it in an elite group of technology—along with fire and the wheel, I suppose.
So it's like cash, only online. You store it in a wallet in your device or in the cloud, and people have hacked them and stolen them. That said, what good is it?
The downside of the CNN Money description is that it doesn't seem to be accurate. Vox published an interesting account in December (only half a year ago, so I'm not lagging behind the curve that badly). Timothy Lee points out that while Bitcoin fluctuates like any currency, sometimes losing alarming portions of its worth against the dollar, despite CNN Money's claim, it actually is not quite a currency, but more of a new, unregulated open financial system, and so has enormous potential. Lee compares Bitcoin to the Internet:
Because no one owns or controls the network, there are no limits on how people can use it. Some people have used that freedom to do illegal things like buying drugs or gambling online. But it also means there's a low barrier to entry for building new Bitcoin-based financial services. There's an obvious parallel to the internet. Before the internet became mainstream, the leading online services were commercial networks like Compuserve and Prodigy. The companies that ran the network decided what services would be available on them.So what good is it besides buying drugs? Lee says they can do international currency transactions, that while Western Union charges 8 percent, that Bitcoin ATMs charge only 3 percent per transaction (on each end, meaning sending funds would cost 6 percent, and also painting CNN Money's "no transaction fees" as wrong—it isn't as if Malaysia Airlines is their only embarrassment ) an improvement, though hardly worth braving the uncertainties of the Bitcoin world, at least right now. (He also mentions the ATM's were launched in late 2013, and by 2015 there were some 329 of them).
I explored the glowing orange machine screen, but it seemed to only work if you already had an account, and given that it accepts only $20s and $100s, I didn't quite see the point of pumping big bucks into it just to then try to find a vendor who would take the Bitcoins my money would become. Where's the benefit in that?
I don't want to merely echo Lee's analysis, you should give it a read. The takeaway is that Bitcoin is to financial networks what Uber is to taxi services: an unregulated, technology-driven twist that might work spectacularly—as Uber has so far—or might crash and burn. The question is whether all that regulation is necessary. My hunch is, given how screwed up our own economy has been—thank you banking industry—that people going into Bitcoin in a big way are going to miss those legal protections.
Right now, it seems only really useful to those who want to buy drugs online—that wouldn't be me. As for its other uses, I'm not exactly an early adopter. Maybe some of you have some Bitcoin experiences you'd like to share. I think I'll wait, then maybe find a place that accepts them that has something I wish to buy. Investors have poured some $500 million into it, so somebody thinks it has potential.