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Bitcoin: A New Age For Money

While it is true that countries are likely to impose “harsh taxes and capital controls,” if recent trends in financial regulation are a clue, there are some key misunderstandings of the nature of the world wide web and Bitcoin in the above-quoted Time article.  Anonymity – indeed, even pseudonymity –  through either medium, the internet or Bitcoin, is a difficult state to achieve.

This misunderstanding is understandable. Bitcoin and other so-called crypto-assets (while crypto-currency is a term commonly used, many of these coins actually exhibit the characteristics of a financial asset, not currency) are a brand new advent. The internet itself has been around now in our collective conscious for just over twenty years, and it still remains a mystery to many people.  

When we look back on what humans thought about the internet when it first popped into the collective conscious as a real thing in the nineteenth century, we twenty-first century “digital natives,” get a kick out of their understanding (read: misunderstanding) of the world wide web. More on that later.

The burning question remained for nearly everyone who had been involved with Bitcoin prior to its big break, landing on mainstream media seemingly in regular rotation like a payola scheme. But on mainstream sources this burning question was scantily asked.  Instead, themainstream reported that Bitcoin was strictly digital currency, and thus should be regulated as such. Never once asking the big question in an honest scope:

A New Age For Money

Bitcoin challenges not only the way the globalized world does business in the twenty-first century, but also certain assumptions about money altogether. Sure, Bitcoin might not last forever, but Bitcoin has already changed the future by changing the present. This transformation started long before Bitcoin went mainstream in the spring of 2013.

Few were expecting a supposedly one

There are, to be sure, considerable advantages of digital money over traditional, paper-based fiat currencies become obvious upon first use of Bitcoin.

Yet another benefit of Bitcoin is its proclivity to lead users to become more aware of internet privacy and computer security, exposing some individuals to software they would not otherwise experience. A digital currency regime at the national level would increase users’ daily interaction with software systems, perhaps improving the skills and knowledge of users regarding personal finance software and finance optimization technology, as well as computer and Internet science generally.

Those nations which promote the use of decentralized digital currencies could earn a competitive advantage at the international level when it comes to computer literacy.  Because of technologies like Bitcoin, computer literacy is more important than ever.

Is Bitcoin the new Cayman Islands or a better memory? In a way, both.  Hip-hop and punk rock audiences mention often that these styles are not music genres, they are lifestyles. Bitcoin can be seen the same way. It’s not just a money, it’s not just a technology, it’s more a way of life. A worldview, but more fluid. A philosophy. It is an open-source software community, and many of its participants are open about their work, not trying to hide illicit activities. Bitcoin is also a better memory. Thus, Bitcoin is both a new sort of paradise and a better brain.

Expect unimaginable technologies to come from the same school of thought that brought the world Bitcoin. I hope that, within these pages, a clear understanding of Bitcoin basics can be achieved, as well as a broad look at the changes to human life its technology could foster. Many of which already exist.

Although following in the footsteps of past forms of private money, Bitcoin is wholly different, for, not only is it digital, but also the technology is decentralized.  

Commercial banks have indeed looked into creating their own virtual currencies. According to Kirk Hope, the chief executive officer of the New Zealand Banker’s Association, some commercial banks wish to compete with bitcoin. “If it’s not bitcoin it might be some other type of digital currency that could come into play,” Hope said. The currency still faces problems around legitimacy, Hope said. “They are being used to buy things like arms and drugs,” he said. “I suspect tax isn’t being paid on bitcoin transactions.” (11)

All-in-all, Hope demonstrates an acute lack of understanding about bitcoin. For instance, he cites that there can only be 21 million bitcoins in existence as a rationale to argue in favor of bitcoin having shortcomings. But, that “satoshies” can be spent (up to the eighth decimal place) make bitcoin a potentially very robust exchange unit. He says, “you wouldn’t want to pay $300” for a cup of coffee, as if he doesn’t understand that a bitcoin can be subdivided at all.

There are many ways in which bitcoin could be adopted by the more mainstream banking institutions. Products and services are brought into the payment space all the time. Bitcoin is two products: both the exchange unit and the processing mechanism. This might be intimidating for a company like MasterCard, Visa and banks.  What they will have to understand that, for many users, bitcoin’s decentralized nature is one of its primary benefits. Certainly, 2013 was the year in which everyone from bankers to regulators began to come to terms with the existence of something like bitcoin.  2014 will likely be the year of bitcoin education.

Late in 2013, JPMorgan attempted to renew a patent they first filed in 1999. It was reported the bank was designing its own digital currency for use with digital “wallets.” The patent itself related to a “method and system for processing Internet payments using the electronic funds transfer network.”  Although the patent application was lengthy, it did not mention bitcoin, although it did hint that “new Internet payment mechanisms have been rapidly emerging.” (12)

Quickly, however, it was reported that JP Morgan’s patent application had been rejected 175 times. JP Morgan filed the original patent application on August 5, 2013 for an electronic mobile payment system. By October 18, 2013, all claims had been rejected. (13)  By the time of JP Morgan’s patent filing, bitcoin had been in the public eye for a couple years.
Since then, bitcoin has shown tremendous growth, and individuals can now buy many online and offline services (Internet, professional, travel services) and digital and physical goods (clothing, accessories, electronics, books) with the decentralized currency. Divisible to eight decimal places, bitcoins can be used for micro-payments, and some employers are now offering to pay employees in bitcoin. Bitcoin can be exchanged for over thirty traditional fiat currencies. (i.e., EUR, USD, CAD, GBP, PLN, JPY, HKD, SEK, AUD, CHF).

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