If
you've chanced upon the news today, you might have read something about
how a company named Mt. Gox, an outfit based in Japan specializing in
the exchange of Bitcoins, is going bankrupt. Apparently, over $300
million
worth of Bitcoins were stolen from the company over the past several
years. If you're scratching your head just reading this, that's
normal. I've barely heard of Bitcoins too before reading the news
today. So I looked it up. Apparently, Bitcoins are virtual
currency.
Yeah,
that's it. Virtual currency. It acts the same way as most other
currencies. You go to an exchange (like the aforementioned Mt. Gox) and
purchase using another currency any amount of Bitcoins you desire. You
can then spend those coins on a handful of organizations who accept
these things for goods and services. Also like any other currencies,
the price for Bitcoins float according to speculation and demand.
Things were going pretty well for Bitcoins until today's
headlines. They were even going to put automated kiosks in the
Vancouver areas so people can freely buy the coins. But, by now, you're
probably not exactly chomping at the bit to get some. Never mind Mt.
Gox. Who would ever buy a currency that isn't backed
by anything except maybe a handful of online retailers and currency
speculators?
You'd
be surprised. In fact, there are other currencies not back by much of
anything. Want me to show you? Okay. Take out your wallet. Look
inside. What do you see? That's right, those $20 notes (polymer, if
you
are lucky) aren't backed by anything either. Now you're probably
saying that's not true. They are supported by the government. And yes,
that would be accurate. Through monetary and other policies, goverments
can control (barely) the value of the dollar.
However, the note isn't isn't backed by anything. Nothing solid. Did
you know that money used to be linked to precious metals like gold or
silver? It wasn't very long ago (just in the last century, in fact)
that you can literally exchange a dollar for a
certain amount of gold or silver. Not any more. Now, whenever you
work those over time hours to get those hard earned cash, there's not
much to keep them floating other than a hope and a prayer. And belief,
of course.
Growing
up in our Canadian society, it's easy to assume that paper currency has
value. Afterall, millions upon millions of people wake up and do this
every day. The either earn it or spend it, and this happens billions
of times. But other than belief of value, there isn't much else to
back up the dollar. This reminds me of a blog I wrote a long time ago
on Gamespot in which I questioned the value of limited edition copies of
video games that come with codes for downloadable
content. It's one thing to issue a collector's edition like Bravely
Default's, where everything is tangible (a set of cards, an art book, a
sound track and a collector's packaging) but it's questionable the value
of editions typically issued by EA. For instance,
the Dragon Age collectors came with a tine box, a cloth map, and a slew
of codes for various DLCs. I wonder whether or not a 'collector's'
edition should include things like DLCs. Afterall, if it's not a
physical object, what's there to collect? The same
goes for avatar items (whether it's Microsoft or Sony). A real shirt I
can understand, but a digital shirt with some designer logo on it I
don't. Not really. Clearly, there are people paying for these things,
and I think if you were to ask any of these
folks (myself included) whether or not they see value in their digital
purchases the answer would be yes.
Which
is why I'm not really surprised… well, not MUCH surprised… when I hear
that at it's height, a single Bitcoin was being traded at over $1000.
Yeah, pretty insane, right? But, given how much we associate value to
other virtual goods, or paper money, it really isn't surprising. Even
after the Mt. Gox news, Bitcoins are still trading at $500 the last I
heard. Yeah, it got slashed by half, but half a grand is still nothing
to sneeze at.
Either
way, you're probably thinking that Bitcoins are a lousy idea. Virtual
currency is untested. It just doesn't feel safe, espeically after this
Mt. Gox episode. Sure, collector's edition DLCs and avatar items might
not be 'real', but anyone see the value in a few extra levels, a few
additional weapons, or even a virtual shirt with a virtual designer
logo. But a virtual currency? Indeed, in its current state, Bitcoins
are something only a trader or a speculator could
love. But what if I were to tell you that you're already engaging in a
form of transaction very much like Bitcoins? And likely, you've done
so very recently.
Ever bought a gift certificate?
It's
really not so different. You give up some money in exchange for a
medium (in this case, a card) worth the same amount. Then you use the
card to redeem for goods and services. Unlike Bitcoins, the effect is
much
safer. You know for sure, after giving up the money, that noone can
steal it from you so long as you, or the person you give it to, holds on
to the card. You are also certain that, done correctly, the exchange
of goods and services will work every time.
This is why I actually think Bitcoins are a good idea. Imagine a world
wide 'gift certificate' where you put in some money and you can redeem
it for anything anywhere in the world. In fact, proponents of Bitcoins
say this very thing. It's the most cost
efficient way to transfer money because it's all peer to peer. You
don't have to go through a bank or credit card company to do so, and so
your fees are minimal. They just need to shape up the execution, make things safer and offer more stability. Of course, the big difference here is that
Bitcoins are designed to fluctuate in value, depending
on the market conditions, while putting $20 into a gift card guarentees
you $20 worth of goods.
With
one exception. Every shop on Steam? The charge in USD. Every bought a
Steam Wallet card? They take Canadian. Buy a $50 Steam card and you
get to use it for exactly $50 on Steam. I'll let you make the
connection.
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