I last wrote about Bitcoin less than a month ago. (If you’re one of the people who admitted in comments “I still don’t get it,” here’s a terrific and detailed explainer from The Economist.) Since then the value of Bitcoins has quadrupled—and then halved. The founder of Sweden’s Pirate Party moved all his savings into Bitcoin (which disappoints me; I had hoped they were buried on Oak Island) just as US Senator Charles Schumer attacked it as “an online form of money laundering.” Malware designed to steal Bitcoin wallets has been seen in the wild, and in possibly related news, 25,000 Bitcoins were stolen a few days ago. Meanwhile, the virtual currency’s long-term stability has been seriously questioned … but does it really make any sense to think about any “long term” at all for Bitcoin, given the insane volatility of the last month?
Well, sort of. I concede it does look a bit like the lunatics, black-hats, and bubbleheads have conquered the asylum, but there’s nothing inherently crazy or shady about a distributed online currency. What is kind of crazy is assuming that the first one that comes along will last and retain its value indefinitely, which is what almost everyone investing in Bitcoin is doing. (The rest are hoping to sell out to a greater fool, a strategy which admittedly made a few people wealthy during the South Seas tulip bubble and the dotcom boom, but—pretty much by definition—was a loser for most.) Does Bitcoin have a long-term future? I strongly doubt it … but I expect that something like Bitcoin eventually will.
Right now, though, the fools and crazies are muddying the water, and inspiring somewhat-justified contempt like
If lotteries are a tax on those who are bad at math, then bitcoin is a tax on those who are bad at economics.—
Laurie Voss (@seldo) June 10, 2011
or even more cynically,
Battle of the pyramid schemes: Groupon vs Bitcoin, fight!—
Jens Ohlig (@johl) June 14, 2011
“Pyramid scheme,” though, is unfair (to both.) Bitcoin is a fairly monumental achievement—but it’s a trailblazer, not a destination. It should be viewed as a springboard for future iterations, but most of the community that all its recent publicity has attracted seems unable to look past the present, and is treating it as either a get-rich-quick scheme or a cypherpunk fantasy come to life. The good news is, in the long run, this is ideal—because the crazier the Bitcoin world gets, the more we can learn from the madness, and the better its successor(s) will be.
Image: biggertree, Flickr.