“It is inevitable that Bitcoin will become a multi-trillion dollar enterprise because every other currency in the world is tied to dying central banks that are encumbered with impossible-to-pay debts and bankrupt counter-party risks” – Max Keiser
It has been a rollercoaster of a week for Bitcoin, an open-source, peer-to-peer, digital currency that can be used online to send or receive payments with a high degree of anonymity. The climb this week to a high of $266 per bitcoin followed by an epic crash (from which it has somewhat recovered and stabilized) helped to bring wide mainstream attention to a currency that had until now inhabited a niche realm.
A good deal of the recent interest appears to have come from get-rich-quick investors, many of whom will likely also have been part of the panic-selling that occurred during the most recent crash. This crash could have been caused by any number or combination of factors, but when the world’s largest bitcoin exchange, Mt.Gox, explained that it had been overloaded by a sudden explosion of new accounts – leading eventually to a suspension of trading to install new servers – a likely culprit was found. Pirate Party founder Rick Falkvinge goes into detail on the current shortcomings of the Bitcoin infrastructure here.
This negative press has served to obscure many of the great things about Bitcoin.
- It uses cryptography to create and transfer money instead of using a central issuing authority. It is not possible, therefore, for any external authority to directly interfere in this process. This is particularly important as it ensures, for example, that new bitcoins cannot be issued to buy debt, as the US Federal Reserve does – in essence propping up the US economy and making demand for US debt look higher than it actually is.
- As a holder of funds is essentially their own bank, it is not possible for external authorities to seize funds belonging to the holder, as was recently threatened in Cyprus. Indeed the crisis in Cyprus has been cited (with slim evidence) as a factor in the recent surge in attention on Bitcoin.
- A significant (and growing) number of merchants and businesses now accept bitcoins as payment for products or services.
- Speed: received funds are available for use within minutes.
- Cost: very cheap compared to conventional payment networks.
- Anonymity: it is extremely difficult (although not impossible at this time) to link bitcoin transactions with real-life personas.
Many common misconceptions regarding Bitcoin are dealt with here.
The philosophy of Bitcoin revolves around the idea of taking power and control away from external entities like governments or banks and putting it directly into the hands of people. This is important because there is an extremely long list of serious abuses committed by these entities as a direct result of the power and secrecy they are afforded: to cite one example, HSBC laundering drug money for Mexican cartels who are responsible for the deaths of an estimated 70,000 civilians in recent years and who now control most of the public institutions in many parts of Mexico. Note that despite HSBC admitting their wrongdoing, not one executive responsible for these despicable crimes has been criminally charged.
Bitcoin was created and designed specifically to eliminate interference and abuses by financial and political elites, and as these abuses are directly responsible for many – if not all – of the serious issues facing humanity, that is one reason right there for Bitcoin or a concept like it to be pursued with vigor, because under such a currency system, where potentially hundreds of millions or even billions of people no longer depend on the so-called ‘fiat’ currencies, the power of unscrupulous banks and governments to do serious damage is greatly undermined.
That is not to say that powerful entities such as these would be dead and buried. There are other ways to undermine Bitcoin, such as the propagation of denigration, ridicule and fear via media propaganda campaigns and astroturfing, or frequent powerful DDOS attacks intended to destabilize even the major Bitcoin exchanges. As the currency is still relatively small and the concept very new to most laymen, it is far easier to manipulate bitcoin value using such underhand methods, bringing about panic-selling and other ill effects caused by uncertainty, ignorance and fear.
Indeed, during the recent crash, a perusal of comments on Twitter provided a fascinating study of many of the negative aspects of human nature: greed, mindless panic, short-sightedness, schadenfreude and a healthy dose of outright idiocy. It is possible – likely even – that newcomers to the currency were influenced to sell, even with significant losses, in the belief that Bitcoin was finished for good. As this graph shows, however, the currency has gone through crashes of varying scales before – the only difference being that almost no one cared at the time.
There are, of course, legitimate concerns about Bitcoin itself, notably the fact that its relative anonymity is a double-edged sword as it would provide valuable cover for the transactions of criminal enterprises. While there is no doubt that this is a concern, we ought to remember that as things stand currently, some of the largest ‘industries’ in the world are criminal ones: human and drug trafficking and the illegal arms trade. The fact that the ‘fiat’ currencies rule supreme has done nothing to stem this tide of illegality; indeed, these activities generate enormous profits and have done for decades – centuries, even.
A switch to a relatively anonymous currency may even force positive change, particularly with regard to drug trafficking, where the tactics employed in the decades-long ‘drug war’ have proven to be utterly ineffective, and have in fact caused great human suffering and seen drug cartels gain ever more power. With drug traffickers able to conduct financial transactions more easily, authorities would be under greater pressure to abandon traditional discredited tactics and instead treat drug abuse as a medical issue, not a criminal one. The superb and devastating documentary on the drug war, The House I Live In, provides ample proof of the necessity for such a sea change in this area.
Bitcoin is also a useful way for organizations that engage in true journalism like Wikileaks (who have been victims of a massive funding blockade) to receive donations that may one day grow to be significant, giving them greater power to inform the public of the truth of corporate and government criminality. This is particularly vital in an age where almost all the media is owned by a tiny number of huge corporations, all of which have a vested interest in maintaining the status quo. Without Wikileaks and the very few organizations (or journalists) like it, terrible things like this remain hidden for all time.
The currency is still relatively new. The problems that occurred after its first wide exposure to the mainstream were inevitable – what enterprise does not have teething problems on its way to success? It needs new blood to thrive and, given the data provided by Mt.Gox regarding new accounts, new blood is what it is now getting. The recent crash may scare away some of the get-rich-quick types but that is a good thing. One need not put significant money into Bitcoin; it is enough to demonstrate support for the concept by creating a small account and helping to build up something that might one day be a globally significant economic system based on fairness, privacy and security. The most important thing is a sincere belief in the philosophy of Bitcoin, not a short-sighted and base desire for material gain.
Bitcoin has a real chance of one day being a force that will challenge the supreme rule of the financial criminals (and their cohorts in other arenas) who run the show and who have demonstrated on numerous occasions that they are greedy, self-serving, parasitic sociopaths. Vitally, it will also provide a safe haven for your hard-earned cash, far beyond the grasping hands of the banks and their servants, if/when the next big world financial system crash occurs and the ‘bailouts’ come directly from your bank accounts.
The beauty of the concept is that if Bitcoin grows large enough, the banks and politicians would be able to do nothing whatsoever about it short of switching off the internet or killing everyone (and I wouldn’t put the second option past them). For this reason alone, Bitcoin is surely one of the greatest potential forces for true democracy in these dark times. Learn about it and support it…because even if Bitcoin eventually fails, you will have made a powerful statement against the dysfunctional status quo, and that is the first step toward making other statements for change; the very definition of activism.
Note: in the spirit of this article, the writer purchased (a few days before the crash!!) a small number of bitcoins. Any donations (gratefully) received from readers will go towards the creation of the human rights/direct democracy NPO detailed below. Please send any donations to this bitcoin address:
‘The 99.99998271% – Why the Time is Right for Direct Democracy‘ by Simon Wood is available for free download. In this 70-page book, the current state of human rights and democracy is discussed, and a simple method of implementing direct democracy is suggested.
Simon Wood on twitter (@simonwood11) and Facebook or at his blog. The Direct Democracy Alliance, a voluntary group dedicated to creating national/global direct democracy, is now also on twitter: (@DDA4586)
Author’s note: For over a year I have been writing detailed articles on human rights and direct democracy, and have written a book on the topic which is freely available. However, despite some small successes, I am yet to make a scratch in any meaningful way that will bring about real change. For this to happen, I need to create an NPO or similar organization devoted to creating and promoting direct democracy and human rights. I therefore appeal to any reader who has significant resources, or who has connections to someone who has, to contact me with regard to making a philanthropic donation to bring about a transparent organization with paid, professional staff which can actually make a difference.